N SAMPATH GANESH Vs. UNION OF INDIA

JUDGEMENT

(1.) A prayer made under S. 140(5) of the Companies Act,2013 or 2013 Act against the statutory auditors by the Union of India through Ministry of the Corporate Affairs (MCA) in an investigation/dispute regarding constant ever- greening of debts extended to its subsidiary Companies & third parties/companies by IL & FS Financial Services Limited (hereinafter referred to as "IFIN") and alleged dubious role played by its CAs ie company auditors before National Company Law Tribunal ie NCLT and orders passed therein, gives rise to the present bunch of petitions. Petitioners state that said S. 140(5) is unconstitutional and in any case, can not be invoked against the ex-statutory auditors. In WP 5263 of 2019, direction to lodge prosecution issued under S.212(14) of 2013 Act is questioned. Since only law points are argued, we need not refer to the facts which are not crystallized as yet.

(2.) In Writ petition No.4144 of 2019, petitioner is a partner of M/s. BSR and Associates which is a Limited Liability Partnership (LLP) of Indian Chartered Accountants. He has questioned validity of section 140(5) of the Companies Act, 2013. He has also challenged the order dated 9/8/2019 passed by the National Company Law Tribunal, Mumbai Bench whereby his objection to maintainability of Company Petition No. 2062 of 2019 raised by him vide Misc Application No. 2506 of 2019 has been dismissed and that company petition is held to be maintainable under section 140(5) . Objection raised vide Misc Application No. 2505 of 2019 filed by M/s. BSR Associates challenging said maintainability also came to be rejected. M/s. BSR Associates has challenged it vide WP 4145 of 2019. Misc. Application No.2258 of 2019 was filed by Petitioners in WP No. 5023 of 2019 M/s. Deloitte Haskins and Sells, another (LLP), Misc. Application No.2506 of 2019 was filed by the Chartered Accountant Sampat Ganesh, Misc. Application No. 2268 of 2019 was filed by Chartered Accountant Udayan Sen and Misc. Application No. 2270 of 2019 was filed by Chartered Accountant Kalpesh J. Mehta. All these Misc. Applications questioning the maintainability of Company Petition No. 2062 of 2019 were dismissed by common order and the company petition filed by Union of India through Ministry of Corporate Affairs was held maintainable. The petitioners mainly stated that because of resignation tendered by the Chartered Accountants, proceedings under section 140(5) do not survive. The other persons/concerns have filed criminal petitions for challenging the rejection of preliminary objection vide WP No.4145 of 2019, WP No. 5023 of 2019, WP No.5035 of 2019, WP No. 5036 of 2019.

(3.) The NCLT has also passed an order on Misc. Application No. 3254 of 2019 filed in connection with Company Petition No. 2062 of 2019 under section 140(5) of the Companies Act, 2013 for appointment of statutory auditors for IL & FS Financial Services Limited ("IFIN") under first proviso to section 140(5) of the Companies Act,2013. This application was moved by the Union of India through its Ministry of Corporate Affairs, the NCLT has found that under section 140(5) only, the Union of India is authorized to appoint or change the auditor. The auditor appointed by the Company IFIN namely Mukund M. Chitale & Co. (MMC) has been treated as appointment of statutory auditors under section 140(5) by NCLT on 18.10.2019.