Ministry of Corporate Affairs (MCA) has asked the National Company Law Tribunal (NCLT) to freeze the assets of the former auditors of an Infrastructure Leasing & Financial Services (IL&FS) subsidiary, arguing that the step is needed to stop fund diversion. This seems to be first time when MCA has instructed NCLT to freez assets of Auditor

The government’s counsel requested the tribunal to pass an order to freeze the bank accounts of 23 proposed respondents that have been newly impleaded in MCA’s main petition against IL&FS, including Deloitte Haskins & Sells LLP and BSR Associates LLP, the former auditors of subsidiary IL&FS Financial Services (IFIN) and other auditors

The legal prosecution argued that they are really careful to use words like fraud or collusion but as they go deeper into the affairs of the group companies and directors, they are of the view that there is more than what meets the eye, so MCA are seeking an order to freeze assets of audit firms, its partners as well as the erstwhile directors of IFIN.

However, the MCA said the audit firms could be granted relief so that they could meet their operational costs such as salaries, electricity bills, transportation and rental costs, they would be allowed to withdraw a sum of Rs 1 lakh per month.

The government had moved NCLT to ban Deloitte and BSR Associates, for five years for their alleged role in financial irregularities in the IL&FS case. The tribunal has reserved its order on the plea for the ban.

The NCLT, Mumbai, in its December 3 order, had barred former IL&FS directors from “creating third-party rights, mortgaging or alienating movable and immovable assets fully or partly owned”. The MCA has prayed to the NCLT to extend the same order to audit firms and their partners named

The tribunal clarified that it won’t pass an order on freezing the assets while the appeal of the auditors is pending with the National Company Law Appellate Tribunal (NCLAT). After hearing the government’s arguments, the bench adjourned the case to August 28