Supreme Court Stays Appellate Tribunal’s Order Holding SEBI Lacks Power To Bar Auditors
The Supreme Court stayed an order of the Securities Appellate Tribunal which had held that markets' watchdog Securities and Exchange Board of India does not have the power to bar auditors.
A bench comprising Justices Arun Mishra and Indira Banerjee also issued notice on the appeal filed by the SEBI against the SAT's Sept. 9 order. The SAT, in its order which set aside the ban on audit firm Price Waterhouse, had noted that SEBI does not have the power to bar auditors.
Earlier, the SEBI had challenged SAT's decision to quash a two-year ban that was imposed on PwC in connection with the Rs 7,800 crore Satyam fraud.
On Jan. 10, 2018, the watchdog slapped a two-year ban on Price Waterhouse, an arm of PricewaterhouseCoopers India, from auditing any listed company in connection with PwC's 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.
The fraud at erstwhile Satyam Computer Services came to light in January 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 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.