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Relief for Deloitte & KPMG as SC declines stay on Bombay HC order
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SME Times News Bureau | 16 Jun, 2020
In a big relief for audit firms BSR and Associates, and Deloitte Haskins
and Sells, both former auditors of IL&FS Financial Services, the
Supreme Court refused to stay the Bombay High Court order which quashed
all prosecution against the firms in the IL&FS scam.
A bench
headed by Chief Justice S.A. Bobde and comprising Justices M.R. Shah and
A.S. Bopanna said: "We want to penalize the government for filing its
petition late."
The bench also questioned the Ministry of
Corporate Affairs (MCA) about the delay in filing the appeal. It,
however, said that the MCA can continue with its probe in the matter.
In
April, the High Court quashed all prosecution, pending before the
National Company Law Tribunal and a special court in the city, against
the two firms over the allegations of financial irregularities. BSR,
which is part of KPMG India, and Deloitte, moved the High Court last
year challenging the plea by the Centre before the tribunal seeking
their removal as auditors of IL&FS. And, under section 140 (5) of
the Companies Act, this kind of removal would also lead to a five year
ban on the audit firms.
The NCLT, in August last year, found
merit in the Centre's plea, and approved the proposal for removal of
both audit firms. Challenging this decision, the firms moved the High
Court and submitted before the court that they had already resigned as
auditors of IL&FS, and this had happened long before the Centre's
decision seeking their removal. The firms have challenged the
constitutional validity of section 140 (5) of the Act.
The MCA
had moved the court seeking this kind of removal and also initiated
criminal proceedings against the audit firms for their alleged role in
financial irregularities in the IL&FS Group. The SFIO had allegedly
claimed the BSR and audit firms had acted in breach of auditing
standards, and they had failed to detect financial inconsistencies at
IL&FS.
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