NATIONAL COMPANY LAW TRIBUNAL

[PETITION TO BAR THE AUDITORS OF IL AND FS BEFORE NCLT]

Company Petition No .556924 of 2019

Details of Petition:

Particulars of the petitioner :

i. MINISTRY OF CORPORATE AFFAIRS (Through the Joint Secretary )

ii. New Delhi, India
iii. 114/24 North Avenue, Parliament Street, New Delhi
iv. Telephone - 05112405728

Particulars of the respondent(s) :

i. Respondent(1) : Deloitte Hashkins

ii. New Delhi, India
iii. 115/5 , DLF Dreamcity, New Delhi, India
iv. Telephone -055566879.

Petition in the form of affidavit under Section 140(5) of the Companies Act for failure
to detect and report the scams that took place involving IL&FS and its 21 entities when
they were the auditors of the IL&FS.

I, Jay Nirupam solemnly affirm and say as follows:

1. I am the Joint Secretary to the Ministry Of Corporate Affairs

2. I have read the petition now shown to me and state that the statements made in all
paragraphs to thereof are correct and true to my knowledge.

3. The facts of the case are given below:

Infrastructure Leasing & Financial Services Limited (IL&FS) is a systemically important

Core Investment Company with the Reserve Bank of India and is engaged in the business of
giving loans and advances to its group companies (and holding an investment in such
companies). IL&FS has a large number of group companies across various sectors such as
Energy, Transportation, Financial Services etc. IL&FS was initially promoted by the Central
Bank of India, HDFC Limited and the Unit Trust of India.

IL&FS Group, which has approximately over Rs. 91,000 crores in debt, is facing a severe
liquidity crisis. Between July 2018 and September 2018, two of the subsidiaries of IL&FS
Group reported having trouble in paying back loans and inter-corporate deposits to
banks/lenders.

In July 2018, the road arm of IL&FS was facing difficulty in making repayments due on its
bonds. Further, in early September 2018, one of the subsidiaries of IL&FS Group was unable
to repay a short-term loan of Rs. 1,000 crore taken from Small Industries Development Bank
of India (SIDBI). Also, certain group companies defaulted in repayments of various short and
long-term deposits, inter-corporate deposits, and commercial papers.

IL&FS failed continuously to service its debt and the imminent possibility of a contagion
effect in the financial market led the Central Government to move an application under
Sections 241 and 242 of the Companies Act, 2013 before the NCLT, Mumbai Bench.

It sought the immediate suspension of the Board of Directors of IL&FS and the appointment
of specified new directors, on the ground of massive mismanagement of public funds by the
erstwhile Board. It was also alleged that the affairs of the company were being conducted in a
manner prejudicial to the public interest.

On May 30, SFIO submitted a charge sheet against 30 parties, including two auditor firms,
for concealing information by not flagging the alleged criminal conspiracy and misreporting
the financial statements of the IL&FS firms.

MCA through it’s joint secretary has moved against the auditors, Deloitte Haskins and Sells
as well as BSR and Associates LLP and their former auditors, under Section 140(5) of the
Companies Act, for their role in “perpetuating the fraud” at IFIN, a subsidiary of IL&FS. The
Ministry seeks debarment of these audit firms and their audit partners. It also seeks interim
attachment of their properties, including bank accounts and lockers.
Ministry of Corporate Affairs has started a prosecution against the auditors of IL&FS based
on the Serious Fraud Investigation Report ((SFIO). Thereby Deloitte and BSR Associates are
prosecuted for their failure to detect and report the scams that took place involving IL&FS
and its 21 entities when they were the auditors of the IL&FS. The Auditors Deloitte and BSR
are currently arguing before NCLT that "the NCLT can't pass final order to ban auditors
under Section 140(5) of IBC on prima facie evidence of fraud and an auditor, which has
already resigned can't be double punished".

NCLT must allow the prosecution of C Sivasankaran and his group based on the SFIO report.
The report reveals that the management of IFIN has missed their position to give loans to
Shiv Group ignoring the fact that many companies failed to repay the loans given by the
IFIN. Tribunal must also allow the MCA to implead Surinder Singh Kohli and Subhalakshmi
Panse who were the independent director of IFIN and member of Audit Committee who were
aware of the NPAs of the company and knew that loans were granted to the already
defaulting borrowers.

4. Jurisdiction of the Tribunal: The petitioner declares that the matter of petition falls
within the jurisdiction of the Tribunal under section 140(5) of the Act.

5. Limitation - The petitioner further declares that the petition is within the limitation as
prescribed in the provision of section 140(5) read with section 433 of the Act as it has been
filed within time prescribed.

6. Matter not pending with any other Tribunal etc. - The petitioner further declares that
the matter regarding with this petition has been made is not pending before any Tribunal of
law or any other authority or any other Tribunal.

7. Particulars in respect of the fee paid in terms of the Schedule of Fees of these rules.-

(i) Amount of fees – Rs.100/-

(ii) Name of the Bank on which Demand Draft is drawn or Online Payment is made- State
Bank Of India

(iii) Demand draft number : DD531035

8. It is therefore prayed that directions may please be given:

Relief(s) sought- In view of the facts mentioned in paragraph 5 above petitioner prays for
the following relief(s)

(i) The auditors of IL and FS should be prosecuted under section 241 and 242 of the Act

(ii) The auditors of IL and FS should be banned from auditing accounts of any company for a
period of 5 years.

(iii) The Honourable Tribunal may also pass any order it may deem fit in the light of justice ,
equity and good conscience.

Dated this 10th day of October 2019

(Signature of the petitioner)

Solemnly affirmed before me at Mumbai, India on this (month) 10th day of October 2019

(signature)