Point Of Law : Noted from precedent decisions, both Indian and Foreign, Auditor is the watchdog acting on behalf of the shareholders - Such role cannot be performed if the Auditor is tied down by terms of contract.

ORDER :

P Naveen Rao, J.

Heard learned senior counsel Sri V Ravinder Rao for revision petitioner; learned senior counsel Sri Sunil B.Ganu for first respondent and learned senior counsel Sri K.Vivek Reddy for second respondent.

2. On 07.01.2009 Sri B.Ramalinga Raju, the then Chairman-cum- Managing Director of the then Satyam Computer Services Limited (for short ‘SCSL’) released a letter addressed to the Board of Directors of SCSL revealing for the first time the financial mismanagement and several illegalities in operations of SCSL. The Price Water House, the plaintiff in OS.No.43 of 2012 was the statutory auditor to SCSL from April 2000 to February 2009.

3. According to plaintiff, the letter written by Sri Ramalinga Raju was shocking. However, it did not provide any details whatsoever, regarding deep complexity of the scheme, the then Chairman cum Managing Director and other Directors have orchestrated. The Regularity Authorities had to conduct detailed investigation spread over three years to unearth the deep fraud committed by the Directors of SCSL.

4. As assessed by these Authorities, the complexity of the fraud far exceeds the confession in the letter dated 07.01.2009. According to plaintiff, the fraud committed by the then Managing Director and other Directors range from creation of false invoices, invention of customers, creation of false bank records, summary of false financial records and reporting, so on. Plaintiff alleges that the defendant forged the books and deceived the plaintiff to conceal the fraud. As a result of the fraud, perpetrated by the defendants on the plaintiff and due to their deceitful conduct, the professional practice and services rendered by the plaintiff to the clients in India and abroad has been severely affected, causing loss of clients and profits, suffered irreparable commercial damages on ongoing basis since the initial confession of Sri Ramalinga Raju. Even the ability to attract new clients has been severely impacted resulting in further commercial losses.

5. The plaintiff filed O.S.No.43 of 2012 in the Court of the VIII Additional District judge, Ranga Reddy District at L.B.Nagar praying to pass judgment and decree in favor of plaintiff and against defendants jointly and severely for a minimum sum of Rupees hundred crores together with interest at the rate of 18% per annum from the date of judgment and decree till the payment or realization. The then Chairman-cum-Managing Director Sri Ramalinga Raju is arrayed as 2nd defendant and other Directors as defendant Nos. 3 to 7. The SCSL is arrayed as 1st defendant.

6. On cause of action, according to plaintiff, the complex and elaborate nature of the fraud announced by Sri Ramalingaraju became clearer over a prolonged period of time pursuant to in-depth investigations carried out into this fraud by the investigating and regulatory authorities during the ensuing months since January, 2009, and that the suit is filed within three years from the date of arising of cause of action.

7. In the suit the 2nd defendant filed I.A.No.3539 of 2012 under Order VII Rule 11(d) of CPC to reject the plaint on the ground that mandatory provisions and requirements under Section 69 of the Partnership Act, 1932 (for short ‘Act, 1932’) have not been complied and therefore suit is not maintainable.

8. In I.A.No.3539 of 2012 the trial Court rejected the plea of 2nd defendant that the suit is barred by Section 69(2) of the Act, 1932 and dismissed the I.A. Hence, this Revision.

9. According to Sri V.Ravinder Rao, learned senior counsel for petitioner/2nd defendant, plaintiff is not registered under the Act, 1932. He would submit that Sections 128 and 129 of the Companies Act, 1956 (old), cast upon the plaintiff statutory duty to undertake auditing of the 1st defendant – Company. However, between the plaintiff and 1st defendant, the relationship is one of contractual to undertake job of auditing of accounts of the Company. The issues raised in the plaint also flow out of said co