Thursday, May 11, 2023

Two former IL&FS audit firms will now be prosecuted thanks to the Supreme Court

Supreme Court paves way for prosecution of 2 ex-IL&FS audit firms

 Delhi, India: On Wednesday, the Supreme Court overturned the Bombay high court's decision that quashed the SFIO investigation into the alleged financial irregularities of former IL&FS Financial Services auditors Deloitte Haskins & Sells and BSR & Associates.

The top court also upheld the validity of section 140(5) of the Companies Act of 2013, granting the appeals of the Centre and the Serious Fraud Investigation Office (SFIO) against the high court verdict.

The arrangement manages expulsion and renunciation of examiners and forces a five-year restriction on a reviewing firm that is demonstrated to have "acted in a false way", or to have "abetted or connived in any extortion".

In its 103-page decision, a bench of justices M R Shah and M M Sundresh stated, "The challenge to the constitutional validity of section 140(5) of the Companies Act, 2013 fails and it is observed and held that section 140(5) is neither discriminatory, arbitrary, or violative of Articles 14, 19(1)(g) of the Constitution of India, as alleged."

It overturned the high court's decision that said the audit firms could not be sued under section 140(5) of the Act because the auditors had quit. The application/procedures under segment 140(5) of the Demonstration, 2013 is held to be viable even after the renunciation of the concerned reviewers and presently the NCLT (Public Organization Regulation Council) in this manner to pass a last request on such application in the wake of holding enquiry as per regulation ...," it said.

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