Supreme Court raps Sebi for dragging its feet in Satyam auditor case

Sets six-month deadline to conclude proceedings in the case against Price Waterhouse

The Supreme Court on Tuesday severely criticised the Securities and Exchange Board of India (Sebi) for dragging its feet in the prosecution of the auditors of erstwhile Satyam Computer Services for seven years and directed the whole-time member to conclude the proceedings in six months.

The court noted that a "trivial" issue was allowed to be dragged on since 2010 just because there is provision for appeals.

The bench presided over by Chief Justice J S Khehar was hearing the appeal of Sebi against the order of Securities Appellate Tribunal (SAT) which had asked it to provide documents and statements of witnesses to the accused persons for inspection. Sebi maintained that it had provided materials that were relevant for examination and cross-examination. However, the accused persons including chartered accountants in the global audit firm Price Waterhouse have denied this.

The judges observed that Sebi should not care what material the accused want to use for cross-examination. If statements of witnesses and documents are going to be used in the trial they should be provided to the accused persons as they have a right under the criminal law to see them. It was a simple issue and Sebi should not have come to the Supreme Court, the judges remarked.

The chartered accountants had also challenged the power of Sebi to issue show cause notices to them on grounds of jurisdiction. In 2010, the Bombay High Court had held that "it cannot be said that Sebi has absolutely no jurisdiction to issue show cause notices against the petitioners simply because they are professionals and whether the facts stated in the show cause notice are correct or not may be adjudicated as per the evidence available, after affording reasonable opportunity of hearing to the petitioners."

The SEBI shall now proceed with the matter in accordance with law and adjudicate the matter which is initiated on the basis of show cause notices in accordance with law, the High Court ruled.

Following this, Sebi whole-time member MS Sahoo had passed an order in December 2010, allowing the cross-examination request of Price Waterhouse subject to certain conditions.

"While the request for cross-examination of some of the persons mentioned above is justified and has been granted, I must say that the Noticees appear to be using the request for cross-examination of a large number of persons, most of whom were their own employees/partner with a view to delay matters and render the proceedings ineffective," Sahoo said in his order.

"The cross-examination shall be restricted to those portions of the statements which are prejudicial to PW and which have been disputed by it. After the cross-examination of each person is completed, SEBI shall be entitled to reexamine them, if considered necessary," the order dated December 15, 2010, said.

After SAT ruling went against it, Sebi had moved the apex court.