The Securities Appellate Tribunal (SAT) on Monday dismissed an order by the Securities and Exchange Board of India to ban Price Waterhouse & Co. from auditing listed companies for two years.
SEBI, the capital markets regulator, had banned the local affiliates of PricewaterhouseCoopers in January 2018 after a probe into a 2009 accounting fraud case in software services company Satyam Computer.
Price Waterhouse challenged the SEBI ban the same month in the SAT. At the time, the tribunal had allowed it to complete audits it had already taken on for the 2018 calendar year.
Satyam founder B Ramalinga Raju had stunned Indian markets in January 2009 when he admitted that the company had overstated profits and assets for several years. Price Waterhouse was Satyam’s auditor during the period in which the $1-billion fraud was perpetrated.
On Monday, the tribunal said in its judgment that SEBI overstepped its jurisdiction and could not have banned PwC.
However, in their order, SAT presiding officer Justice Tarun Agarwala and member CKG Nair also said that there had been a professional lapse on the part of the auditors in conducting the audit.
“These lapses amounted to negligence. Action has already been taken by (the) ICAI against the auditors,” the bench said, referring to the Institute of Chartered Accountants of India.
SEBI had also ordered Price Waterhouse to forfeit wrongful gains of about Rs 13.1 crore plus interest. The SAT upheld this part of the SEBI order, citing the professional lapse by the auditors.
“For this lapse/negligence, we are of the opinion that the appellants [PwC] were not justified to retain this amount,” the SAT said, adding that SEBI was justified in disgorging the amount along with interest.