January 16, 2008
Shri Deepak Parekh ,
& Other Directors,
Satyam Computer Services Limited,
1-8, 303/6, Mayfair Centre, Ist Floor,
Sub: Demand for claiming damages and filing of charges against PwC.
The firm was appointed Auditors, NOT its partners.
We welcome the decision of the Central Government in expeditiously nominating six directors on the Board of Satyam Computer Services Ltd. after superseding the earlier board. We hope that the present board of directors would take all steps which are necessary for protecting interest of the employees, shareholders, clients, vendors and other stakeholders.
As a responsible non-profit organisation- recognised by Securities and Exchange Board of India (SEBI) as an organisation working for investor protection- deeply concerned with the scam which has occurred in the company and its wide ranging ramifications, we would like to draw your kind attention to one important point viz. likely failure of the Chartered Accountants firm in carrying out their job. Though the exact reasons for auditors failure would be known only on completion of the on-going investigations, most likely it was their dereliction of duty or connivance, as any other explanation defies comprehension.
As Price Waterhouse Coopers was appointed the auditors of Satyam Computer Services Limited after passing of a resolution by shareholders at the Annual General Meeting of the company (for all the relevant years), the said firm is responsible towards its clients i.e. Satyam, in discharging its obligations in a fair and diligent manner required under the Companies Act. This they obviously have failed to do and are liable for consequences laid down under the Civil and Criminal Acts, as well. Moreover, the Companies Act and Chartered Accountants Act, requires and enables the shareholders and the company to appoint a firm as its auditors. The proposal for nomination of auditors is mooted by the Board of Directors for shareholders approval. The names of the partners are neither disclosed in the resolution nor required. Under these circumstances and disclosures, the resolution is considered purely on the strength of the image enjoyed by the firm and decided accordingly by the shareholders.
As far as Satyam and its shareholders are concerned, PwC has failed miserably in carrying out the audit properly and the audit reports does not reflect the true and fair view of the affairs of the company. In fact it is to the contrary for last several years. As such the firm is liable towards its clients and the shareholders (including those who bought the shares in the secondary market during the relevant period) relying on the certification given by PwC, to compensate them and pay damages. Which partners of the firm were responsible for this, is purely the internal matter of PwC and this cannot be an excuse for disowning their legal responsibility and liability.
A parallel can be drawn with the liability and responsibility of the manufacturer or service provider towards customers/ clients / consumers. In the event a person dies after consuming a product which was later on proved to be not fit for consumption, its manufacturer cannot evade his civil and criminal liability by shifting it to some employees who may be responsible for such manufacturing. The manufacturer has the overall responsibility and cannot evade the same on the pretext of faulty action taken by his employees or suppliers. Similarly, in the instant case, PwC would be the main party responsible and liable if it is found that they failed to discharge their duties.
In view of the above, we formally request the Board of Directors to file civil and criminal charges / suit against PwC, claim damages and also demand revocation of their license and registration from Institute of Chartered Accountants of India, in case the investigations substantiates our apprehension.
For Midas Touch Investor Association
CC: Secretary, Ministry of Corporate Affairs.
Chairman, Securities and Exchange Board of India.