Satyam Scam: Securities Appellate Tribunal Quashes Two-Year Ban on PwC
Mumbai: The Securities Appellate Tribunal (SAT) on Monday overturned a regulatory order banning Price Waterhouse, an affiliate firm of PwC India, from auditing any listed company for two years for its role in the Rs 7,800-crore Satyam scam.
The development is a major setback to capital markets regulator SEBI and a relief to the global auditing and consultancy company.
However, in its order, the SAT partly allowed disgorgement of the Rs 13 crore fee from the auditor.
The Satyam scam saw the Ramalinga Raju-promoted company going belly up in January 2009.
Nearly a decade later, in January 2018, SEBI imposed a two-year ban on entities or firms practicing as chartered accountants under the brand or banner of PwC from auditing listed companies.
Now, a year later, the SAT has set aside the PwC ban, noting that only the national auditor watchdog ICAI (Institute of Chartered Accountants of India) can take any action against its members.
The tribunal also added that fraud cannot be proved on the basis of negligence in auditing.
“Sebi has no authority to look into the quality of audit and auditing services. Sebi can only take remedial and preventative action. The direction issued is neither remedial nor preventive. But punitive,” SAT said.
If there was any dereliction of duties, it was on the part of the two partners for which the other 10 firms cannot be banned just because they have some resource sharing agreements, the tribunal added.
However, it said there has been a breach of duty, and therefore the entire fee of Rs 13 crore can be taken back with interest from PwC.
On January 8, 2009, Satyam Computer Services founder-chairman B. Ramalinga Raju had publicly admitted and confessed to large-scale financial manipulations to the tune of over Rs 5,000 crore in the company’s books. A SEBI probe, however, found the scam was much higher at Rs 7,800 crore.
Soon after the admission, the government superseded the Satyam board and initiated a sale process, which in April that year ended in Tech Mahindra taking over the company.