Setback to SEBI: SAT squashes ban on PwC in Satyam scam

On Monday, In a major setback to SEBI, Securities Appellate Tribunal or SAT overturned the markets regulator's order banning Price Waterhouse Coopers from auditing any listed company for two years for its role in the ₹7,800-crore Satyam scam.

However, SAT partly allowed disgorgement of the ₹13 crore fee from the auditor. The scam saw the company Ramalinga Raju promoted company going belly up in Jan 2009.

Setting aside the ban on PwC, which is one of the 'Big Four' global accounting firms, SAT said, only the national auditor's watchdog ICAI (Institute of Chartered Accountants of India) can take any action against its members and fraud cannot be proved on the basis of negligence in auditing.

"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," SAT said.

If there was any dereliction of duties, it was on the part of the two partners for which the other 10 firms cannot be banned just because they have some resource sharing agreements, the tribunal added.

However, it said there has been a breach of duty, therefore, the entire fee of ₹13 crore can be taken back with interest from PwC.

On January 8, 2009, Satyam Computer Services founder-chairman B Ramalinga Raju had publicly admitted and confessed to large-scale financial manipulations to the tune of over Rs 5,000 crore in the company's books. A Sebi probe, however, found the scam was much higher at ₹7,800 crore.

Soon after the admission, the government superseded the Satyam board and initiated a sale process, which in April that year ended Tech Mahindra took over the company.

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