After NCLT nod, ICAI arm to reopen books of financially crippled IL&FS

An arm of Institute of Chartered Accountants of India (ICAI) will be reopening the books of the financially crippled infra lender IL&FS.

The Mumbai bench of the National Company Law Tribunal (NCLT) had on January 1 directed the reopening of the books and recasting of the financial statements of IL&FS, IL&FS Financial Services, IL&FS Transportation Networks between fiscal years 2012-13 to 2017-18.

In view of the substantial public interest involved in the matter, ICAI Accounting Research Foundation (ICAI ARF) will be carrying out the task, an official statement said.

The whole exercise will be independent, it said, acknowledging the Serious Fraud Investigation Office (SFIO) is also carrying out an investigation on IL&FS and its group/ subsidiary/associate companies.

Being a 'section 25' company, whose purpose is not for profit, ICAI ARF can outsource this assignment so that it is over within a reasonable period of time, the statement added.
 

The NCLT had allowed for the reopening under Section 130 of the Companies Act to ascertain financial mismanagement.

The government, which took over the board of the diversified and complex IL&FS last year, wanted to check the balance-sheets of the crippled group and its two listed subsidiaries.

Earlier, SFIO and ICAI reports had indicated that the accounts were prepared a fraudulently and negligently in the last five years by the previous management.

The statutory bodies including, the the Reserve Bank, the markets watchdog Sebi and the Income Tax Department gave their no objection for restating the accounts.

However, the auditors Ernst & Young owned SRBC & Co, Delloitte Haskins & Sells and KPMG affiliate BSR Associates had opposed the move citing that they had no role in the alleged frauds arguing financial accounts are made by the company and not the auditors.

The NCLT had observed that based on the ICAI and SFIO reports though it cannot be concluded that the auditors and former directors had any role in preparing of the financial accounts, lets reopen it in the interest of fairness.

After allowing the reopening and recasting the books of account of IL&FS, ITNL and IL&FS Financial Services, the tribunal clarified that the order is without any prejudice and will not affect the proceedings before ICAI and SFIO probe.

The group owes over Rs 94,000 crore to lenders, mostly banks.