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Two former audit firms of Infrastructure Leasing and Financial Services Limited (IL&FS) -- BSR and Associates and Deloitte Haskins and Sells were searched in Mumbai on Wednesday by the Enforcement Directorate (ED) to probe their alleged role in financial irregularities committed by the company.
The IL&FS had filed for bankruptcy in 2018. The searches at premises of BSR and Associates and Deloitte Haskins and Sells took place under the provisions of the Prevention of Money Laundering Act (PMLA), ED officials stated.
Companies Act, 2013
The agency moved into action following a Supreme Court ruling a week ago on a Bombay High Court verdict that had quashed the Serious Fraud Investigation Office (SFIO) probe against the former auditors.
The apex court bench of Justices MR Shah and MM Sundresh also upheld the validity of section 140(5) of the Companies Act, 2013, that dealt with removal and resignation of auditors and had provision of slapping a five year ban on the auditing firm if found to have acted in fraudulent manner or abetted or colluded in any fraud.
The SC bench observed the section of 140 (5) of the Act was “neither discriminatory, arbitrary and/or violative of Articles 14, 19(1)(g) of the Constitution of India” and allowed the National Company Law Tribunal (NCLT) to move ahead with its inquiry.
The SC ruling and the Centre’s recent move to bring Chartered and Cost Accountants , and Company Secretaries under the ambit of PMLA for five specified financial transactions is expected to put a leash on the money laundering ecosystem.
In 2019, the ED had started probe against the IL&FS after taking cognizance of an FIR filed by the Delhi Police Economic Offence Wing (EOW) against its group companies, IRL and ITNL.
Since then, the ED had arrested Arun Kumar Saha, one of the former members of the committee of directors of IFIN, and Karunakaran Ramchand, former managing director of ITNL, among others. It filed first chargesheet before a special PMLA court in Mumbai accusing the IL&FS top brass of perpetuating illegal payment default crisis and financial bungling. Their assets worth about ₹570 crore were attached.
Meanwhile, a Deloitte spokesperson said, “This routine inquiry is in respect to an ongoing matter regarding a former client and we continue to extend our full cooperation to the authorities.”
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