NCLT Allows Probe into Deloitte, BSR, SRBC in IL&FS Fraud Case

IL&FS Case: NCLT Allows Proceedings Against Auditors to Continue

Key Findings

• The National Company Law Tribunal (NCLT) has allowed proceedings against Deloitte, BSR & Associates, and SRBC & Co to continue in the Infrastructure Leasing & Financial Services Ltd (IL&FS) case.
• The tribunal has ruled that auditors cannot claim immunity and must be assessed based on evidence of their involvement in alleged fraudulent conduct.

Background

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The case relates to proceedings under Section 339 of the Companies Act, 2013, which addresses fraudulent conduct of business and applications by auditors and their partners seeking to be excluded from the case. The Union of India initiated the proceedings in 2018 following governance failures at IL&FS and its units.

Ruling

The NCLT has clarified that liability is not automatic and would depend on evidence establishing "knowing" involvement in the alleged fraud. The tribunal emphasized that mere professional engagement as an auditor is not sufficient; their role must be determined based on the facts and material on record.

Industry Implications

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The ruling significantly increases litigation exposure for audit firms, while leaving the question of liability open. Legal experts said the order marks a shift in how courts may approach auditor accountability and could have wider implications for how fraud provisions are invoked in corporate cases.

Expert Analysis

• Alay Razvi, Managing Partner at Accord Juris, said the ruling increases exposure for Deloitte, BSR & Associates LLP, and SRBC & Co. to proceedings under Section 339 in the IL&FS case.
• Raheel Patel, Partner at Gandhi Law Associates, said the order widens the immediate litigation exposure of Deloitte, BSR, and SRBC but stops short of attributing liability.
• Akshat Pande, Managing Partner at Alpha Partners, said the ruling clarifies the interpretation of Section 339 and rejects a narrow reading of "any person" to include third parties who participated in or facilitated fraudulent conduct.