Indore-based EKI Energy Services statutory auditor removal draws flak

SES has urged the market regulator Securities and Exchange Board of India (Sebi) to probe the affairs at EKI

Indore-based EKI Energy Services has faced criticism over the controversial ouster of its statutory auditor Walker Chandiok & Co.

A resolution to remove the well-known audit firm before the expiry of its term received 100 per cent ‘against’ votes from public institutions.

Nevertheless, the resolution was still cleared thanks to ‘for’ votes from the promoter group, who hold 73.42 per cent stake in the company.

In a stock exchange filing, EKI has said the removal of the auditor was “on the grounds of unreasonable fee hike, inordinate delay in the conclusion of audit for the fourth quarter and financial year ended March 31, 2023, resulting in adverse consequences including statutory fines, significant erosion of faith and trust on account of unresponsiveness, lack of involvement of the engagement team and on other various grounds.”

The removal is, however, subject to the approval of the central government, the company said.

EKI has already appointed Mahesh C Solanki & Co as its new auditor.

Proxy advisory and governance firm Stakeholders Empowerment Services (SES) said the removal and appointment of the new auditor before obtaining central government’s approval is unlawful.

“The company appears to be a hot bed for auditors, having seen two resignations and the removal, all in a period of less than three years. Two auditors resigned, citing pre-occupation, which can never be detected or certified or countered. Next, the company appoints Walker Chandiok & Co giving a false hope to investors regulators, that this time the company means business and handed over the audit to an international firm. Few months down the line, the situation was created ripe for third divorce in a span of three years, this time the auditor was not obliging and divorce could not be obtained by mutual consent,” said SES.

An email sent to the company didn’t elicit a response.

SES has asked markets regulator Securities and Exchange Board of India (Sebi) to probe the affairs at EKI.

“Sebi must order a forensic audit of the company, while asking Walker Chandiok & Co to complete their audit work. Since, it is a case where auditors are not getting data, a suitable regulatory order must be passed,” it has said.

“Sebi should ask ICAI to seek information from auditors who resigned citing a convenient excuse of pre-occupation to know the real reason, as probability theory does not support strings of resignation with the same underlying reason of pre-occupation. It is easy to nail the lie, as these auditors would have resigned for more work,” the proxy firm added.

Shares of EKI are down by over 60 per cent so far this year.

Curious case of EKI

• 100% public shareholders voted against the removal of auditor 
• Resolution approved based on votes by promoters 
• Removal of auditor before govt nod against the law, says governance firm SES
• Asks Sebi to order forensic audit of EKI Energy and probe stock price movement
• EKI has sees two auditors resigning, one removed in less than three years