IL&FS Scam: NCLT Allows Govt to Re-open Past 5-years Financial Statements of IL&FS, ITNL and IFIN
Moneylife Digital Team 02 January 2019
The National Company Law Tribunal (NCLT) has allowed the government to re-open and re-cast the past five years' financial accounts of Infrastructure Leasing & Financial Services (IL&FS) and  its subsidiaries IL&FS Transportation Networks Ltd (ITNL) and IL&FS Financial Services Ltd (IFIN).
Last month, while submitting an interim report prepared by Institute of Chartered Accountants of India (ICAI), the Ministry of Corporate Affairs (CA) had sought the reopening of  financial records of IL&FS and IFIN and ITNL.
According to the MCA’s application, IL&FS and its group company auditors, Deloitte Haskins & Sells LLC, EY affiliate SRBC & Co. LLP and KPMG affiliate BSR & Associates LLP, understated bad loans and did not point out the inadequate provisioning made against such loans, violating norms set by Reserve Bank of India (RBI).
No reasons were given for increasing the liabilities or loans and the borrowing costs of the financial services subsidiary, leading to non-disclosure of the consequential impact of insufficient provisioning for debts, the report says.
ICAI, in its interim report had stated statutory auditors of IL&FS acted in a 'negligent and fraudulent manner' and prepared incorrect financial statements of the debt-laden group. Deloitte Haskins & Sells LLP, SRBC & Co. LLP, an affiliate of Ernst & Young (EY) and BSR & Associates LLP were auditors of IL&FS and its two main subsidiaries. According to reports, the newly constituted National Financial Reporting Authority (NFRA) may be assigned auditing of past five years’ books of accounts of IL&FS. 
During the last hearing, the NCLT had asked to send notices to Securities and Exchange Board of India (SEBI), RBI, Income Tax department and other statutory authorities before taking any decision on re-opening of IL&FS books. On Monday, a counsel for SEBI told the Bench that the market regulator did not have any problem in re-opening of the group’s listed companies’ financial statements, says a report from
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