ICAI and SFIO at loggerheads over non-cooperation in IL&FS probe

The Institute of Chartered Accountants of India (ICAI) has written to PM Narendra Modi, saying the Serious Fraud Investigation Office (SFIO) was not co-operating with it in the probe of Infrastructure Leasing & Financial Services (IL&FS). It also alleged the SFIO did not give it information when chartered accountants were allegedly helping shell companies at the time of demonetisation.

The ICAI has started an inquiry into the role of auditors of IL&FS, but has got a cold response from the SFIO, which is also probing the case. When the body wrote to the SFIO, asking it to provide information on IL&FS, the SFIO refused to do so, said sources at the ICAI.

The SFIO is investigating IL&FS for alleged misappropriations of funds, default on inter-corporate deposits, etc.

So far as setting up the National Financial Reporting Authority (NFRA) is concerned, the ICAI had sought former attorney general Mukul Rohatgi’s opinion. Rohtagi will assist it on the issue whether the ICAI can investigate the cases the NFRA probes. Section 132 (4)(a) of the Companies Act denies such powers to the ICAI. 

ICAI President Naveen Gupta said, "The Chartered Accountants Act is a special piece of legislation and can be over-ridden only if the Act is repealed. The Companies Act is a general Act that cannot stop the ICAI from investigating any companies.” Gupta said the NFRA would not be able to point out discrepancies or non-compliance of public sector undertakings because the government would appoint its members. The government is setting up the NFRA to take up cases against auditors. 

While the ICAI can punish auditors, the NFRA can even penalise the auditing firm.

IL&FS has been the first case sent to the NFRA for investigation.