The Securities and Exchange Board of India will, in November, hear afresh the case relating to the role of audit firm Price Waterhouse in the multi-crore Satyam fraud. The capital market regulator (which has been investigating the case for more than a year now) had to suspend the hearing in August following a court directive.
While the hearing was going on, Price Waterhouse had moved the Bombay High Court challenging SEBI’s jurisdiction to investigate audit firms. The court had dismissed the petition, but allowed the firm to appeal to the Supreme Court. The court had also directed SEBI not to issue any interim order for four weeks.
According to people familiar with the case, since the audit firm is yet to approach the Supreme Court, SEBI has decided to resume the hearing. A SEBI source said the hearing was to begin earlier this month, but PW had asked for more time and it has now been scheduled for November 3. A lawyer associated with the case, however, said PW can still go in for appeal, but it is yet to take a decision. A PW official said he would not like to comment on the case at this juncture.
Before moving the court, the audit firm had approached SEBI for a consent settlement, which was rejected by the regulator.
Legal experts say that going by the Bombay High Court order, SEBI has the jurisdiction to investigate audit firms but its power to take action against them may be limited, even if they are found guilty. First, SEBI has to establish the collusion between the auditors and the promoters of Satyam in the fraud, they pointed out.
After preliminary investigation, SEBI last year had issued a show-cause notice to auditors of Satyam 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 auditors of PW were arrested following investigations into the fraud by CBI and other agencies after the Satyam Founder Chairman, Mr Ramalinga Raju, confessed to the massive fraud but were later granted conditional bail.