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 noted that the court wants to penalize the Centre for the late filing of the petition. The bench also questioned the Ministry of Corporate Affairs (MCA) about the delay in filing the appeal. The top court noted that the auditors will remain on bail while the MCA continues with its probe in the matter.
In April, the High Court quashed all prosecution against the two firms, which was pending before the National Company Law Tribunal and a special court in the city, 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.
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