Reliance Capital Likely To File Rs 10,000-Crore Defamation Suit Against Its Erstwhile Price Waterhouse & Company

The Anil Ambani-owned Reliance Capital plans to file a Rs 10,000-crore defamation suit against its erstwhile auditor Price Waterhouse & Co (PwC).

In a related development, some shareholders of the company are also expected to file a class action suit against PwC for eroding value of their investment.

The board decided to take legal action after the company received a clean chit from two law firms against allegations levelled by PwC which allegedly caused defamation, loss of reputation and also a massive loss to shareholders of the company.

It may be recalled that PwC, a network firm of PwC India, had resigned as the auditor of Reliance Capital and Reliance Home Finance in June after stating that it failed receive satisfactory responses to requests for additional information from these companies.

In a letter written to the Ministry of Corporate Affairs, PwC had stated that it resigned under the provisions of Section 143 (12) of the Companies Act, which deals with resignation of an auditor in cases where it suspects fraud.

Meanwhile, PwC too has hired law firms like Shardul Amarchand Mangaldas, J Sagar and AZB, in order to prepare a defence against not merely the Anil Ambani-led Reliance Group but also regulators as well as probe agencies like National Financial Reporting Authority (NFRA) and the Serious Fraud Investigation Office (SFIO).

The big four audit firms, namely Deloitte, PwC, EY and KPMG are under tremendous pressure due to the investigations into Infrastructure Leasing and Financial Services (IL&FS) and two of its subsidiaries. Investigators had alleged negligence and connivance between auditors and managements in their charge sheet filed in the IL&FS Financial Services Ltd case.