Audit regulator National Financial Reporting Authority (NFRA) has banned Udayan Sen, former CEO of Deloitte India, for undertaking any auditing activities for 7 years. He has also been asked to pay a penalty of Rs 25 lakh. The regulator's action came in light of his role in the audit of scam-hit IL&FS Financial Services (IFIN).
"CA Udayan Sen is debarred for the period of seven years from being appointed as an auditor or internal auditor or undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate," NFRA said in its order on Wednesday.
In January, NFRA had sent a show cause notice to Sen, who was the Engagement Partner for Deloitte Haskins and Sells in the statutory audit of IFIN for the year 2017-18. The show cause notice enquired why action should not be taken against him for professional misconduct.
In response, Sen filed a writ petition before Delhi High Court to withdraw the show cause notice by NFRA in February. In his plea, he contested that NFRA was not even in existence when the audit in question was conducted. He claimed that any action against him would be retrospective as any regulation or regulator has no jurisdiction over an event that occurred before they came to force.
However, Sen filed an "interim/protem" reply in June, followed by a supplemental response to the show cause notice on July 20. He stated that his supplemental response should be read with his interim response and together they shall constitute his response to the show cause notice, NFRA said in its statement.
"Keeping in view the principles of natural justice and of fairness, NFRA has examined all the replies filed by the CA, and other material on record, and has proceeded to pass this order," the regulator stated.
NFRA further added that it will not implement its order till July 31, 2020, in view of an explicit direction from the Delhi High Court. The court will hear the matter next on this date.
"As a professional accounting firm we are surprised and concerned that the NFRA has chosen to issue and make public an order against a former partner of the Firm, in spite of the question of its jurisdiction being sub-judice and awaiting adjudication and disposal by the Hon'ble Delhi High Court," a Deloitte India spokesperson said,
IFIN and other entities from the Infrastructure Leasing and Financial Services (IL&FS) group continued to enjoy high ratings from various rating agencies due to window-dressing of the company books. The wrongdoings at the company came to light in 2018 after the IL&FS group and its entities started defaulting on debt repayments.