BSR & Associates gets temporary relief from HC in IFIN audit case

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In temporary relief to BSR & Associates, a KPMG affiliated firm, the Bombay High Court has stayed the criminal case proceedings under section 140 (5) of the Companies Act filed against the audit firm in National Company Law Tribunal (NCLT), by the Ministry of Corporate Affairs (MCA) until further notice.

The court directed the MCA and Serious Fraud Investigation Office (SFIO) to file their replies within four weeks. The case is in connection with alleged lapses in the auditing of IL&FS associate firm IFIN.

The case was being heard by a special court in Mumbai, while simultaneous proceedings were being heard by a bench of the NCLT.

"The government initiated action against BSR & Associates just a day after the Serious Fraud Investigation Office (SFIO) submitted its 32,000-page interim report," argued senior counsel Mukul Rohatgi. “The government shouldn't have taken action on the bases of the interim report filed by investigation agencies."

Senior Counsel, Aspi Chinoy, argued that the case filed by BSR & Associates was only to stall proceedings against them.

"They (BSR) are saying that the action is based on the interim report, but we have nowhere mentioned that the report is interim. This is the final report as far as IFIN is concerned, but the agencies are conducting investigations on 79 other subsidiaries of IL&FS and it is only in that context that we are calling it an interim report," Chinoy stated.

"After the proceedings were initiated, BSR resigned as auditors to make the petition of the government infructuous," he added.

The counsel for the government argued that the auditor could have approached the National Company Law Appellate Tribunal (NCLAT) like Deloitte Haskins and Sells.

Further countering BSR’s arguments about the investigation report, Hiten Venegaonkar, counsel for the SFIO said that the report of the investigation agency is final. “Only when the central government asks to submit an interim report is when we submit such reports, but this was not sought in this case. We have arrested two people on the bases of this report and they are currently in the jail,” he argued.