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New Delhi: This was in line with reported revenues of Rs 8,394 crore for 2007-2008 and Rs 6,410 crore for 2006-2007. If in fact the profits claimed were inflated, then the company could make a refund claim to the government. This may help the company keep itself alive for a little time till it finds its feet.”
Additionally, the company stated in the most recent full balance sheet, as of March 31, 2008, that Rs 956.29 crore was in current accounts and Rs 3,317.70 crore was in fixed deposit accounts. The latter is what former chairman Ramalinga Raju confessed does not exist. Definitely a probe would include questioning of the key bankers mentioned in the annual report— Bank of Baroda, BNP Paribas, Citibank, HDFC Bank, HSBC and ICICI Bank.
Apart from the accounting angle, a whole mélange of legal issues too need attention. Sujjain Talwar, partner at Mumbai-based Economic Laws Practice, comments, “There are multiple ways in which this case could unfold. One school of thought would say that the liability to Price Waterhouse would be restricted to Price Waterhouse India. The extent of this liability would be defined either through a liability insurance the firm would have raised when taking on a new client or through clauses outlined in Price Waterhouse’s letter of engagement with Satyam. Usually this liability would be the total amount of fees or a percentage of fees paid by Satyam to Price Waterhouse as its auditor.
“However any liability coverage would protect an accounting firm only from ‘error’ or ‘negligence’ and not ‘fraud’. If a case of fraud is filed against Price Waterhouse then the liability insurance or letter of engagement raised by Price Waterhouse will not be able to save it”. Satyam in 2006-2007 paid Price Waterhouse Rs 3.67 crore and in 2007-2008 Rs 3.73 crore in audit fees.
Given that Satyam is also listed on the NYSE the outcome of this case will be contextual to both India and the US. Talwar adds, “Historically, the way such cases have been treated in the US and in the UK are very different from the way they have been treated in India. In India, Price Waterhouse would have a liability to the company and not to shareholders. The ‘Law of Tort’ in the US, which PricewaterhouseCoopers in the US could be subjected to, would place the firm with, ‘the duty of care to employees and shareholders”. In...
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