NCLT allows govt to open IL&FS group companies’ past financial statements

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The National Company Law Tribunal allowed the government’s plea for re-opening and re-casting of financial accounts of IL&FS and its group companies.

The National Company Law Tribunal (NCLT) Mumbai today allowed the government’s plea for re-opening and re-casting of financial accounts of Infrastructure Leasing & Financial Services (IL&FS), and its subsidiaries IL&FS Transportation Networks Ltd (ITNL) and IL&FS Financial Services Ltd (IFIN) for the past five years.

In December, the MCA through its Western Regional Director Manmohan had filed a plea for re-casting of financial accounts for the three companies for the period between years 2012-13 and 2017-18.

The Ministry of Corporate Affairs (MCA) suspects these accounts have been prepared in a fraudulent manner in order to “provide a rosy picture” of its financial health, its Director (Legal Protection) Sanjay Shorey said.

The assessment was based on the interim findings of a probe by the ICAI and the Serious Fraud Investigation Office (SFIO).

The three auditors who were in charge of IL&FS books at various points during the period, SRBC & Co, Deloitte Haskins & Sells, and BSR Associates, opposed the move, saying that they had no role in any alleged fraudulent transactions. “We don’t prepare accounts. We just audit accounts, which were prepared by the company itself,” lawyers for one of the auditors told the tribunal.

The tribunal told MCA to wait for the final findings of the ICAI report before determining any fault on the part of the auditors. It did, however, observe that that the SFIO interim report had raised serious concerns over the accounting practices at the company.

At the last hearing, after MCA had sought to open IL&FS’ books under a rare provision of companies’ law not invoked before, the NCLT had asked it to send notices Sebi, RBI, Income Tax and other statutory authorities. A counsel for SEBI counsel told the court it did not have any problem in re-opening of the group’s listed companies’ financial statements.