After the statutory auditors resign claiming the company did not provide satisfactory answers to their queries. Now the company is suing the auditors for false claims and damaging the company’s reputation. This is the story between Price Waterhouse & Co (PwC) and Reliance Capital, a group company of Anil Ambani Group. The claim for damages? Rs 10,000 crore! Not just that, some shareholders of the company are separately taking on the world-renowned audit firm with a class action suit for the loss the auditors’ actions and statements have caused them. The release says.
Reliance Capital claims it has obtained opinions from its current auditor as well as independent legal firms that there was no wrongdoing on its part and that the irregularities in its books as pointed out by PwC do not exist. It appears Reliance Capital had sent these opinions to the auditors to respond but got no reply. This is the reason for this legal suit for damages.
After PwC sent a letter to the Ministry of Company Affairs that they are invoking the provisions of section 143 (12) of the Companies Act and are quitting as auditors of two companies, Reliance Capital and Reliance Home Finance. Now, this particular clause implies that the company has committed some financial irregularity and when the auditors asked for details or explanations, the management did not provide them a satisfactory reply.
Subsequently, Reliance Capital sought a legal opinion and has managed to receive the opinions in its favour as stated above. The company’s board has since met and decided to haul PwC to court and ask it to pay Rs 10,000 crore as compensation for the damages caused. The wordings used are “defamation, reputation loss and also a massive loss to shareholders of the company”.
The class action suit under section 245 of the Companies Act 2013 is being planned by some section of the shareholders of both the companies and the promoters can become parties to that suit later. They are claiming that the shares of Reliance Capital and Reliance Home Finance fell 48% and 58% respectively, as soon as the auditors resigned.