AHMEDABAD: More than 10 state Public Sector Undertakings (PSUs) are likely to miss the deadline of August 31 to submit the audit reports this year, but none of them will be held responsible for the default as the Gujarat high court has granted them this protection.
The HC said that these PSUs should not be held responsible in case they are not in a position to submit audit reports under the provisions of the Companies Act. The deadline could be missed due to a high court’s order by which the ousted audit firm Pipara & Co LLP has been appointed again as statutory auditor of these PSUs.
The HC said that it is conscious that its decision is going to cause some difficulties to the companies and the newly appointed auditors, but it has to set right the “illegality” and to set the clock back.
This complexity arose after the Anti-Corruption Bureau (ACB) raised objection to Pipara & Co’s work quality claiming that it had not pointed out the multi-crore scam in the Gujarat State Land Development Corporation Ltd (GSLDC) in 2018. The ACB warned the state government about the services of the audit firm. The government in December 2020 informed eight of its PSUs to hold thorough inspection of the audit firm’s work and blacklist it. Since the statutory auditor is appointed by the Comptroller and Auditor General (CAG), the state government informed the CAG to remove Pipara & Co and appoint another auditor. Accordingly, B P Bang & Co was appointed as statutory auditor for the Gujarat State Police Housing Corporation Ltd, which is one of the PSUs that were being audited by Pipara & Co for last few years.
A sudden removal from the PSU brought Pipara & Co to the high court complaining that the state government and the CAG did not even inform the company before taking the decision. Not granting an opportunity of hearing is against the principles of natural justice. The CAG admitted to the mistake.
After hearing, the bench of Justice J B Pardiwala and Justice Vaibhavi Nanavati quashed the CAG’s decision to remove the company from the position of statutory auditor of the PSUs and ordered to restore its status saying that the basic procedure was not followed. The HC has granted one month’s time to CAG to carry out the process once again. While Pipara & Co’s position has been restored, the HC has asked it not to undertake any audit work till CAG passes a fresh order on whether it is to be retained. The court has also stayed the new audit firm from its job in the meanwhile.
As the audit work has been stayed, the HC said that this would cause problems for the PSUs and the new auditors, but it has to set the illegality right.
