Bombay High Court on Tuesday quashed all prosecution against the two firms that had been pending before NCLT and a special court in the city, over alleged financial irregularities
Mumbai: Granting relief to audit firms BSR and Associates, and Deloitte Haskins and Sells, both former auditors of IL&FS Financial Services, the Bombay High Court on Tuesday quashed all prosecution against the two firms that had been pending before the National Company Law Tribunal and a special court in the city, over alleged financial irregularities.
BSR, part of KPMG India, and Deloitte had moved HC last year challenging the validity of the Union government's plea before the NCLT seeking their removal as auditors of IL&FS.
Such removal under section 140 (5) of the Companies Act would also bring along a ban on the audit firms for five years.
The Union Ministry of Corporate Affairs had sought such removal and also initiated criminal proceedings against the firms for their role in alleged financial irregularities at the now bankrupt IL&FS Group.
In August last year, the NCLT had found merit in the Union government's pea, and subsequently approved the proposed removal of both firms.
The firms however, approached HC arguing that they had already resigned as auditors of IL&FS much before the Ministry sought their removal.
They had, therefore, challenged the constitutional validity of section 140 (5) of the Act.
The section deals with removal and resignation of auditors and imposes a five year ban on an auditing firm that is proven to have "acted in a fraudulent manner", or to have "abetted or colluded in any fraud".