Price Waterhouse cannot escape onus; liability to vary

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New Delhi: India, the Bhopal gas disaster was subject to the ‘law of tort’ but ultimately there was no decision from the courts on this case and it was settled outside”.

Whereas in the US the law is more disposed towards looking out for the interests of employees and shareholders, in the UK the law is more circumspect and in India ‘judge-made laws’ would allow people other than the company to take a stance against the auditor. Talwar cites the example of a recent case in the UK where audit firm Moore Stephen won against its client Stone & Rolls on the grounds that “the company can’t claim against the auditor for failure to detect its own fraud”, which in fact means that when the company’s bosses themselves have committed the fraud the auditor cannot be blamed. In India, the 1980s saw a case where Tri-sure India Ltd sued its auditors AF Ferguson over misrepresentation in the financial statements, in which the Bombay High Court ruled in favour of the auditor and placed the company with the blame of fraud.

Though the Indian legal system tends to follow the UK system, the Satyam case will reveal whether the law deals with the wrongdoers with a greater penalty as done in the US. In the US courts are allowed to subject ‘normal damages’ and ‘punitive damages or damages to be paid as punishment’ upon companies, in India the norm is ‘normal damages’ and ‘punitive damages are not the practice and therefore wrongdoing companies are not charged as heavily as their counterparts in the US.