For the sake of clarity and convenience, the facts from LPA No.886/2010, which arises from the order passed in WP(C) No.2205/2010, shall be exposited for the purpose of adjudication.The appellant, a chartered accountant and a member of the Institute of Chartered Accountants of India (ICAI), was a partner of M/s Price LPA 885-886/2010 Page 2 of 59 Waterhouse (M/s PW), a firm of Chartered Accountants registered with ICAI.In the year 2000, the firm was appointed as the statutory auditors of M/s Satyam Computer Services Ltd. (SCSL).The statutory audits of SCSL for the years 2001 to March, 2007 were conducted and the reports were signed by Mr. Subramani Gopalkrishnan, the appellant in LPA No.885/2010 [the petitioner in WP(C) No.5352/2010].As the factual matrix would further unfurl, on 7th January, 2009, Mr. B. Ramalinga Raju, the then Chairman of SCSL, in a communication send to the Board of Directors, disclosed that the balance sheet of SCSL as on 30th September, 2008 carried inflated (non-existent) cash and bank balances of Rs.5,040 Crores (as against Rs.5361 Crores reflected in the books) and accrued non-existent interest of Rs.376 Crores.LPA 885-886/2010 Page 2 of 59The liability was understated to the extent of of Rs.1230 Crores on account of funds arranged by him and the accounts overstated the debtors position by Rs.490 Crores (as against Rs.2651 crores reflected in the books).Quite LPA 885-886/2010 Page 3 of 59 apart from the above, there were many other disclosures which eventually led to his arrest and a criminal trial which we shall refer to at a later stage.LPA 885-886/2010 Page 3 of 59On 10th January, 2009, the ICAI corresponded with M/s PW, Bangalore, referring to the letters of Mr. Raju, the Chairman of SCSL, that the said firm had failed to carry out necessary checks which were required while undertaking the audit of the financial statements and certifying the quarterly results of the company.The ICAI alleged that the firm had violated the accounting principles while auditing and certifying the accounts/quarterly results of SCSL for the aforementioned years and quarters and did not give a true and fair view of the accounts and further did not exercise due diligence and were negligent in their professional duties as statutory auditors.The ICAI treated the newspaper report as information within the meaning of Section 21(2) of the Chartered Accountants Act, 1949 [as amended by the Chartered Accountants (Amendment) Act, 2006 which came into effect from 17th November, 2006] (for brevity the CA Act).M/s PW was called upon to disclose the name or names of the member or members who was/were answerable to the allegation/s and send a copy of the aforesaid information letter along with LPA 885-886/2010 Page 4 of 59 its enclosures to the said member/members and he/they be requested to send his/their written statement, if any, in triplicate within 21 days from the receipt of the letter.It was also stipulated in the said letter that the member or members who are answerable should also send a declaration duly signed in the enclosed format and in the event the name(s) of the member(s) answerable was not disclosed, all the members who were partners or employees of the firm on the date of occurrence of the alleged misconduct shall be responsible for answering the allegation or allegations contained in the information.After certain correspondences, on 30th January 2009, M/s PW replied to the ICAI stating, inter alia, that the key members were Mr. S. Gopalakrishnana, Mr. S. Talluri, Mr. P. Shiva Prasad and Mr. C.H. Ravindranath.M/s PW informed that Mr. S.LPA 885-886/2010 Page 5 of 59"19.1 The statutory auditors have failed to exercise reasonable care and compliance with various auditing and assurance standards issued by the Institute of Chartered Accountants of India as a generally accepted auditing practice while reporting on the financial statements and the materiality of the misstatements are so huge that it has rendered the financial statements for all these years as untrue and unfair.However, the executive, management and staff have drawn substantial amounts as remunerations, commission, incentives, bonuses, ESOPs.However, all these overstatements and misstatements have reported the EPS at a higher level in the financial reporting annually as well as quarterly which has directly impacted the movement of the share prices in the stock exchanges market in India and abroad."The allegations are regarding alleged fudging of LPA 885-886/2010 Page 19 of 59 accounts over seven years.The appellant is required to understand the records for which he would be required to consult the papers alongwith the persons who had conducted the audit.their reliance.The turnover of M/s SCSLvii) You did not exercise due in 2006-2007 was Rs.6228 Crores, in LPA 885-886/2010 Page 28 of 59 diligence and were grossly negligent 2007-2008 was Rs.8137 Crores and in the conduct of your professional the respective Audit Fees paid duties as the statutory auditors of were Rs.3.67 Crores and Rs.3.73 the company for all these years.The turnover of M/s Wipro in the year 2006-07 andxi) On account of the knit criminal conspiracy between manipulations/ falsification of the the management of M/s. SCSL i.e. accounts by the Company for all B. Ramalinga Raju, A-1, B. these years, it is apparent that the Ramaraju (A-2) and Shri V. same was not possible without your Srinivas (A-3) and the statutory knowing about the same as the auditors S. Gopalakrishnan (A-4) Statutory auditor of the company.and Srinivas Talluri (A-5).In addition to the above audit fee, the auditors received an amount of Rs.1.24 crores and Rs.1.27 crores for the said years towards rendering other services.These amounts were separately in the accounts though mandated as per the reporting norms.LPA 885-886/2010 Page 29 of 59v) Specific role of the two petitioners has been again narrated as follows:As per the records maintained by The Institute of Chartered Accountants of India, Sri S. Gopalakrishnan (A-4), was a partner in the firm M/s Price Water House, Bangalore and not in M/s Price Waterhouse.By affixing his signature on the Audit Reports for and on behalf of Price Waterhouse he deliberately with the knowledge of its implications and consequences violated the requirements of the Auditing & Assurance Standards.In the Agreement entered between M/s SCSL and M/s Price Waterhouse, instead of affixing his signature, he has signed as Price Waterhouse contrary to the established procedure and practice whereby it is incumbent on an individual partner of the firm to affix his signature as a representative of the Auditor firm authenticating the contents of the report.Ramalinga Raju, A-1 and Sri B.Ramaraju (A-2).By virtue of his status as a Statutory Auditor it is incumbent on his part to verify the bank balances and FDRs claimed to be held by M/s SCSL besides other investments, liabilities and sales of the Company before certifying the Statutory Audit Report which forms the basis of Annual Financial Statement of the company.He has knowingly certifies the inflated/forged balance sheets prepared basing on the forged FDRs and other data with regard to the banks and also the status of the sales without making any mandatory independent verifications.The auditors are required to write directly to the banks and obtain confirmation of balances.After obtaining the confirmations they must compare these figures with the figures as appearing in the books of accounts LPA 885-886/2010 Page 31 of 59 of the company.LPA 885-886/2010 Page 31 of 59Gopalakrishnan received the confirmations from the banks which are in great variance with the figures provided by the management and appearing in the books of accounts.He has consciously overlooked the accounting irregularities committed by M/s SCSL for the past 7 years showing his complicity in the commission of the above said offences and he is liable as a co-conspirator.Letters generated on the letter pads of M/s Price Waterhouse were recovered from the computer systems of M/s SCSL.These letters were supposed to be written by the auditors addressed to the banks seeking confirmations about the balances.Sri S. Gopalakrishnan as part of the conspiracy got these letters generated in the computer systems of M/s SCSL for the purpose of creation of the records which depicts his privy and involvement in the conspiracy.He also made M/s SCSL to generate certain letters addressed to the banks directing the banks to directly inform the auditors.In the agreement entered into between M/s. SSCL and M/s. Price Waterhouse contrary to the established procedure and practice whereby it is incumbent on the individual partner of the firm to affix his signature as a representative of the Auditor firm authenticating the contents of the report.Sri Talluri Srinivas (A-5) having been aware of the fact that he never represents M/s. Price Waterhouse designated Statutory Auditors for M/s. SCSL has signed as "Price Water House" and thereby cheated the investors in furtherance of the conspiracy with Sri V. Srinivas (A-3), Sri B.Ramalinga Raju (A-1) and Sri B.The auditors are required to write directly to the banks and obtain confirmation of balances.After obtaining the confirmations should compare these figures with the figures as appearing in the books of accounts of the company.There is a discrepancy with regard to the existence of the Price Waterhouse, Hyderabad as Auditors in the registration with the ICAI, a statutory body.The ICAI has confirmed that Sri Talluri Srinivas is a member Price Waterhouse, Bangalore and not Price Waterhouse.As such the certification of Statutory Audit Reports by such non-member LPA 885-886/2010 Page 40 of 59 Audit Firms consequently invalidates the Annual Financial Statement of the Company which is a statutory requirement under law to invite investments from the prospective investors.LPA 885-886/2010 Page 40 of 59Letters generated on the letter pads of M/s Price Waterhouse were recovered from the computer systems of M/s SCSL.These letters were supposed to be written by the auditors addressed to the banks seeking confirmations of balances.Sri Talluri Srinivas as part of the conspiracy, got these letters generated in the computer systems of M/s. SCSL for the purpose of creation of records which depicts his privy and involvement in the conspiracy.He also made M/s SCSL to generate certain letters addressed to the banks directing the banks to directly inform to the auditors.However, these letters were generated merely for the purpose of record which shows the role of Sri Talluri Srinivas in the conspiracy.From the investigation, it is clear that the whole fraud was designed and orchestrated by Shri B.Ramalinga Raju (A-1), Shri B.Ramaraju (A-2) and Shri V.Srinivas (A-3) and they got the same implemented with the active connivance of Shri G. Ramakrishna (A-7), Shri D. Venkatapathi Raju (A-8) and Shri S. Srisailam Chetkuru (A-9).Further Sri G.Gopalakrishnan (A-4) and Shri Talluri Srinivas (A-5) have actively participated in the conspiracy by auditing the fudged balance sheets and certified the same and thereby connived with the other accused.Further Sri.B. Suryanarayana Raju (A-6) has actively participated in the conspiracy by assisting Sri B.Ramalinga Raju (A-1), Sri B.Ramaraju (A-2) in reaping maximum benefit from this fraud and in rotating funds amongst the companies.In view of the above have committed the offences of conspiracy, cheating, cheating by personation, generating forged valuation securities, forging the LPA 885-886/2010 Page 42 of 59 documents for the purpose of cheating and knowingly using these forged documents as genuine.The said list reads as under:"LIST OF WITNESSES IN THE MATTER OF SHRI S. GOPALAKRISHNAN AND SHRI S. TALLURI BY THE DISCIPLINARY COMMITTEEConcerned official from ICAIShri A.V.Y. Krishna, CBI, HyderabadThe then Investigating Officer of SEBI LPA 885-886/2010 Page 43 of 59LPA 885-886/2010 Page 43 of 59Concerned official from Citi Bank, HDFC Bank, ICICI Bank, HSBC Bank, BNP Paribas and Bank of Baroda.The concerned official (Finance Department) of Satyam Computer Services Ltd.The concerned official (Sales Department) of Satyam Computer Services Ltd.Main Partners of Price Waterhouse (FRN)Main Partners of Lovelock & Lewes (FRN)Through Mr. Ramji Srinivasan, Sr.Advocate with Mr. J S Bakshi, Mr. Amitesh S. Bakshi, Mr. Zeyaul Haque, Mr. Rakesh Agarwal and Mr. Pulkit Agarwal, Advocates for ICAI/Respondent No.1 Mr. Jatan Singh, CGSC with Mr. Ashish Kumar, Advocate for UOILPA 886/2010 TALLURI SRINIVAS ..... Appellant Through Mr. T. Andhyarujina, Sr.Advocate with Mr. R. Sudhinder, Mr. Rahul Ravindran and Ms. Prerna Amitabh, Advocates versus INSTITUTE OF CHARTERED ACCOUNTNTS OF INDIA & ANR ..... Respondents LPA 885-886/2010 Page 1 of 59 Through Mr. Ramji Srinivasan, Sr.Advocate with Mr. J S Bakshi, Mr. Amitesh S. Bakshi, Mr. Zeyaul Haque, Mr. Rakesh Agarwal and Mr. Pulkit Agarwal, Advocates for ICAI/Respondent No.1 Mr. Jatan Singh, CGSC with Mr. Ashish Kumar, Advocate for UOI CORAM:LPA 885-886/2010 Page 1 of 59HON'BLE THE CHIEF JUSTICE HON'BLE MR.JUSTICE SANJIV KHANNAWhether reporters of the local papers be allowed to see the Yes judgment?2. To be referred to the Reporter or not?Whether the judgment should be reported in the Digest? Yes DIPAK MISRA, CJ Keeping in view the similitude pertaining to the legal controversy in both the appeals, despite the fact that there is a slight difference in the factual matrix, these appeals were heard together and are being disposed of by a common order.LPA 885-886/2010 Page 4 of 59Gopalakrishnan and Mr.Srinivas had been arrested by the local police and they were out of reach.As is manifest, on 20th February, 2009, the criminal investigation was transferred to the Central Bureau of Investigation (CBI) and RC No.4(S)/2009 was registered against Mr. S. Gopalakrishnan, Mr. Srinivas and seven other accused persons for offences punishable under Sections 409, 420, 468, 471, 477A, 201 and 120B of the Indian Penal Code.One of the conclusions recorded by the said group is to the following effect:As is evincible, on 7th April, 2009, the CBI filed its charge sheet in the Court of the Additional Chief Metropolitan Magistrate (ACMM) arraigning Gopalakrishnan, Srinivas and seven others as accused persons.LPA 885-886/2010 Page 6 of 59The documents which were relied upon by the CBI was the report of the ICAI Group which was a part of the MDIT.At this juncture, the Director (Discipline) of ICAI placed a prima facie opinion before the disciplinary committee and the committee was of the prima facie view that the said chartered accountants were guilty of professional misconduct within the meaning of clauses (5), (6), (7), (8) and (9) of Part I of the Second Schedule to the CA Act. A prima facie opinion was also formed that the said two chartered accountants were guilty of other misconduct within the meaning of Section 22 read with Section 21 of the CA Act. On the basis of the said prima facie opinion, a notice was sent to the chartered accountants enclosing a copy of the prima facie opinion and requiring each of them to send their written statement along with supporting documents and a list of witnesses within 21 days.It is apt to note that at that time, both the appellants herein were in judicial custody and at that juncture, the CBI filed a supplementary charge sheet.On 4th February, 2010, Srinivas was enlarged on bail by virtue of the order passed by the Apex Court in Criminal Appeal No.257/2010 on certain conditions.LPA 885-886/2010 Page 7 of 59As pleaded, on 26th February, 2010, notices were issued by the ICAI to Srinivas with respect to the disciplinary proceedings pending against him as well as Ravindranath.Srinivas replied to the ICAI stating that Ravindranath had been cited as a witness in the criminal case pending before the Special Court, CBI against Srinivas.It was contended by Srinivas that his appearance as a witness in the disciplinary proceedings against Ravindranath would severely prejudice his position in the criminal case pending trial.As regards the disciplinary proceedings against him, he asseverated that he would be dealing with that separately and thereafter, on 26th March, 2010, he stated that the initiation of the disciplinary proceedings against him should be deferred since the alleged acts of commission or omission on the basis of which the disciplinary proceedings had commenced not only form the basis of a prima facie opinion but also form the basis of various charges against him in the criminal cases and, hence, any disclosure of his explanation or defences until the final conclusion of the criminal trial pending before the Special Court at Hyderabad would seriously impact his defence in the criminal trial.When the ICAI decided to proceed with the disciplinary LPA 885-886/2010 Page 8 of 59 proceedings, Srinivas filed WP(C) No. 2505/2010 and the learned Single Judge initially directed postponement of the disciplinary proceedings for some time.LPA 885-886/2010 Page 8 of 59As is reflectible, on 25th June, 2010, Gopalakrishnan was granted bail by the High Court of Andhra Pradesh with certain conditions and thereafter, similar proceeding was initiated against him and he also took the same plea.It was urged before the learned Single Judge that the charge sheet in the criminal case and the prima facie opinion formed by the Director (Discipline), ICAI are more or less identical and the list of witnesses in both the proceedings are same and if they are allowed to continue simultaneously, serious prejudice would be caused to the writ petitioners as their defence would be disclosed.A reference was made to the report dated 5th April, 2009 of the ICAI group which formed a part of the MDIT, the conclusion of which formed the basis for the prima facie opinion dated 17th September, 2009 of the Director (Discipline), ICAI and the said report LPA 885-886/2010 Page 9 of 59 formed the basis of the charge sheet and, hence, the allegations are identical.The ICAI charges against the appellant, in turn, relies on the charge sheet filed by the prosecution.The prosecution has also listed the Director (Discipline) of ICAI as a witness who had formed the prima facie opinion against the appellant for the purpose of issuance of the notice to show cause and, this is bound to cause prejudice to the appellant.The LPA 885-886/2010 Page 17 of 59 prosecution has also listed Sh.Similarly, certain witnesses are common and on their examination the appellant would be put in a disadvantageous position.The allegations, inter alia, involve complicated questions of facts pertaining to falsification of LPA 885-886/2010 Page 18 of 59 accounts and fabrication of documents, etc. which make the appellants presence imperative to assist his counsel.The appellant has to necessarily spend close to 10 to 12 hours a day to participate in the proceedings and to defend his life and liberty which is extremely time consuming.Therefore, the appellant will not have any effective opportunity to defend himself in the disciplinary proceedings as there will be no time left for preparing himself for the disciplinary proceedings.Therefore, the appellant would be severely prejudiced if the disciplinary proceedings are allowed to continue until the completion of the trial.LPA 885-886/2010 Page 18 of 59(b) In view of the conditions imposed by the Court in its order dated 25.06.2010 granting bail, it would be physically impossible for the appellant to defend himself before the ICAI without consulting his team members who had conducted the audit.It was, inter alia, a condition of bail that the appellant shall not tamper with any evidence and shall not influence the prosecution witnesses.The appellants team members have been arrayed as prosecution witnesses.Despite this glaring discrepancy and having both the confirmations i.e. the original confirmations received from the banks and the forged blank confirmations provided by the other accused, Sri S.Gopalakrishnan in furtherance of the conspiracy, has accepted forged bank confirmations provided by the accused, certified the same and incorporated in the final accounts.He has flouted the prescribed Audit and Assurance Standard number 30 of the Institute of Chartered Accountants of India, thereby facilitated the projection of falsified data in the Annual Financial Statements of the Compare continuously.The presentations made by him to the audit committee about the health of the company were misleading and in fact he gave a very good certification regarding the financial discipline and controls available in the company contrary to the reality.LPA 885-886/2010 Page 32 of 59As a consideration for his acts in accommodating the accused persons, he has received an exorbitant audit fee from M/s SCSL over and above the market rate which reflects a quid pro quo arrangements.Shri Talluri Srinivas (A-5) affixed his signature on the financial statements as a partner of M/s Price Waterhouse the Statutory Auditors for M/s. SCSL for the financial year 2007-2008.. Sri Talluri Srinivas continued the legacy of Sri S. Gopalakrishnan (A-4) and he actively took part in the conspiracy hatched by Sri V.Srinivas (A-3), Sri B. Ramalinga Raju (A-1) and Sri B. Ramaraju (A-In spite of this, Sir S. Gopalakrishnan deliberately did not make any extensive changes in the audit plan which clearly establishes his motives and intentions in allowing the fraudulent practices to continue in M/s SCSL.Sir Talluri Srinivas has also followed the suit in furtherance of the conspiracy allowed the above deficiencies to continue.LPA 885-886/2010 Page 38 of 59Even though as many as 135 control deficiencies were identified in the integrated audit conducted in accordance with the Standards of Public Company Accounting Oversight Board which has severe impact on the internal control and financial accounting.Gopalakrishnan continued the trend and deliberately did not LPA 885-886/2010 Page 39 of 59 bring these control deficiencies to the notice of the Audit Committee and thereby facilitated the continuance of the fraudulent practices unabated.He did not comment on these control deficiencies in his Audit Report even though they are material in nature, thereby his privy and active role in the conspiracy is established.Sri Talluri Srinivas also did not take remedial action and continued the same practices to continue which establishes his role in perpetuating the fraud by the other accused.The above acts of Sri Talluri Srinivas reveal the offences punishable u/s 120B r/w 420, 419, LPA 885-886/2010 Page 41 of 59 467, 471, 477A of the IPC.LPA 885-886/2010 Page 41 of 59Further they have falsified the accounts of the company and also caused disappearance of evidence of the offence to screen themselves from legal punishment.Therefore, all the accused are liable for commission of offences punishable under sections 120B r/w 420, 419, 467, 468, 471, 477A and 201 of the Indian Penal Code and substantive offences thereof.LPA 885-886/2010 Page 42 of 59In the course of hearing, Mr. Ramji Srinivasan has also filed the list of witnesses who would be examined in the disciplinary proceedings against the appellants.Quite apart from the above, it is contended that the appellants cannot take shelter under the umbrella that they have stopped practising inasmuch as the institute has no power to suspend their registration.Additionally, it is urged by learned senior counsel that the charges levelled against them do not involve complex questions of law and fact and, hence, it is not desirable to invite an interdiction in exercise of the inherent jurisdiction of this Court.LPA 885-886/2010 Page 56 of 59On a perusal of the comparative chart of the charges levelled in the disciplinary proceeding and the chargesheet in the criminal proceeding, the list of witnesses, the nature of enquiry, the purpose of enquiry and arraigning the appellants as accused persons in the criminal case are on a different base.In addition, the charges levelled against the appellants in the departmental proceeding/the proceeding under the Act do not involve grave and complex questions of law.LPA 885-886/2010 Page 57 of 59

Sections cited: Section 120B in The Indian Penal Code, Section 471 in The Indian Penal Code, Section 420 in The Indian Penal Code, Section 201 in The Indian Penal Code, Section 468 in The Indian Penal Code, Section 409 in The Indian Penal Code