Supreme Court notice over alleged PwC irregularities
The Supreme Court Friday issued notice to the government on a public suit seeking a probe into the allegations of irregularities in India by US-based economic consultancy PricewaterhouseCoopers (PwC).
Issuing the notice also to the Reserve Bank of India (RBI), the Enforcement Directorate and Central Board of Direct Taxes among others, a bench of Chief Justice P. Sathasivam, Justice Ranjana Prakash Desai and Justice Ranjan Gogoi said the issues raised by NGO Centre for Public Interest Litigation (CPIL) need to be examined.
The notice, returnable in four weeks, has also been issued to Registrar of Companies, Kolkata, The Institute of Chartered Accountants of India, PricewaterhouseCoopers Private Limited and its four partnership companies operating in India.
The CPIL has sought "an immediate enquiry" into various allegations against PricewaterhouseCoopers and its various network audit firms operating in India and sharing the PwC name for alleged falsification of books of accounts, evasion of income-tax and violation of FDI rules, RBI guidelines and the Foreign Exchange Management Act, among others.
"Apparent violations of various regulations, policies and statutes, prima facie, makes a fit case for thorough investigation and any inaction of the relevant authorities to investigate could result in jeopardising and undermining of public interest, rule of the law and the regulatory structure besides probable loss to the public exchequer," it said.
Citing instances of apparent financial irregularities and violations of the regulations by PwC India, the PIL claimed that there was an inflow of Rs. 240 crores "apparently from overseas" to the various entities of PwC India in the financial years 2010 and 2011.
"This was in violation of the FDI policies, RBI guidelines and other rules and regulation... which was not reflected correctly in their account books," the PIL said.
CPIL counsel Prashant Bhushan said that there were unexplained credits that were made to audit firms which in turn were used to acquire Mumbai based audit firm Dalal and Shah through a "circuitous route by giving interest free loans of the exact amount to its four partners and further allowing them to invest the said exact amount in Dalal& Shah, Mumbai".
This, Bhushan argued, was in "violation of the FDI policy, RBI guidelines, FEMA and regulations thereunder and ICAI regulations and also resulting in evasion of income-tax".
The PIL said that only three firms of PwC paid insurance premium but the benefits of the insurance policy were enjoyed even by other member firms which did not pay any premium in violation of the Companies Act.
The violations of rules and regulations, the PIL said "are in public domain for more than one year. However, the relevant authorities have failed to do any investigation into these allegations/reports and take required action against them which poses serious risk and threat to the public interest".
The inaction of the relevant authorities, the PIL said has also resulted in undermining of the law and the regulatory structure.
The PIL wondered whether the reluctance of the regulators to investigate or take any action against PwC India was due to "the international clout & influence and financial strength of PwC which is one of the world's leading auditing and advisory firms".
Pointing to the way Indian regulators were shying away from proceedings against the wrongdoings of the Indian arm of the US consultancy firm, the PIL said that "one of its network audit firms, M/s Price Waterhouse Bangalore, who were the auditors of the erstwhile Satyam Computer Services Limited (Satyam) for more than eight years, failed to discover the biggest accounting scandal till date in Indian history".
The scandal came to light only after its disgraced founder-chairman B.Ramalinga Raju confessed to it in January 2009, it said.
The PIL said that although the trial in the Satyam matter was still on in India, the US regulators, - Securities and Exchange Commission (SEC) and Public Company Accounting Oversight Board (PCAOB) - by their April 5, 2011, order had imposed civil money penalty aggregating $7.5 million and other sanctions on five partnership firms of PwC based in Kolkata, Bangalore and Mumbai.
(Posted on 06-12-2013)