The Modi govt sent a petition to the National Company Law Tribunal indicating that they found auditing lapses in IL&FS’s books.
Mumbai: The Indian government has sought to reopen the books of Infrastructure Leasing & Financial Services group, alleging evidence of auditing lapses was uncovered while looking into allegations that funds were siphoned from the beleaguered financier.
A probe by India’s Serious Fraud Investigation Office indicated the lender’s accounts were fraudulent and mismanaged, Sanjay Shorey, a lawyer for the government told the National Company Law Tribunal on Friday. The court told the government to notify those involved, including regulators and tax authorities, of its petition and set January 1 as the next hearing date.
India is probing the alleged diversion and siphoning of funds from IL&FS, a systemically important infrastructure financier, which missed a series of debt repayments this year. The group’s struggle to service $12.6 billion in borrowings had roiled the credit market and continues to make it harder for other non-bank lenders to access funds. The government in October replaced the management of the troubled company.
The initial findings of a body overseeing accountants found that IL&FS’s statutory auditors were responsible for mismanagement, Shorey told the court in Mumbai. The petition included copies of the Institute of Chartered Accountants of India’s initial opinion of audits of some companies conducted by Deloitte Haskins & Sells LLP, SRBC & Co. LLP and BSR & Associates LLP, according to a copy of the petition seen by Bloomberg.
A spokeswoman for EY, an SRBC & Co. affiliate, declined to comment before seeing a copy of the petition, while there was no immediate response to an email sent to Deloitte Haskins and a representative for KPMG, a BSR affiliate, wasn’t immediately reachable.
Shorey, who was representing the Ministry of Corporate Affairs, has asked for a re-examination of the books over the past five years of Infrastructure Leasing & Financial Services, IL&FS Financial Services Ltd. and IL&FS Transportation Networks Ltd. He asked that the central government be allowed to appoint an auditor and the books to be finalized in three months. – Bloomberg
This is an old problem. Recall Satyam. KFA could not have been diverting large sums of money and getting away with it for so long if the auditors had been diligent and straight. Independent directors one does not expect much from, but statutory auditors cannot get away lightly for their transgressions.