KPMG audit report on Srei filed in time, say lenders in NCLT

Time period starts from red-flagging of the account, they argue

The KPMG forensic audit report on Srei was submitted within three months of red-flagging the account by banks and was well within the timeline, lenders argued before the Kolkata Bench of the National Company Law Tribunal (NCLT) on Thursday.

Hemant Kanoria, founder of Srei, had moved NCLT for setting aside the forensic audit by KPMG appointed by lenders.

Kanoria’s application mentioned that according to the provisions of a Reserve Bank of India (RBI) circular, dated July 3, 2017, an auditor, once appointed, was required to complete the audit and give the report within a maximum period of three months from the date of the Joint Lender’s Forum meeting authorising the same. On March 23, 2021, KPMG was appointed auditor by the lenders.

However, Abhinav Vashisht, representing lenders before the tribunal, said the time period starts from the red-flagging of the account which took place much later.

The NCLT had granted stay in any action being taken, including with regard to classification which was set aside by the National Company Law Appellate Tribunal. It was only thereafter that the red-flagging could be done.

Between October 12, 2021, and November 17, 2021, six banks red-flagged the account. The counsel also said that the timelines have to do with the RBI and banks and not the applicant and banks.

He also said that it cannot be argued that procedures that are envisaged under the RBI directives and therefore, under the statute because of the Banking Regulation Act are in any manner going to delay the insolvency resolution process. The insolvency process will continue without in any manner affecting the process or the timely resolution of the corporate debtor, the counsel said.

Kanoria’s application had cited an issue of parallel auditing in the wake of the corporate insolvency resolution process in Srei. It mentioned that according to the Insolvency and Bankruptcy Code process, the resolution professional of Srei had appointed BDO India LLP as the transaction auditor of Srei Infrastructure Finance.

The application also said that the “nature, scope and functions” of the audit conducted by BDO India and KPMG were overlapping, due to which there was likelihood of “concurrent, contradictory, and divergent” conclusions emerging between the two auditors.

Among his prayers, Kanoria sought an injunction order, restraining KPMG from continuing the audit of the corporate debtor. However, Ramji Srinivasan, representing KPMG, said the report had been submitted, the banks were in receipt, and they had further acted upon it.