Price Waterhouse vs M/S Satyam Computer Services Ltd
2023 Latest Caselaw 1203 Tel

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              HONOURABLE SRI JUSTICE P.NAVEEN RAO
                                &
             HON'BLE SRI JUSTICE NAGESH BHEEMAPAKA


                   APPEAL SUIT NO.1573 OF 2018

                           Date: 14.03.2023

Between:

M/s.Price Waterhouse,
a Partnership firm registered with the
Institute of Chartered Accountants of India
bearing Registration No.007568S
having its Branch Office at 8-2-293/A/1131A,
Road No.36, Jubilee Hills, Hyderabad
and Head Office at 'The Millennia', 5th Floor,
Tower D, 1 and 2 Murphy Road,
Ulsoor, Bangalore, through its duly authorized
Partner Mr. N.K.Varadarajan, s/o.A.N.Krishnan,
Aged 50 years, R/o. Hyderabad.
                                                   ..... Appellant/
                                                         Plaintiff

           and

Satyam Computer Services Limited,
through its Company Secretary
Unit 12, Plot 35 & 36, Hitech City
Layout, Survey No.64, Madhapur,
Hyderabad, and others.
                                                 .....Respondents/

Defendants

The Court made the following:

HONOURABLE SRI JUSTICE P.NAVEEN RAO & HON'BLE SRI JUSTICE NAGESH BHEEMAPAKA

APPEAL SUIT NO.1573 OF 2018

JUDGMENT: (Per Hon'ble Sri Justice P Naveen Rao)

Heard learned senior counsel Sri Sunil B.Ganu for appellant,

learned senior counsel Sri K.Vivek Reddy for first respondent and

learned senior counsel Sri V.Ravinder Rao for second respondent.

2. On 07.01.2009 Sri B.Ramalinga Raju, the then Chairman-cum-

Managing Director of the then Satyam Computer Services Limited (for

short 'SCSL') released a letter addressed to the Board of Directors of

SCSL revealing for the first time the financial mismanagement and

several illegalities in operations of SCSL. The Price Water House, the

plaintiff in O.S.No.43 of 2012 was the statutory auditor to SCSL from

April 2000 to February 2009.

3. According to plaintiff, the letter written by Sri Ramalinga Raju

was shocking. However, it did not provide any details whatsoever,

regarding deep complexity of the scheme, the then Chairman cum

Managing Director and other Directors were orchestered. The

Regularity Authorities had to conduct detailed investigation spread

over three years to unearth the deep fraud committed by the Directors

of SCSL.

4. As assessed by these Authorities, the complexity of the fraud far

exceeds the confession in the letter dated 07.01.2009. According to

plaintiff, the fraud committed by the then Managing Director and

other Directors range from creation of false invoices, invention of

customers, creation of false bank records, summary of false financial

records and reporting, so on. Plaintiff alleges that the defendant forged

the books and deceived the plaintiff to conceal the fraud. As a result of

the fraud, perpetrated by the defendants on the plaintiff and due to

their deceitful conduct, the professional practice and services

rendered by the plaintiff to the clients in India and abroad has been

severely affected, causing loss of clients and profits, suffered

irreparable commercial damages on ongoing basis since the initial

confession of Sri Ramalinga Raju. Even the ability to attract new

clients has been severely impacted resulting in further commercial

losses.

5. The plaintiff filed O.S.No.43 of 2012 in the Court of VIII

Additional District Judge, Ranga Reddy at L.B. Nagar praying to pass

judgment and decree in favor of plaintiff and against defendants

jointly and severely for a minimum sum of 100 crores together with

interest at the rate of 18% per annum from the date of judgment and

decree till the payment or realization.

6. The then Chairman-cum-Managing Director Sri Ramalinga Raju

is arrayed as 2nd defendant and other Directors as defendant Nos.3

to 7. The SCSL is arrayed as 1st defendant.

7. On cause of action, according to plaintiff, the complex and

elaborate nature of the fraud announced by Sri Ramalinga Raju

became clearer over a prolonged period of time pursuant to in-depth

investigations carried out into this fraud by the investigating and

regulatory authorities during the ensuing months since January,

2009, and that the suit is filed within three years.

8. In the suit the 2nd defendant filed I.A.No.3540 of 2012 under

Order VII Rule 11(d) of CPC to reject the plaint on the ground of

limitation as suit was not filed within one year of discovery of alleged

fraud and cause of action arose on 07.01.2009.

9. In I.A.No.3540 of 2012 the trial Court held that as plaintiff came

to know of the fraud committed by 2nd defendant on 07.01.2009 under

Section 17(1)(a) the period of limitation would begin to run from that

date and the suit ought to have been filed within one year from

07.01.2009 whereas, suit was filed on 07.01.2012 and therefore,

clearly barred by limitation. Holding so, allowed the IA., and rejected

the plaint.

10. Learned senior counsel Sri Sunil B.Ganu would contend that

the letter of 2nd defendant dated 07.01.2009 does not contain full

details. It was the staring point to probe into the alleged fraud and its

ramifications. The fraud is of very complex nature. The Regulatory

Authorities and the plaintiff were investigating into the fraud for the

last three years before filing the suit to unearth the extent of fraud

committed by the defendants and then only the suit could be filed.

According to learned senior counsel, trial Court erred in applying

Section 17(1) of the Limitation Act, 1963 (for short 'Act, 1963'). The

said provision has no application. As no other Article deals with

situation as in this case the residuary provision in Article 137 of the

Act, 1963, would apply and suit was filed within time.

11. Having regard to the provisions of the Act, 1963, law on the

subject and the facts of the case, we are of the opinion that the trial

Court erred in rejecting the plaint. Learned senior counsel Sri

V.Ravinder Rao and Sri Vivek Reddy, fairly submit that the suit plea is

not hit by limitation. However, learned senior counsel Sri V.Ravinder

Rao requests the Court to leave open the issue of fraud to be urged in

the suit.

12. Having regard to the fair submissions of the learned senior

counsel, the decision under appeal is set-aside and the suit is

restored. Accordingly, the Appeal is allowed. No costs. Miscellaneous

applications, if any pending, stands closed.

___________________________ P.NAVEEN RAO, J

___________________________ NAGESH BHEEMAPAKA, J Date: 14.03.2023 Kkm/tvk

HONOURABLE SRI JUSTICE P.NAVEEN RAO & HON'BLE SRI JUSTICE NAGESH BHEEMAPAKA

APPEAL SUIT NO.1573 OF 2018

Date: 14.03.2023

Kkm/tvk