RBI appoints special auditor for First Leasing; firm's MD allowed to quit

The Reserve Bank of India (RBI) has appointed an auditor for a special audit of the book of accounts and transactions of First Leasing Company of India, from the year ended March 31, 2010.

A C Muthiah, the chairman of First Leasing, also said its board of directors had accepted last week's resignation of Farouk Irani as managing director (MD), though this would not absolve him of accountability to the company, stakeholders and statutory authorites.

The company told the BSE exchange on Friday that N C Rajagopal & Co, chartered accountants, had been appointed by RBI to do the special audit.

The company has also appointed former Supreme Court judge, S Mohan, as an additional director (non-executive and independent) on the board.

Earlier, the company said its statutory auditor had informed it that some of the audit reports and certificates issued by them should no longer be relied on and the financial statements might undergo amendments.

In September 2013, the RBI had directed the company not to transact any business or incur any further liabilities, in the light of the findings of the inspection of the books of accounts and other records as on March 31, 2013. It also restricted the Chennai-based finance company from declaring or distributing a dividend. The company is not to sell, transfer, create a charge or mortgage or deal in its property or assets without RBI's permission.

The action on Irani came after he conveyed his plan to resign last week, in view of the recent developments. These included media reports stating he'd admitted to a gap of around Rs 1,000 crore in the company's balance sheet, a reply by the board of directors to the regulator on the issue and Irani's attempt to withdraw the board's reply.

The company was incorporated by A C Muthiah as the First Leasing Company of the Country on September 10, 1973, with Irani, a pioneer of corporate leasing services in India, as MD.