Here's a breakdown of the recent Bombay High Court decision that stopped actions against Anil D. Ambani based on a disputed forensic audit report.
The Case: Ambani vs. Banks
Anil D. Ambani filed lawsuits against IDBI Bank, Indian Overseas Bank, and Bank of Baroda. The banks had issued notices to Ambani based on a forensic audit report by BDO LLP, which Ambani challenged.
Key Point: Auditor's Qualifications Questioned
- Audit Report Date: October 15, 2020
- Issue: The audit was done by BDO LLP, but the report was signed by someone who was not a Chartered Accountant (CA), breaking the rules.
- Court's View: The judge, Milind N. Jadhav, said the audit report wasn't trustworthy because it wasn't done by a qualified CA, as required by the Companies Act.
Timeline and Actions
- Appointment of Auditor: BDO LLP was hired on May 7, 2019, to audit financial years 2013-2017.
- Report Submission: The report was late and submitted on October 15, 2020, much later than planned.
Banks' Argument
The banks argued that the 2016 RBI Master Directions did not require the auditor to be a CA. They said that the 2024 Directions, which made this clear, should not be applied to the past.
Court's Decision
- Temporary Relief Granted: The court stopped all actions based on the disputed audit report.
- Reasoning: The court stressed the need for audits to follow the rules, highlighting the importance of hiring qualified auditors.
Implications
- For Ambani: This decision gives temporary relief, stopping the banks from taking further action based on the faulty report.
- For Banks: They need to rethink their reliance on the forensic audit report and make sure future audits follow the rules.
Verdict Summary
The court decided that actions based on the audit report could not proceed because the report was not prepared by a qualified auditor as required by law. This decision highlights the importance of following legal standards in financial audits to ensure the actions based on such audits are valid.
