CALCUTTA HC LIFTS RBI BAN ON PRICE WATERHOUSE

Audit firm Price Waterhouse & Co, which was struck off panel of banks and finance companies following a RBI order, has been granted a reprieve from Calcutta High Court.

In October last year, RBI had issued instructions to banks and finance companies asking them not to hire Price Waterhouse and Lovelock & Lewes as auditors. Both firms are part of PricewaterhouseCoopers. The ban followed lapses in the audit of Global Trust Bank—the failed private bank that was amalgamated with Oriental Bank of Commerce.

In its order, RBI had said the Institute of Chartered Accountants of India is conducting an inquiry and a decision is awaited. “In view of this, we advise that you may consider not to engage the captioned firm for audit work of your bank till further advised in this regard.”

The court order does not have significant commercial implications for PwC since norms do not permit a firm to audit more than four banks. However, it does help the firm as it does not have the stigma of an RBI ban for the time being.

Following the order, PwC had moved the court stating that the allegations levelled by RBI were not proved and were still being examined by the ICAI. RBI had, however, argued that it had the powers to issue such directions on its own. In the order, Justice Pranab Kumar Chattopadhaya said: “Undisputedly the allegations against the petitioner have not yet been established and are being examined by ICAI. In the aforesaid circumstances, I am prima facie of the opinion that the respondent RBI should not take any penal action against the petitioner firm.”

The court also issued an interim order restraining RBI from issuing any further instructions to any bank or financial institution advising them against engaging PwC in audit work. Incidentally, PwC was removed as auditors in end-September ‘03 by the erstwhile management of GTB, after PwC had qualified the account and doubted the going concern status of GTB.