Another auditor in soup, Ministry of Corporate Affairs seeks disqualification from NCLT

Continuing its actions against auditors who fail to perform their duty, Ministry of Corporate Affairs (MCA) has sought disqualification and 5 year ban on statutory auditor of a Pune-based Chit fund company Netwealth Agrotech India. MCA has filed the petition in Mumbai bench of NCLT under section 140(5) of Companies Act. NCLT Mumbai today heard the petition of the MCA and directed for issuing notices to the auditor and directors of the company.

In NCLT, MCA argued that the auditor has signed the balance sheets for the last 5 years without verifying the books of accounts and records of the company. MCA further informed to the NCLT bench that the statutory auditor has also admitted that his digital signature was issued by his assistant.  As per MCA the “Netwealth Agrotech India was not maintaining any books of accounts, vouchers, bills or statutory registers etc nor any meetings were held by the company for finalizing results and audits,  the above fact was admitted by all the directors of company”. Despite this “the statutory auditor Dattatray Maruti Khune conducted the audit and prepared two sets of balance sheets”.  

MCA’s Director Prosecution Sanjay Shourie alleged that statutory auditor Dattatray Maruti Khune is involved in fraud along with the directors of the company and has filed two sets of Balance Sheets for the Financial years 2012-13, 2013-14, 2014-15, 2015-16 and 2016-17 which are false and misleading information and has no previous year’s figures nor any documentary evidences. Also, the said balance sheets are filed on the MCA portal only in the month of April, 2018. MCA claimed the statutory auditor, to cover-up these issue has prepared and filed 2nd set of Balance Sheet for the FY 2012-13, 2013-14, 2014-15, 2015-16 and 2016-17 were prepared only in the month of November, 2018. MCA argued that auditor failed to exercise reasonable care and compliances of various auditing and assurance standards issued by the ICAI.

MCA pleaded the Statutory auditor Dattatray Maruti Khune, being watch dog of the company failed to carry out necessary checks which were required while undertaking the audit of the financial statements and never reported the same.  MCA further argued that he has signed the Balance Sheet without auditing or qualifying in his report, hence it raises serious doubts on working of the auditor who was involved in fraud and has furnished false and misleading information deliberately which did not give a true and fair view of the accounts and further did not exercise due diligence and was negligent in his professional duties as statutory auditor and is liable for penal action.

MCA also argued that the statutory auditor Dattatray Maruti Khune is already working as Assistant professor in State Government College since 1999 and also simultaneously he is practicing as a Chartered Accountant and doing audit of various companies since 20 years. Hence, being a professional in practice he cannot render other services as a professor in a State Government College and liable for action for professional misconduct. Petition in NCLT was filed by MCAs RoC Pune and Regional Director Mumbai, Manmohan Juneja also appeared in the case.  

MCA is also launching a prosecution for violation of section of 447/448 of Companies Act 2013 and will also refer the matter to ICAI for disciplinary action. MCA has already filed petition against auditors Deloitte and BSR & Associates in IL&FS case for not performing duty as statutory auditors.