The prospect of a five-year ban from statutory audit has moved closer for Deloitte Haskings & Sells and KPMG-affiliate BSR & Associates following a ruling by the Indian National Company Law Tribunal (NCLT).
The Indian government is pressing for the ban to be imposed over allegations concerning the two firms’ roles in the IL&FS scandal, allegedly aiding and abetting financial fraud at Infrastructure Leasing & Financial Services and, it is also claimed, ‘deliberately’ failing to report fraudulent activity.
The two firms had challenged the NCLT jurisdiction but this challenge has now been rejected. However, in handing down its ruling, the NCLT did allow for an appeal and another hearing has been scheduled for 5 September 2019. That is unlikely to be the end of the matter, with the NCLT itself expecting the case to go onto the National Company Law Appellate Tribunal and ultimately to the Supreme Court.
Deloitte and BSR had argued that as they had already resigned as auditors, they were not liable to be ‘removed’. The NCLT disagreed and the two firms could now be subject to ‘deemed removal’.