The Institute of Chartered Accountants of India (ICAI) on November 4, undertook to withdraw the show-cause notice against the Delhi and Kolkata partnerships of PricewaterhouseCoopers (PwC) in relation to the Satyam scam.

When the scam broke out, the Bangalore partnership of Pricewaterhouse Lovelock & Lewes (PW-Bangalore) was hauled up since they were the auditors to Satyam. Consequently, other branches of PwC came under the scanner of ICAI. Due to the restriction on the number of partners in India to a maximum of 20, PwC operates through a number of partnerships distinguished by the city they operate in, each with a distinct registration number. While it is globally known as PricewaterhouseCoopers or PwC, in India, its known as Price Waterhouse followed by the name of the city they operate in.

However, ICAI, the apex body for chartered accountants, issued notices to PW's offices across the country and had, on the basis of an opinion given by its Director (Discipline), found PW-Delhi and PW-Kolkata 'prima-facie guilty of misconduct'. Subsequently, they proceeded to issue show-cause notices to PW-Delhi and PW-Kolkata and therefore PW-Delhi filed a petition in the Delhi High Court seeking quashing of proceedings initiated against it by ICAI.

Amit Sibal, appearing for PW-Delhi, argued that PW-Delhi had no connection with PW-Bangalore, which had audited Satyam's accounts. Sibal contended that PW-Delhi ought to have been granted an opportunity to be heard prior to deciding whether or not they were guilty of misconduct.

Sibal told Bar & Bench that the ICAI also alleged that PW-Delhi permitted PW-Bangalore use the word 'Price Waterhouse', without the name of the city following it, which amounts to misconduct.

When the matter came up for admission on November 4, the Bench comprising Justice Sanjeev Khanna objected to ICAI initiating proceedings without complying with the procedure laid down by law and with insufficient evidence. C.S. Vaidyanathan, the counsel appearing for ICAI, undertook to withdraw the show-cause notice issued to PW-Delhi and PW-Kolkata.

PwC has been consistently maintaining during investigations that their auditing partner in Bangalore, Lovelock & Lewes, are the auditors to the Satyam scandal and not PwC. The auditing fee which was deposited in the name of Pricewaterhouse, Bangalore, was later transferred into the account of Lovelock & Lewes and the jailed Partners Gopalakrishnan and Srinivas Talluri withdrew the money from the Lovelock & Lewes account.

In a related development, during criminal proceedings initiated by the Government of India involving PW-Delhi before the same Bench, Senior Counsel Mukul Rohatgi adopted the same argument that PW-Delhi was not connected with PW-Bangalore, and that no cause of action arose against the Delhi partnership. The Bench instructed the government counsel to receive instructions from the Government and revert.

Raian Karanjawala of Karanjawala & Co. briefed both Amit Sibal and Mukul Rohatgi. PW-Bangalore retained the services of J. Sagar Associates as soon as the scandal broke out to defend the partners who were arrested on charges of accounting fraud.