Business Standard / New Delhi Jan 09, 2009, 00:55 IST
Given the magnitude of the Satyam fraud, one of the targets of angry shareholders is audit firm Price Waterhouse. Corporate Lawyer Namrata Mehta’s PR firm has been proactive and sent out an advisory to newspaper offices. This points out that the auditor’s contract is with the company and not with shareholders, so it may be difficult to take action against them under Indian law — in case a company files against the auditor, the liability of the auditor will be limited to the extent of the fees they receive. But all’s not lost. Having given this background, the lawyer suggests a way out in the form of a tort claim. Once some conditions are satisfied, and they look pretty easy — the auditors owe a duty of care to the shareholders and other stakeholders, that the shareholders relied upon the auditors, that there was a breach of such duty, and lastly that the shareholders suffered actual losses — a claim could be possible. The PR release then points to a precedent (Caparo Industries versus Dickman) where this worked.
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