(MENAFN - Asia Times) The crisis in India's leading shadow banker IL & FS group has raised questions about the role played by well-known auditors such as Deloitte and KPMG for not raising timely red flags on bad loans and manipulation of accounts.
The Ministry of Corporate Affairs has approached the National Company Law Tribunal to bar the auditors of the IL & FS Financial Services ( IFIN ) – Deloitte Haskins & Sells and BSR & Associates – from the business for five years for alleged collusion with the IFIN management. BSR is a KPMG network accounting firm.
The ministry's application also named individuals – former Deloitte chief executive Udayan Sen, Deloitte partner Kalpesh Mehta and BSR partner Sampath Ganesh. It has also sought to appoint a new statutory auditor for the company.
The National Company Law Tribunal has asked the auditors to file replies by June 19. The case has been listed for hearing on June 21.
Also Read:India's IL & FS board seeks ban on Deloitte
The move comes after an investigation by the Serious Fraud Investigation Office, which allegedly revealed that auditors connived with IFIN's former directors to conceal information about wrongdoing by managers.
The entire IL & FS network had more than 35 firms that audited subsidiaries, joint ventures, and associate firms.
Some of the major Indian firms including Sharp and Tannan, KS Aiyar & Co and MP Chitale were auditors of the subsidiaries. The Serious Fraud Investigation Office is investigating the role played by senior executives and audit committee members of these 35 companies.
In a related development, theSerious Fraud Office investigation also revealed that in 2017 a complaint by a whistleblower was allegedly covered up by the top management of IL & FS in connivance with independent directors. The audit committee of IFIN was accused of simply abiding by the management version and not delving into allegations made by the whistleblower.
The scam at IL & FS came to light last year after several group entities defaulted on repayments due to severe liquidity problems.Later, the government appointed a new board of directors, led by noted banker Uday Kotak, which is now working on ways to revive the ailing group. IL & FS group has an accumulated debt burden of more than 900 billion rupees – close to US$13 billion.
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