Ministry asks NCLT to freeze assets of IFIN auditors

In a bid to tighten its noose over audit majors Deloitte and BSR, the Corporate Affairs Ministry (MCA) has filed an application at the Mumbai bench of the National Company Law Tribunal (NCLT) to freeze the assets of the auditors of the defaulting firm IL&FS Financial Services (IFIN) to prevent fund diversion.

The plea comes over nearly two months after the MCA asked the tribunal to ban both the firms from audit operations in the country for a period of five years.

According to the Serious Fraud Investigation Office (SFIO), Deloitte had disregarded the Reserve Bank of India's (RBI) regulations and turned a blind eye to IFIN's "evergreening" of loans, and never cross-checked any of the certificates the company used to mislead lenders.

Both Deloitte and the KMPG arm BSR & Associates, the investigation showed, had failed to fulfill their duties as auditors.

In June, BSR & Associates resigned as the statutory auditor of the financial arm of IL&FS after the MCA sought a ban, while Deloitte was the statutory auditor of IFIN till the financial year 2017-18.

The NCLT has already reserved its order on the plea to ban both the firms.

The crisis in the infrastructure lending major IL&FS came to light in September last year when it defaulted on its commercial papers, a short-term debt instrument. Following the crisis, the government appointed a new board led by Uday Kotak.

Investigations into the matter have opened a can of worms with both the auditors and the rating agencies of IL&FS and its group companies along with the erstwhile management under the scanner. Few of the prevous IL&FS top officials have also been arrested in this connection.

( With inputs from IANS )