The Bombay High Court on Friday dismissed the writ petition filed by Price Waterhouse challenging the jurisdiction of the Securities and Exchange Board to investigate the audit firm’s role in the multi-crore Satyam accounting fraud. Delivering the order, the Division Bench headed by Mr Justice P. B. Majmudar said, “It is not a situation where we can say that SEBI cannot proceed with its investigations.”
However, the court has granted the audit firm four weeks to go in for appeal. Price Waterhouse is likely to appeal to the Supreme Court.
No interim order
Counsel appearing for SEBI, Mr Shiraz Rustamji, told reporters later that the court has ruled that SEBI has the jurisdiction to investigate the audit firm and that it can go ahead with its hearing. But it cannot issue any interim order in the next four weeks.
In a statement, Price Waterhouse said the Bombay High Court has disallowed the writ petition of Price Waterhouse challenging SEBI’s jurisdiction over accounting and auditing professionals. However, further proceedings of SEBI have been stayed by the court for four weeks.
“We await receipt of the High Court written order, which we will examine to decide our next course of action including the option of filing an appeal to the Supreme Court,” the statement said.
Price Waterhouse’s contention was that audit firms are not market intermediaries regulated by SEBI. They are registered with the Institute of Chartered Accountants of India and are accountable to it for any professional lapses.
The issue
SEBI, which has been investigating the Satyam case, had issued a show cause notice to the audit firm under the Fraudulent and Unfair Practices Regulations last year.
The charge was that the Partners of the Hyderabad arm of the audit firm were allegedly involved in falsification of accounts of Satyam Computers, renamed as Mahindra Satyam after it was taken over by Tech Mahindra.
SEBI, which has been hearing the case for the last several months, was to come out with its order, when Price Waterhouse moved the High Court last month challenging the stock markets regulator’s jurisdiction.
Initially, the case was heard by a division bench headed by Justice D.D. Sinha. After four days of hearing, the judge recused himself from hearing the case without giving reason.
Subsequently, the case was shifted to another division bench headed by Justice P.B. Majmudar.
Interestingly during the hearing the audit firm had approached SEBI for a consent settlement of the case which the regulator had rejected. A second application filed for a settlement is still pending.
A consent order is like an out-of court settlement. Generally, the accused agrees to pay a specified sum to settle the case on mutually agreed “consent terms.”
