IL&FS: NCLT allows MCA’s application to appoint Mukund M Chitale & Co as Statutory Auditor [Read Order]

The Mumbai Bench of National Company Law Tribunal (NCLT) has allowed an application moved by the Ministry of Corporate Affairs (MCA) to appoint Mukund M Chitale & Co as Statutory Auditor for IL&FS Financial Service Limited (IFIN) for Financial Year 2018-19..The NCLT Bench of judges V P Singh and Rajesh Sharma passed an order on October 18. The Bench has been hearing the petition filed by the MCA seeking a five-year ban on BSR & Associates (a KPMG arm) and Deloitte Haskins, former auditors of IL&FS..The MCA had applied to the Tribunal for appointment of statutory auditor after the Supreme Court, on September 26, granted liberty to the Central Government to move an application before NCLT seeking the appointment of Auditor for IL&FS, in order to fill up the vacancy created by the resignation of auditors BSR & Associates (a KPMG arm). Deloitte Haskins & Sells had stopped being an auditor after Fiscal Year 2018..With this, a Division Bench of Justices UU Lalit and Indira Banerjee of the Supreme Court had disposed of an SLP filed by MCA challenging the September 4 order of the Bombay High Court which had granted interim relief to former auditors and had stayed proceedings of NCLT Mumbai Bench..Moreover, Solicitor General Tushar Mehta, appearing for the MCA had submitted before the Supreme Court on September 26, that after the resignation of the BSR and Deloitte as its auditors, IL&FS passed a resolution on July 11, this year appointing M/s. Mukund M. Chitale & Co. Chartered Accountants as Statutory Auditors to fill up the vacancy..Mehta had further submitted that M/s Mukund M. Chitale & Co. had, however, expressed their inability to take up the assignment, which would, in turn, mean that fresh appointment is required..Thereafter, advocate Sanjay Shorey, Director of Legal Prosecution for MCA moved an application to appoint Statutory Auditor before NCLT on October 11. The MCA, in its application, contended that Mukund M. Chitale& Co. have submitted their consent for the appointment as Statutory Auditors for IL&FS Financial Services Ltd (IFIN), vide letter dated September 30, 2019..The former auditors Deloitte and BSR (respondents) opposed the move and argued that the MCA has intentionally and incorrectly interpreted the liberty granted by the Supreme Court and selectively quoted the Apex Court order..The former auditors and their partners went on to submit,.“A conjoined reading of Supreme Court order, i.e. the liberty granted by the Supreme Court coupled with the refusal to interfere with the Bombay High Court interim order clearly shows that the Supreme Court did not grant liberty to the Petitioner to approach this tribunal in the present proceedings, i.e. proceedings under the Company petition.”.The Respondents further contended that the applicant’s attempt to appoint a Statutory Auditor is ill-conceived and it seeks to do so in a petition where the company IFIN is not a party..However, the NCLT Mumbai held that the application is based on the liberty granted by the Apex Court to the MCA to move an application for appointment of Statutory Auditor and therefore there are ‘sufficient grounds’ for such an appointment..Allowing the MCA application, the NCLT approved the appointment of Mukund M Chitale & Co for Financial Year 2018-19..The Tribunal ruled,.“Since IFIN has already appointed Mukund M Chitale & Co as its statutory Auditor, but under first proviso to Sec 140(5) of the Companies Act only Union of India is authorised to appoint or change the Auditor, and the Auditor has shown its inability to take the assignment without sanction of Union of India and the Company can’t remain without Statutory Auditor. .Thus, the appointment of the Statutory Auditor made by the company shall be considered as an appointment of Statutory Auditor under the first proviso to Section 140(5) of the Companies Act 2013.”.[Read Order]