Statements of CAs always qualified with riders: SC

 Statements of CAs always qualified with riders: SC

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23.01.2022

Writing the judgment, Justice V Ramasubramanian, part of a bench comprising Justice Hemant Gupta, said, “The statements of the chartered accountants are always qualified with certain riders such as ‘according to the information and explanations given to us in the course of our audit’ or ‘to the best of our knowledge and belief and according to the information and explanations given to us’. ”

The bench added, “The statement in the auditor’s report is as per the information given to them or as per the information culled out to the best of their ability”.

The SC said the CBI registered an FIR for the offences  under Section 420 read with Section 120B of the IPC only on March 16, 2015, nearly four years after the termination of the deal. “The officers of Antrix as well as officials of the government were also implicated in the FIR for offences under the Prevention of Corruption Act, 1988. Therefore, the appellants cannot set up a plea of estoppel on the ground that the termination of the agreement in the year 2011 was not on the ground of fraud, when the discovery of fraud itself was many years later,” it said.

It also rejected the plea against winding up on the ground that even during the ICC arbitration proceedings, Antrix had not taken the plea of fraud. The bench said, “The arbitral proceedings commenced in 2013 and the award itself was passed on September 14, 2015. Antrix cannot be expected to plead fraud in the arbitral proceedings, even before the discovery of fraud. ”

The bench said, “Persons who are ducking/avoiding summons in the criminal prosecution, cannot be heard to contend that they must have been heard in the petition for winding up. Taking advantage of their citizenship/residence abroad, these shareholders are prosecuting proceedings for the enforcement of (i) ICC Arbitral Tribunal Award in India; and (ii) BIT Awards overseas, even while making it impossible for CBI to serve summons on them for the past five years. It is not open to such persons to raise the bogey of failure to afford an opportunity. ”

Can’t cite clean chit by auditor to stall co’s winding up, says SC

New Delhi: In the recent landmark Antrix-Devas judgment, the Supreme Court ruled that proceeding for winding up of a company on ground of perpetrations of a fraud cannot be stalled by shareholders by citing reports from chartered accountants or auditors giving clean chit or reporting nondiscovery of any fraud during the period inquestion.

The SC rejected the arguments of Devas and its shareholders that since the au- ditors’ reports of 2012, 2016, 2017 and 2020 had certified that "no fraud on or by the company has been noticed or reported during the course of the audit", the AntrixDevas deal was terminated not on the ground of fraud. "The auditor’sreport can neither be taken as gospel truth nor act as estoppelagainst the company," the court said.

Writing the judgment, Justice V Ramasubramanian, part of a bench comprising Justice Hemant Gupta, said, "The chartered accountants/auditors are notexperts either in criminal law or in the technology that formed the subject matter of the agreement between Antrix and Devas ."