Supreme Court paves way for prosecution of 2 ex-IL&FS audit firms – Times of India

New Delhi: The Supreme Court on Wednesday set aside the judgment of the Bombay High Court in which it had quashed SFIO-Probe against audit firms BSR & Associates and Deloitte Haskins & Sells, both former auditors of IL&FS Financial Services, for allegedly financial irregularities,
The top court also upheld the validity of Section 140(5) of the Companies Act, 2013, while allowing the appeal of the Serious Fraud Investigation Office (SFIO) and the Center against the High Court’s decision.
The provision deals with the removal and resignation of auditors and imposes a five-year ban on an auditing firm that is proved to have “acted fraudulently” or “abetted or colluded in any fraud”.
“The challenge to the constitutional validity of section 140(5) of the Companies Act, 2013 fails and it is observed that section 140(5) is neither discriminatory, arbitrary and/or violative of Articles 14, 19(1) g) of the Constitution of India, as alleged,” a bench of Justices MR Shah and MM Sundresh said in its 103-page judgment.
It set aside the High Court’s decision, which had quashed proceedings under section 140(5) of the Act against audit firms on the ground that the auditors had resigned. “The application/proceeding u/s 140(5) of the Act, 2013 is maintainable even after the resignation of the concerned auditors and now the NCLT (National Company Law Tribunal), therefore, passing final orders on such application As per the investigation…,” it said.