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Satyam scam: SAT quashes SEBI's two-year ban on PwC

Quashing the ban on PwC, the SAT ruled that the ban imposed by SEBI was "erroneous in law", and only ICAI has the right to take action against auditing firms

twitter-logoBusinessToday.In | September 9, 2019 | Updated 18:49 IST
Satyam scam: SAT quashes SEBI's two-year ban on PwC, asks firm to disgorge Rs 13 crore
The Rs 7,800-crore scam saw Satyam Computers going belly up in January 2009.

The Securities Appellate Tribunal (SAT) has overturned the order by Securities and Exchange Board of India banning Pricewaterhouse Coopers (PwC) from auditing any listed company for two years. The market regulator had imposed the ban on the global accounting firm in January 2018 over its alleged role in decade-old Satyam Computer scandal.

Quashing the ban on PwC, the SAT ruled that the ban imposed by SEBI was "erroneous in law". The appellate tribunal stated that only the national auditor watchdog ICAI (Institute of Chartered Accountants of India) can take any action against its members and fraud cannot be proved based on 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, the SAT stated. The other 10 firms cannot be banned on grounds that they have some resource sharing agreements, the tribunal added.

However, the SAT said there has been a breach of duty, therefore, the entire fee of Rs 13 crore can be taken back with interest from PwC. SEBI had ordered disgorgement of the fees with 12 per cent per annum interest from January 7, 2019, till the date of payment.

Pricewaterhouse Coopers, one of the Big Four accounting firms, was the auditor of Satyam Computer Systems in January 2009 when its Chairman B Ramalinga Raju admitted large-scale financial manipulations in the company's book. While the company had admitted defrauding Rs 5,000 crore, an investigation by the SEBI revealed that it amounted to Rs 7,800 crore.

Soon after the reveal, the government had superseded the Satyam board and initiated a sale process, which ended in April that year with Tech Mahindra taking over the company.

In January 2018, SEBI had banned entities practising as chartered accountants in India under the brand and banner of PwC for two years from directly or indirectly issuing any certificate of audit of listed companies, compliance of obligations of listed companies and intermediaries registered with the regulator. PwC had later challenged the order before SAT.

(With PTI inputs)

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