Case Law Details
Uday J Desai & Ors Vs Union of India & Ors (Delhi High Court)
Introduction In a landmark ruling, the Delhi High Court in the case of Uday J Desai & Ors Vs Union of India & Ors, overturned a previous decision and stated that a party is not precluded from challenging an audit report solely based on their participation in the appointment of that Auditor. The Court’s ruling has considerable implications for both the auditing industry and borrowers.
Analysis The High Court held that just because the appellants had agreed to the appointment of a certain auditor and participated in deliberations with them, it did not mean they were barred from challenging the auditor’s findings. This clarifies a previously grey area regarding the role and powers of participants within the auditing process.
The Court referenced the Supreme Court’s decision in State Bank of India & Others v. Rajesh Agarwal & Others, which established the importance of providing an opportunity for an entity to explain their evidence and defend against potential adverse actions. The High Court agreed that it was necessary to give the appellants an opportunity to address the consortium of banks on the forensic report’s contents, which had resulted in an adverse decision.
The Court also clarified that it would not prevent banks from independently taking action in accordance with the law, provided the appellants were given an opportunity to be heard.
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