MUMBAI: The Securities Appellate Tribunal (SAT) on Monday quashed the two-year ban on audit firm Price Waterhouse (PW) imposed by the Securities and Exchange Board of India (Sebi) in the wake of the Satyam Computer fraud in 2009.“There is no shred of evidence that the auditors fabricated, fudged or were in collusion with the management of Satyam Computer Services,” the SAT ruling said. It went on to add that Sebi had no jurisdiction to ban any audit firm and that was the sole prerogative of the Institute of Chartered Accountants of India (ICAI).The fraud dates back to 2009 when Ramalinga Raju, the founder of Satyam Computer, confessed to cooking the company’s books and inflating profits. Satyam’s board was superseded and the company was sold in an auction to Tech Mahindra. The audit firms of PW were banned for two years in 2018 by Sebi for the auditor’s role in the scandal.SAT ruled that negligence does not amount to misconduct and the Sebi action without direct evidence cannot be maintained. If the audit of Satyam was conducted in a careless or reckless manner by the audit firm, then action can only be taken under the CA Act by ICAI and not by Sebi, the tribunal said.In what could also impact the market regulator’s powers, SAT also ruled that Sebi should not “encroach” upon territories of other regulators or industry bodies such as the ICAI.As per current regulations, the market regulator’s main purpose is to protect investor interest and the measures or action taken by Sebi have to be remedial and not punitive.The appellate tribunal was presided over by Justice Tarun Agarwala, Dr CKG Nair and MT Joshi. SAT set aside major contentions of the regulator including one that said CAs in India under the brand and banner of PW shall not directly or indirectly issue any certificate of audit of listed companies, and intermediaries registered with Sebi shall not engage any audit firm that was part of the PW network.But SAT upheld Sebi’s move on disgorgement of Rs 13 crore from the auditor along with interest of 12% since 2007 for the wrongful gain.Senior counsel Janak Dwarkadas along with Mukul Rohatgi represented PW while Sebi was represented by senior counsel Ravi Kadam and Kevic Setalvad.“It is an important judgment in the context of professionals acting in a professional capacity. While allowing the appeals, the SAT has held that there is no evidence to show any collusion on part of the auditors,” said Zerick Dastur, founder of Zerick Dastur Advocates and Solicitors, the law firm that represented PWbefore SAT.“The two-year ban of PW and other associated firms violates current regulations,” the tribunal observed. “Also, to consider the ban as a remedial action is farfetched and cannot be accepted. Sebi’s action of banning PW was blatantly erroneous, it said.The order comes at a time when three of the Big Four auditors are already under investigation for their role in auditing Infrastructure Leasing and Financial Services (IL&FS) and its subsidiaries. The Serious Fraud Investigation Office (SFIO) and other regulators are already probing the role of affiliate Indian audit firms under the Deloitte KPMG and EY umbrellas.The order means that PW can continue auditing listed companies but Sebi can approach the Supreme Court, legal experts said.Sebi had launched investigations into Price Waterhouse in 2009 and ICAI had cancelled memberships of the two partners involved besides imposing a fine of Rs 5 lakh each against them.In 2011, PwC agreed to pay $25.5 million to former Satyam investors to settle US litigation. It also paid $7.5 million in US penalties after the Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) fined the firm over its auditing work for Satyam.In the last few months, many auditors have been taking a cautious approach and resigning from some risky accounts in the aftermath of the IL&FS meltdown. Insiders say the auditors fear being made a scapegoat by regulators and investigating agencies while promoters and other stakeholders of fraud-hit companies go scot free.PwC global chairman Robert E Moritz last year told ET the firm seemed to have been punished twice for its role as auditor of Satyam.“The incident happened nine years ago (in 2018), and clearly, there was a bit of an implied penalty because the market saw the problem then,” he told ET. “And we lost the opportunity to not only operate in the marketplace, but also grow in the marketplace.”