MUMBAI: A bench of the National Company Law Tribunal presided over by VP Singh and Ravikumar Duraisamy reserved its order on whether the tribunal had jurisdiction to ban former auditors of IL&FS Financial Services (IFIN).
The bench’s decision came after it heard arguments from Deloitte Haskins & Sells, BSR & Associates and the ministry of corporate affairs. The Centre is looking to ban Deloitte and BSR, which is a KPMG network firm, for five years claiming there were lapses in their audit work for IFIN.
The audit firms argue that NCLT can only ban existing auditors and lacks the jurisdiction to ban them as they are no longer auditors of IFIN. An auditor is like a chowkidar (watchman) and if there is a theft in the house, he should first be sacked and then it should be decided if additional legal action must be taken against him, lawyers arguing for Deloitte told NCLT on Monday.
“If an invited guest steals some crockery or cutlery, can the chowkidar be blamed?” asked Janak Dwarkadas, senior counsel appearing for Deloitte. Sanjay Shorey, the director of legal prosecution at the ministry, said regardless of the way certain sections of the law were worded, it was clear NCLT has such jurisdiction. Citing certain sections of company law and high court judgements, he said where it is written that business “is being conducted,” it includes “was” conducted in many contexts.
“Even if a business has closed down and auditors have resigned, the section doesn’t cease to have jurisdiction,” said Shorey, referring to Section 140 (5) of the Companies Act. Dwarkadas said he would focus on the meaning of the section without getting into semantics. “Jurisdictional aspect doesn’t depend on the size of the scam,” he added.
He also challenged some high court and Supreme Court judgements quoted by the Centre. “One can’t apply a judgement in a section, in another case, in another context and rely upon that in a completely different case,” said Dwarkadas. Shorey argued that the defence in the past had claimed that the Serious Fraud Investigation Office’s investigation report doesn’t have any facts, but “they will run for cover once we read out the fraud part.”
Source- Economic Times.