IL&FS case: NCLAT reserves order over NCLT jurisdiction to implead auditors

NCLAT bench sought written reply from MCA by Tuesday to determine whether the NCLT has jurisdiction to initiate civil proceedings against any party

Hearing a plea by Deloitte Haskins and Sells and KPMG arm BSR & Associates, the NCLAT on Friday reserved its order on the NCLT's jurisdiction over impleadment of auditors in the case involving alleged fraud in IFIN, a subsidiary of IL&FS.

The two-member bench led by Chairman Justice S J Mukhopadhaya also sought a written submission from the Ministry of Corporate Affairs by Tuesday, to determine whether the NCLT has jurisdiction to initiate civil proceedings against any party.

The Ministry of Corporate Affairs (MCA) had asked the National Company Law Tribunal (NCLT) to freeze the assets of the former auditors in the case involving alleged fraud in IFIN, a subsidiary of Infrastructure Leasing & Financial Services (IL&FS).

Arguing for the government, a counsel said that impleadment is being sought to explain the conduct by auditors. He said all those persons who have been impleaded are directly attached with the affairs or the management of affairs of the company and whether there is a fraud or not has to be tried on merit when the appeal is contested.

The counsel said it is not relying solely on the SFIO report but also on the findings of the RBI's Inspection report.

The auditor firms have said that the SFIO's interim report is not admissible and argued that they are not associated with IL&FS Financial Services (IFIN) anymore.

The government's financial fraud probe agency SFIO had recommended necessary action against the auditors and also a detailed internal investigation by the RBI to identify reasons for the delay in detecting the lapses.