IL&FS Fraud Case: NCLAT Restrains Further Action Against Deloitte, SRBC, BSR

The National Company Law Appellate Tribunal (NCLAT) has recently restrained further action against Deloitte Haskins & Sells LLP, SRBC & Co LLP, BSR & Associates LLP and other auditors under Section 339 of the Companies Act, 2013 in the IL&FS matter, pending consideration of their challenge to the maintainability of the proceedings.

The order was passed on May 26 by a bench of Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra.

"We observe that question of maintainability of Section 339 proceeding in subject matter of concern in the Appeal, no further action under 339 can be taken against the Appellant.", it ordered. 

The appeals challenge a March 24, 2026 order passed by the Mumbai bench of the National Company Law Tribunal (NCLT). In that order, the tribunal had allowed proceedings against these auditors and had held that watchdogs cannot be excluded from proceedings

The petitions were originally filed under Sections 241 and 242 of the Companies Act, 2013, concerning oppression and mismanagement in IL&FS companies. According to the appellants, auditors were impleaded on the basis of reports received during the proceedings. Applications were subsequently filed seeking to proceed against them under Section 339.

According to the order, the appellants are auditors and audit firms that had audited IL&FS companies.

The auditors argued that they could not be proceeded against under Section 339 because they were not involved in carrying on the business of the companies. They submitted that auditor disqualifications are specifically dealt with under Section 141 of the Companies Act.

The appellants contended that auditors do not fall within the expression "persons who are knowingly Parties to the carrying on the business" used in Section 339.

"It is submitted that as Auditor, the Appellant had not been Parties to carrying on the business.", it noted. 

The appellants further argued that the NCLT had committed an error in rejecting their objections to the maintainability of the proceedings under Section 339.

The Union of India opposed the appeals. It argued that the expression "Persons who are knowingly Parties to the carrying on the business" is broad enough to include auditors.

According to the Union, the provision can cover any person who was a participant in the business of the company. Auditors could therefore be covered by the provision if the facts so warrant.

"It is a wide expression which can cover any person who was participant in the business of the Company and the Auditors can very well be covered by the expression 'who were knowingly Parties to the carrying on the business.'", Union argued. 

The auditors also relied on the Supreme Court's judgments in Usha Ananthasubramanian v. Union of India and Union of India v. Deloitte Haskins and Sells LLP & Ors.

After hearing the parties, the appellate tribunal observed that the submissions raised by the parties required consideration.

"The submissions raised by Ld. Counsels for Parties need consideration.", the tribunal ruled. 

The tribunal granted the Union of India two weeks to file its reply. Rejoinders, if any, are to be filed within two weeks thereafter.

The tribunal also clarified that parties would remain free to pursue other pending applications for impleadment or interim reliefs. The restriction would apply only to the proceedings covered by its direction.

"We make it clear that the Parties shall be free to press other pending Applications for impleadment or interim reliefs, except the proceeding with regard to which we have passed the order.", it noted. 

The appeals have been listed for admission and disposal on July 13, 2026.