The Hindu Business Line : SC allows SEBI to quiz Raju brothers for 3 days

New Delhi, Feb. 3 The Supreme Court on Tuesday allowed the Securities and Exchange Board of India to interrogate in prison Mr B. Ramalinga Raju and Mr B. Rama Raju, former Chairman and Managing Director respectively of Satyam Computer Services, in connection with the financial scam in the company.

A Bench comprising Chief Justice Mr K.G. Balakrishnan, Mr Justice P. Sathasivam and Mr Justice J.M. Panchal passed this order on SEBI’s special leave petition after hearing Solicitor-General Mr G.E. Vahanvati for the market regulator and Ms D. Bharati Reddy, counsel for Andhra Pradesh, supporting SEBI’s stand.

Mr Vahanvati submitted that every day important documents were going out and if the two brothers were not interrogated immediately, “we would never be able to go to the root of the matter. We should be permitted to interrogate the two brothers in prison for three days.” Mr Vahanvati said SEBI had appointed Mr A. Sunil Kumar, its General Manager, to investigate the matter.

In its brief order, the Bench permitted Mr Sunil Kumar to interrogate the brothers at the Central Prison, Chanchalguda, Hyderabad, for three days from February 4. The Bench asked Mr Sunil Kumar to give the name of the accompanying official to the prison authorities before conducting the interrogation.

SEBI, in its SLP, said it approached the Andhra Pradesh High Court for a direction to permit it to interrogate the brothers, who were in judicial custody in connection with the scam. But the High Court refused permission and posted the matter for February 9.

In view of the urgency, SEBI was constrained to move the apex court, the petition said.

The fraud in Satyam was the worst in the history of the country. In less than one month, the market capitalisation fell from Rs 15,000 crore to Rs 2,000 crore. Domestic investors of the company were devastated and foreign investors’ confidence was shaken, it said.

The market regulator pointed out that it was a specialised agency, which had the competence and expertise to investigate matters pertaining to frauds in transactions in securities.

SEBI said it had appointed a whole-time member as investigating authority to probe into the affairs relating to buying, selling or dealing in the shares of Satyam Computer and more particularly to ascertain whether the provisions of SEBI Act had been violated.

The finding of the trial court that SEBI was not an investigative agency and there was no provision in law under which it could interrogate the two respondents was contrary to law.

The High Court ought to have interfered with the trial court’s findings. But it had not. The petition sought the quashing of the impugned order and a direction to interrogate the brothers in custody.