SEBI jurisdiction over auditors affirmed where listed company accounts raise investor-protection and market-integrity concerns.

SEBI's regulatory powers can extend to auditors where their conduct in relation to a listed company's accounts has a direct bearing on investor protection and market integrity. The High Court noted that audited financial statements are central to investment decisions, and that prima facie material suggesting fabrication, falsification, or misleading certification may justify inquiry, investigation, and preventive directions by SEBI. The Chartered Accountants Act continues to govern professional discipline, but it does not bar SEBI from acting within its own statutory sphere when securities-market concerns arise. On the face of the show-cause notices, there was no total lack of jurisdiction, and the challenge was rejected.

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Issues: Whether SEBI had jurisdiction to issue show-cause notices and proceed against chartered accountants in relation to audit and financial statements of a listed company, and whether such action encroached upon the regulatory domain of the Chartered Accountants Act.

Analysis: The statutory scheme of the SEBI Act confers wide powers on SEBI to protect investors, regulate the securities market, prohibit fraudulent and unfair trade practices, conduct inquiries and investigations, and issue directions in appropriate cases. Those powers are not confined to market intermediaries in a narrow sense and may extend to persons whose conduct has a direct bearing on investor protection and market integrity. Audited financial statements and balance-sheets are central to investment decisions, and where prima facie material suggests fabrication, falsification, or misleading certification of accounts of a listed company, SEBI can inquire into the role of the auditors to determine whether investor-protective directions are warranted. The Chartered Accountants Act governs professional discipline and misconduct within the profession, but that does not exclude SEBI from taking remedial or preventive measures within its own statutory sphere when the conduct of an auditor affects the securities market. The Court also held that the existence of jurisdiction would depend on the material emerging in inquiry, and on the face of the show-cause notices there was no total lack of jurisdiction warranting interference at the threshold.

Conclusion: SEBI's proceedings against the chartered accountants were held to be within jurisdiction, and the challenge to the show-cause notices failed.

Ratio Decidendi: Where the conduct of a professional auditor in relation to a listed company's accounts has a direct nexus with investor protection and the securities market, SEBI may exercise its statutory regulatory, investigatory, and preventive powers without thereby assuming control over the profession itself.

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