Law 9.
Specifically Law 9B1(a) and law 9B2. East's comment draws attention to South's irregularity (L9A1), so the director *must* be called (Law 9B1(a)), and no player should take any action until the Director does his thing (Law 9B2). Also, South's premature correction of the IB may subject him to further penalty (Law 9C). Now, south's pass is cancelled, and you deal with his insufficient bid (keeping 9C in mind).