India’s National Financial Regulatory Authority (NFRA) on Wednesday imposed a seven-year audit ban on a former partner of Deloitte’s India unit for lapses in the audit of an infrastructure lender whose debt defaults sparked a credit crisis in 2018.
The NFRA also imposed a 2.5 million rupees ($33,500) fine on Udayan Sen for professional misconduct while inspecting the books of IL&FS Financial Services Ltd (IFIN) for the 2017/2018 financial year.
Sen could not immediately be reached for comment.
In a statement, Deloitte India said “we are surprised and concerned” that the NFRA issued an order against its former partner even while a Delhi court case was pending on the same matter.
After being served a notice by the NFRA in January, Sen had challenged the watchdog in court, which last month said any NFRA order would not come into effect until July 31.
The NFRA said on Wednesday that its order would not take effect before that date.
In Wednesday’s 88-page order, the NFRA said Sen failed to disclose certain facts during the audit of the infrastructure firm and was grossly negligent in performing his professional duties. Sen denied all charges of misconduct before the NFRA, the order added.
“In this case, it has been clearly shown that the independence in mind and independence in appearance of the statutory auditor has been completely compromised,” the NFRA order said.
IFIN is a unit of major Indian infrastructure financing and construction firm IL&FS, which defaulted on some debts in 2018, triggering wider concerns about risk and debt-management practices in the financial industry.
A government-appointed board at IL&FS has been working to resolve the company’s debt issues.
