The government took control of IL&FS in October after it defaulted on several debt obligations

The government is seeking to ban Deloitte Haskins Sells and KPMG affiliate BSR & Associates for five years, alleging lapses in their audits of a unit of Infrastructure Leasing & Financial Services (IL&FS), which the government took control of last year.

The Corporate affairs ministry told a company law tribunal that the companies "miserably failed" to fulfil their duties as auditors for IL&FS Financial Services (IFIN), a filing seen by Reuters shows.

Both auditing firms denied any wrongdoing on Tuesday.

Deloitte said it "is confident that it has been thorough and diligent in the performance of its duties as an auditor. The firm stands fully for its audit work which has been conducted in full compliance with the professional standards in India."

It said it would cooperate fully with authorities.

BSR said that its "audit of IFIN was performed in accordance with the applicable auditing standards and legal framework", adding it would defend itself "in accordance with the law".

The government took control of IL&FS in October after it defaulted on several debt obligations, saying it stepped in to insulate the financial system from contagion. The group has a debt of more than Rs 91,000 crore ($13.1 billion).

Last month government investigators filed fraud charges against IFIN, its former management as well as the auditors.

Deloitte audited IFIN from 2008-09 to 2017-18 and BSR started auditing it from 2017-18, the petition says. Both Deloitte and BSR audited IFIN in 2017-18.

Reuters reported in March that an interim report by Grant Thornton, appointed by a new IL&FS board to conduct a forensic audit, had found a third of the total outstanding loans by IFIN were either unsecured or had inadequate collateral.

Auditors have come under close scrutiny in India, where the capital market regulator last year barred all the Indian units of PwC, from auditing any listed companies for two years after a probe into a nearly decade-old accounting fraud case.

And India's central bank barred S.R. Batliboi & Co, an EY firm, from conducting statutory audit assignments in commercial banks until April 2020, citing lapses identified in its work.