Audit firm Price Waterhouse has moved the Bombay High Court challenging the Securities and Exchange Board of India’s jurisdiction to investigate its role in the multi-crore Satyam fraud.The audit firm filed a petition in the Bombay High Court on Thursday, seeking a stay on the SEBI proceedings on the grounds that the capital market regulator has no jurisdiction over audit firms.
A spokesperson for Price Waterhouse India said in an e-mailed response: “PW India can confirm that its writ petition contesting the jurisdiction of the Securities and Exchange Board of India over Chartered Accountancy firms and Chartered Accountants is pending for further hearing before the Bombay High Court.” Price Waterhouse’s contention, it is learnt, is that audit firms are not market intermediaries regulated by SEBI.
They are registered with the Institute of Chartered Accountants of India (ICAI) and are accountable to it for any professional lapses.
Counsel for PW said the case is expected to come up for admission next week.
After preliminary investigations into the Satyam fraud, SEBI had issued a show cause notice to PW, auditors of Satyam, last year under the Fraudulent and Unfair Practices Regulations.
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. Two PW auditors, who were arrested following investigations into the fraud by CBI and other agencies after the Satyam founder, Mr Ramalinga Raju, confessed to the massive fraud, were granted conditional bail by Andhra Pradesh High Court recently.
Hearings relating to PW’s role in the case have been going on at SEBI for several months now. During one of the hearings, Price Waterhouse had sought a separate ruling from SEBI on its jurisdiction to investigate auditors, before proceeding to the merits of the case.
Single composite order
According to sources, Price Waterhouse has chosen to move court because it apprehends that SEBI will refuse to entertain its plea for a separate ruling on its (SEBI’s) jurisdiction. On the other hand, the regulator may come out with a composite order.
Interestingly, the audit firm had earlier approached SEBI for a consent settlement of the case which the regulator had rejected. A second application filed for a settlement is still pending.
In a consent order, the accused agrees to pay a specified sum to settle the case against it on mutually agreed “consent terms,” with SEBI.
A SEBI source said that though the Price Waterhouse has moved the court, the regulator continued with its hearing related to PW even on Friday. SEBI which had started investigations last year, is now hearing the parties concerned.
If the court admits the PW petition, then it may be a setback for SEBI as its proceedings against PW will be delayed further.
ICAI had also separately investigated the case. While ICAI can proceed only against the partners of the audit firm, a SEBI order can impose a restraint on the firm if found guilty, said a legal expert.