In January 2018, the Securities and Exchange Board of India slapped a two-year ban on Pricewaterhouse (PwC), an arm of PricewaterhouseCoopers India, from auditing any listed company for its role in the Rs 7,800 crore Satyam scam. The SAT, however, quashed the two-year ban.
The SAT, in its September 9 order, allowed disgorgement of the Rs 13 crore fee from the auditors, but observed Sebi lacks powers to bar the auditors from auditing listed companies. Sebi has questioned this approach adopted by the tribunal, as it virtually made it "toothless".
A bench of Justices Arun Mishra and Indira Banerjee also issued notice on the appeal filed by Sebi against the SAT's September 9 order.
The SAT had observed that the powers conferred on Sebi under Section 11 and 11B are to protect the interests of investors in securities and to promote the development of and to regulate the securities market. Therefore, the measure to be adopted by Sebi is remedial and not punitive.
"Thus, the role of debarment is beyond the scope and powers under Section 11 and 11B of the SEBI Act.. Such directions can only be remedial. If such person is not dealing in securities, then only remedial direction could be issued. Preventive directions cannot be issued. In our opinion, debarment is punitive," said SAT in its order.
Sebi's counsel contested this observation in the top court and referred it equivalent to making it a toothless body. "An auditor's certificate ought not to be issued casually and must be issued after carrying out absolute and complete diligence and caution. Sebi has power to issue directions (with respect to debarment from the securities market or otherwise) against any person associated with the securities market," Sebi said in its plea.
Sebu, in its plea, also insisted accounting manipulations were going on for over eight years, "gross negligence and recklessness in conducting an audit in accordance with accounting standards... failure of the audit function in terms of professionalism, diligence and requisite application of mind on the part of the auditors led to dissemination of spurious and false data in the market which was certified as true".
The tribunal had said the Institute of Chartered Accountants of India (ICAI) can only take action against auditors, and frauds cannot be proved on the ground of negligence in auditing.
( With inputs from IANS )