Market watchdog Sebi on Monday moved the Supreme Court seeking stay on the sectoral tribunal’s order that allowed audit firm Price Waterhouse to cross-examine the accused in the R7,000-crore Satyam Computer Services scam, including Satyam founder B Ramalinga Raju.
The Securities Appellate Tribunal (SAT) in June last year had asked Sebi to allow Price Waterhouse, the scam-tainted company’s external auditor, to cross-examine Ramalinga Raju, his brother and managing director B Rama Raju, and former CFO Vadlamani Srinivas.
It also asked Sebi to furnish copies of their statements to Price Waterhouse, the Indian arm of global professional services firm PriceWaterhouseCoopers, if necessary.
A bench headed by Chief Justice SH Kapadia asked Attorney General GE Vahanvati and counsel Pratap Venugopal, appearing for Sebi, to apprise the court of the scope of enquiry into the matter under the Sebi Act, and the consequences of the criminal prosecution initiated by CBI and the proceedings initiated by Institute of Chartered Accountants of India (ICAI). Such clarity is required so that no confusion is created resulting in the accused getting away, it said.
Sebi had relied on the statements of Raju and the other accused to issue show-cause notices to Price Waterhouse asking them why they should not be debarred from carrying out auditing work for listed companies for a particular period.
It had alleged that the audit firm had not properly audited the financial statements of Satyam and the financial statements presented did not provide a fair and accurate financial position of Satyam, which Raju has admitted were manipulated and false.
Price Waterhouse had moved the SAT as Sebi had rejected its request to allow access to documents and to those accused in the fraud case, which rattled India Inc in 2009. It had had earlier challenged Sebi’s right to question an audit firm regulated by the Institute of Chartered Accountants of India (ICAI).
Price Waterhouse was the auditor of Satyam from April 2000 to September 2008. S Gopalakrishnan, a partner in the firm, had certified the audit reports for the period April 2000 to March 2007, and Srinivas Talluri, another partner in the firm, had certified the audit report for the period April 2007 to September 2008.
Seeking stay on the SAT order, the capital market regulator argued that it had the jurisdiction to investigate the audit firm for its alleged involvement in the fraud at Satyam Computer Services, as it is a preventive action by the regulator to safeguard interests of investors.
Senior counsel Harish Salve and AM Singhvi, appearing for the audit firm, argued that Sebi had no jurisdiction to take the action as it would amount to regulating the profession of Chartered Accountants, which was the exclusive domain of the ICAI.