Government Defends Bringing Charges Against Wife, Daughter Of Former IL&FS Unit CEO Bawa

The government today defended bringing charges of mismanagement against Ashakiran Bawa and Akansha Bawa, wife and daughter of Ramesh Bawa, former managing director and chief executive officer of IL&FS Financial Services Ltd.

The Ministry of Corporate Affairs had on April 19 moved an application in the National Company Law Tribunal to implead Ashakiran and Akansha, among others, in the case of mismanagement and oppression in the IL&FS group entities. The government alleged that the Bawas had transferred money and operated lockers and bank accounts in contravention of the restraint order passed by the Tribunal in December 2018.

Sanjay Shorey, representing the government, said the ministry has not received detailed disclosures from the Bawas after to the tribunal's orders. “No income tax returns for the period under investigation have been filed,” he said. It's necessary to implead them as the Serious Frauds Investigation Office will be probing other IL&FS group companies and has not concluded the ongoing investigation, he said.

The counsel for the Bawas objected, arguing:

• No charge of irregularity or allegation has been raised by the SFIO against Ashakiran and Akansha. The final chargesheet filed by the SFIO does not name the Bawas as there was no adverse finding against them.
• Extension of loan by IL&FS Financial Services to entities controlled by the Bawas were in the nature of unsecured loans. Ashakiran and Akansha Bawa are neither directors nor an interested party in the transactions questioned by SFIO.
• The operation of lockers by Ashakiran were for personal reasons. The initial restrain order did not cover bank lockers and, hence, the operation did not amount to a contempt of court.

Removal of Auditors

The NCLT also heard arguments by the government in its case against Deloitte Haskins and Sells and BSR & Associates. The ministry has sought a five-year ban on them for allegedly colluding with the management in dubious lending practices.

Janak Dwarkadas, representing Deloitte, said:

• Section 139 of the Companies Act 2013 deals with the rights of company to appoint and remove of an auditor. The act envisages a corporate democratic setup.
• Sections 140 (1) to 140(4) deal with the company's right to remove or replace an auditor. Section 140 (5) is an exception to this, under which the central government may seek removal of an auditor if the auditor has acted in a fraudulent manner.
• The NCLT does not appoint or remove an auditor, it “directs” a change of an auditor. If the central government requires such change, it can only be done when a final order to that effect is passed by the tribunal.

Counsel representing the Institute of Chartered Accountants of India approached the NCLT seeking copies of applications in this case.

The NCLT posted the matter for next hearing on July 19.