Satyam scam: SC notice to Sebi on PW auditors plea

Written by Indu Bhan | Indu Bhan | New Delhi | Updated: Jul 7 2012, 08:57am hrs
The Supreme Court on Friday refused to stay inquiry initiated by Sebi against PriceWaterhouse auditors Srinivas Talluri and Subramani Gopalakrishnan, accused in the R14,000-crore Satyam scam. A bench headed by justice DK Jain sought reply from the market regulator after the auditors challenged the Bombay High Court's order that allowed Sebi to commence its inquiry against them.

Gopalakrishnan and Talluri had approached the apex court seeking deferment of the Sebi proceedings against them pending the criminal trial going on in a Hyderabad court and disciplinary proceedings before the Institute of Chartered Accountants of India (ICAI).

They said claimed that Sebi was encroaching on the jurisdiction of the Institute of Chartered Accountants of India, which is the sole regulatory body for the profession, according to the Chartered Accountants Act, 1949.

The CBI investigating the Satyam scam has filed three charge sheets against Gopalakrishnan and Talluri for criminal conspiracy and cheating among other charges. Satyam Computer Services, now Mahindra Satyam, has also filed a suit in a Hyderabad court against its former board of directors, certain employees and the company's audit firm PwC seeking damages for allegedly perpetrating fraud.

PwC too has filed a suit against former chairman of Satyam, B Ramalinga Raju, and others claiming damages of R100 crore for "deliberately" concealing key information that led to the accounting fraud.

The high court had earlier upheld Sebi's powers to issue show-cause notices to auditors in the pursuit of remedial or preventive measures to protect the interests of investors and the securities market.

In 2009, then Satyam boss B Ramalinga Raju admitted to mis-stating earnings to the tune of R7,136 crore. Price Waterhouse had been Satyam's auditors for several years (2001 to 2008) before the admission.

After preliminary investigations, Sebi had found evidence against Gopalakrishnan and Talluri. Following this, it asked Price Waterhouse and 20 of its partners to show-cause why they should not be prohibited from auditing listed firms for their alleged role in concealing the Satyam scam. Gopalakrishnan and Talluri, who were arrested, are currently out on bail.