GTB Scam Case: Delhi HC dismisses PwC Auditors Petition seeking Quashing of ICAI Disciplinary Proceedings [Read Judgment]

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The Delhi High Court has dismissed the writ petitions filed by the auditors of PwC by upholding the disciplinary proceedings initiated against them by the Institute of Chartered Accountants in India (ICAI) in the Global Trust Bank (GTB) scandal.

The issue pertains to the auditors of the erstwhile GTB which had almost collapsed after it was found the bank was allegedly involved in a stock market scam.

The petitioners, who were a constituting partner and a Senior Manager of PwC, conducted the statutory audit and signed a qualified audit report on 30.09.2003 in respect of the affairs of the Global Trust Bank Limited.

In 2004, the Reserve Bank of India (RBI), filed a complaint with ICAI, the apex body that regulates accounting firms, after it found differences between the audit firm’s numbers and RBI’s own numbers in the case of Global Trust Bank (GTB).

Based on the Special Audit conducted by the RBI, the Disciplinary Committee of ICAI had issued show cause notices to the petitioners for alleged misconduct.

But the auditors filed several petitions in courts. These included a contempt-of-court plea against ICAI’s disciplinary committee. By the time the status report as of then came in May 2010, the proceedings for all three years had progressed significantly and were in advanced stages. In fact, by early 2010, ICAI had two other CAs who were connected with this as guilty of professional misconduct and recommended suspension of their membership for five years and three years.

One of them has won an appeal in the Delhi High Court that concerned difference between definitions of the terms ‘information’ and ‘complaint’. However, the the divison bench overruled that decision. On appeal, the Apex Court had stayed the High Court order till the disposal of any final verdict.

This delayed the proceedings against the petitioners Ghosh and Rao, too, who earlier moved the Bombay High Court seeking to stall action against them till the disposal of the above case by the Supreme Court. However, the petition was dismissed by the Bombay High Court with a specific direction that the inquiry be conducted not before December 17, 2013.

The petitioners approached the Court in the present petition, contending that they were unaware as to the manner in which the Council had formed a prima facie opinion at the time of filing the writ petition before the Bombay High Court and are thus, not precluded from challenging the formation of the prima facie opinion yet again.

Justice Vibhu Bhakru found no merit in the above contention and said that “The knowledge as to how the Council had formed the prima facie opinion was always within the reach of the petitioners. The petitioners had recourse to the RTI. Further, the petitioners had also approached the Bombay High Court, inter alia, seeking that directions be issued to the respondents to furnish certain information and it was well within their rights to also request for information as to the formation of the prima facie opinion. However, the petitioners chose to challenge the validity of the Council’s prima facie opinion, without seeking any further information. Having exhausted their remedies, they are now attempting to resuscitate their challenge, which cannot be permitted.”

While dismissing the petition, Court added that “the petitioners had challenged the formation, inter alia, challenging that the prima facie opinion was not valid. The present petition seeks to re-agitate the same issue albeit on the basis of additional information claimed to be have been received subsequently. Plainly, the petitioners cannot be permitted to do so.”

Read the full text of the Judgment below.

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