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The Supreme Court on Tuesday issued notice and continued the partial stay granted on the operation of the judgment of the Bombay High Court in relation to the IL&FS case concerning BSR & Associates LLC, and Deloitte Haskins and Sells, both firms being former auditors of IL&FS Financial Services Ltd (IFIN). (Union of India vs Deloitte Haskins and Sells and Anr.)
In April, the Bombay High Court had directed for quashing of criminal complaints regarding fraud under Section 447 of the Companies Act, 2013 against the Ex Directors of IFIN and other accused persons.
The High Court had also directed for quashing of the disqualification proceedings pending before the National Company Law Tribunal (NCLT) under Section 140(5) of the Companies Act, 2013 against the two firms.
The Centre through Ministry of Corporate Affairs had moved the Supreme Court against this order of the Bombay High Court and a Bench of CJI SA Bobde with Justices AS Bopanna and MR Shah issued notice on the plea today.
Interestingly, the part of the High Court’s order which held the proceedings against the auditors to be unsustainable was stayed by the High Court itself for a period of eight weeks allowing time to the Centre to move the Supreme Court in appeal. Today, while the Apex Court questioned the Centre regarding the delay in filing the appeal, also directed for this stay to continue being in operation till further orders.
The two erstwhile IL&FS auditors had moved the Bombay High Court challenged the constitutional validity of Section 140 (5) of the Companies Act, 2013, the prosecution sanction by the Ministry of Corporate Affairs (MCA), as well the move seeking a ban on BSR & Associates for five years.
The High Court had granted relief to the former IL&FS auditors while quashing the prosecution sanctions as well as the proceedings that were initiated before the NCLT for disqualification of the firms.
Separately, the ex-directors of IFIN had approached the High Court seeking quashing of the entire criminal complaint on grounds of non-application of mind by the Centre while granting permission to file a complaint under Section 212(15).
On Centre’s appeal today, the Supreme Court not only issued notice but also clarified in no unequivocal terms that the order of the Supreme Court ought not to affect any other orders regarding grant or refusal of bail to any of the persons accused in the IL&FS scam.
The financial transactions of the IL&FS group came under the scrutiny of the SFIO after the company defaulted on debt worth Rs. 91,000 crore.
The SFIO probe had revealed that auditors colluded with IL&FS Financial Services Ltd (IFIN) executives and concealed information about the wrongdoings of the management despite having full knowledge of the affairs at IL&FS.
Following the SFIO findings, the MCA, under Section 140(5) of Companies Act, 2013, had moved an application before the NCLT seeking the removal of the auditors, and sought a five-year ban on BSR for allegedly conniving with the management of IFIN.
The Centre was represented by Solicitor General Tushar Mehta while the Respondents were represented by a battery of Senior Counsel including Mukul Rohatgi, Harish Salve, Arvind Datar, Shyam Divan, Darius Khambata, Navroz Seervai, and Aabad Ponda