Satyam case: Price Waterhouse allowed to cross-examine witnesses

The Securities Appellate Tribunal has directed the Securities and Exchange Board of India to allow Price Waterhouse (PW) to cross-examine persons whose names have been mentioned in PW's appeal to the Tribunal in the Satyam case.

SEBI has also been asked to also furnish copies of these persons' statements to PW.

In an order on Wednesday, the SAT directed SEBI to complete the PW enquiry within four months and also asked PW to offer its cooperation.

PW had moved the Tribunal challenging a SEBI order of December 2010 not allowing it full access to documents or complete cross-examination of persons whose statements were referred to, or relied upon by the market regulator's show-cause notice to PW in the Satyam case. SEBI had allowed selective access to witnesses and documents.

PW had appealed to the SAT saying the SEBI order was in breach of principles of natural justice in as much as there is absolute denial of opportunity to cross-examine the witnesses.

The Tribunal pointed out that though it never normally interfered in the enquiry stage, it had to intervene in this case because “violation of principles of natural justice was writ large on the face of the impugned order.” The SAT said that it is an elementary principle of law that a person required to answer the charge must know not only the accusation but also the testimony by which the accusation is supported.

The SAT disallowed PW's prayer to inspect all documents (including those not relied upon by the SEBI in its show-cause notice) saying it is for the first time before this Tribunal and that too during the course of argument that a prayer was made for inspection of all documents. It also said there is no rule of law which permits appellants to have access to all material available with SEBI which has not been relied upon or referred to in its show-cause notice issued to PW.

Though all the three SAT members were unanimous in their findings that PW should be allowed to cross-examine witnesses and should have access to the witnesses' statements made to SEBI, the presiding officer (a judicial member) observed that SEBI should provide all material to PW irrespective of the fact whether relied upon/referred to or not.

This was due to the fact that SEBI would rely upon only the material that supports its case against PW and not on the one that supports PW. So, in addition to the directions proposed by his fellow members who are non-judicial, he directed the SEBI to allow PW full inspection of material collected during the course of the investigations.