SC extends interim stay on SAT's observation on Sebi's power to bar auditors

The Supreme Court Monday extended its interim order staying the directive of the Securities Appellate Tribunal (SAT) which had held that markets watchdog Sebi does not have power to bar auditors.

A bench of Justices Arun Mishra and Indira Banerjee said it would hear arguments in the third week of March on an appeal filed by Securities and Exchange Board of India (Sebi) challenging the SAT's September 9 last year order.

SAT had set aside the ban on audit firm Price Waterhouse and noted that Sebi does not have the power to bar auditors.

Sebi has challenged SAT's decision to quash a two-year ban that was imposed on Price Waterhouse in connection with the Rs 7,800 crore Satyam fraud.

On January 10, 2018, the watchdog had slapped a two-year ban on PW, an arm of PricewaterhouseCoopers (PwC) India, from auditing any listed company in connection with its role in the Satyam scam.

The tribunal had quashed the order but partly allowed disgorgement of the Rs 13 crore fee from the auditors concerned.

During the brief arguments on Monday, Attorney General K K Venugopal, appearing for Sebi, said that SAT had set aside the Sebi order with regard to alleged fraud by Price Waterhouse.

He said SAT had directed that no ban can be imposed on the auditor for auditing the books of a listed company.

Senior advocate Mukul Rohatgi, appearing for Price Waterhouse, said that the stay was operating in favour of Sebi and the plea has become infructuous as the period of ban was already over.

"The question is not about whether it is infructuous or not. The issue is whether Sebi is entitled to do this," the bench said and posted the matter for hearing in the third week of March.

It said that the interim order passed by the apex court on November 18 last year would continue in the meantime.

The fraud at erstwhile Satyam Computer Services had come to light on January 8, 2009 wherein the company's founder Ramalinga Raju publicly admitted to cooking the books to the tune of Rs 5,004 crore over a period of time. A Sebi probe had found that the scam was much larger at Rs 7,800 crore.

Setting aside the ban, the tribunal had said that only the Institute of Chartered Accountants of India (ICAI) can take any action against auditors and that frauds cannot be proved on the basis of negligence in auditing.

Among other observations, the tribunal had pointed out that 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," it had said. PTI ABA MNL SA