Case Law (SC) -- The Criminal proceedings and the prosecution lodged by the Serious Fraud Investigation Office (SFIO) u/s 140(5) against Auditors shall be maintainable, even after the resignation of the auditors specially when there are conclusive findings against each of the auditors pointing out multiple breaches, violations of statutory duties and fraudulent conduct.

"16. In view of the above and for the reasons stated above, challenge to the constitutional validity of section 140(5) of the Companies Act, 2013 fails and it is observed and held that section 140(5) is neither discriminatory, arbitrary and/or violative of Articles 14, 19(1)(g) of the Constitution of India, as alleged. The impugned judgment and order passed by the High Court quashing and setting aside the application/proceedings under section 140(5) on the ground that as the auditors have resigned and therefore thereafter the same is not maintainable is hereby quashed and set aside. Consequently, the impugned judgment and order passed by the High Court quashing and setting aside the NCLT order holding that even after the resignation of the auditors, the proceedings under section 140(5) shall be maintainable is hereby quashed and set aside. The application/proceedings under section 140(5) of the Act, 2013 is held to be maintainable even after the resignation of the concerned auditors and now the NCLT therefore to pass a final order on such application after holding enquiry in accordance with law and thereafter on the basis of such final order, further consequences as provided under the second proviso to section 140(5) shall follow. However, it is made clear that we have not expressed anything on merits on the allegations against the concerned auditors and it is ultimately for the NCLT/Tribunal to pass a final order on the application filed by the Central Government under section 140(5) of the Act, 2013. 

17. In view of the above and for the reasons stated above, the impugned judgment and order passed by the High Court quashing and setting aside the direction under Section 212(14) of the Companies Act, 2013 dated 29.05.2019 issued by the Union of India to SFIO is hereby quashed and set aside. The impugned judgment and order passed by the High Court quashing and setting aside the prosecution lodged by the SFIO vide Criminal Complaint CC No.20/2019 on the file of Special Court (Companies Act) and Additional Sessions Judge, Greater Mumbai is also hereby quashed and set aside. Now the said Criminal Complaint CC No. 20/2019 be proceeded further by the concerned Trial Court in accordance with law and on its own merits.

UNION OF INDIA and Another v. DELOITTE HASKINS AND SELLS LLP and anr Crl.A. Nos.-2302 to 2307/2022 dated 03.05.2023

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