Indian policymakers and those at the helm, keen to ensure ‘ease of doing business’, must introspect as to why the Indian legal system is yet to settle all the disputes within the country as regards the Satyam scam that rocked Corporate India 12 years ago, Montek Singh Ahluwalia, former Deputy Chairman of Planning Commission, said on Wednesday.
This introspection is especially needed when all the disputes abroad that arose because of Satyam misdemeanour were settled within a year, Ahluwalia said at the book launch event of The Tech Phoenix —Satyam 100 Day Turnaround in the Capital.
“All the disputes abroad that arose because of Satyam misdemeanour were settled within a year. The ones inside are still going on. Somebody who is responsible for ease of doing business and what we are doing about our legal system should think what is going on here,” Ahluwalia said.
Noting that Satyam in 2009 was a “terrific rescue” by the six government-appointed Board members, Ahluwalia also underscored the need to think about the future as regards efficiency of the Indian legal system and also whether the punishment meted out to individual chartered accountants and the firms they represented were going to lead to greater due diligence within CA firms to avoid future collusion with promoters.
“An Independent director can go only by the CA report. He is not meant to go behind the CA report to see if good job was done by the CA or not. In this case, clearly CAs did a bad job, probably wilfully and they were punished and two partners went to jail. Price Waterhouse was debarred for two years to take new assignments for listed companies,” Ahluwalia added.
Effort of collusion
Speaking on the occasion, Deepak Parekh, Chairman, HDFC, and a member of the six-member Board then appointed by the Government to help rescue Satyam, said that Satyam was a total failure of accountants, staff, Board, auditors and probably collusion between critical staff members with auditors. “Directors anyway are the last people to find out if there was a fraud,” Parekh quipped.
“It was real failure of CAs who audited Satyam. The company fraudulently printed HDFC letter-head. The auditors didn’t ask for reconciliation of bank accounts. It was so obvious that the logo of our bank (HDFC Bank) was on the wrong side of the letter-head. Auditors did not pay heed to it. They did not confirm balances. All of it happened as an effort of a collusion,” Parekh said.
As for the role of independent directors, Parekh said they were all rubber stamps and they carried on with it.
Tarun Das, one of the six government-appointed Board members to rescue Satyam, said the independent directors didn’t know as to what they were presented were false accounts. “They took it at face value what was presented to them,” Das said.
Das highlighted that the six-member Board also got lot of help from the then External Affairs Minister Pranab Mukherjee, SEBI which went out of its way, IDBI Bank that gave an unsecured loan to save Satyam. “It was an amazing team work going beyond the six members of the Government-appointed Board,” he added.
Kiran Karnik, one of the six Board members then appointed by the Government, said it is easy to blame directors and say that they have to take responsibility. “But when Big-4 audit company certifies everything, there is no reason why independent directors should have any doubts,” Karnik added.
He suggested that independence should also be defined by the number of years on the Board. “If an independent director remains on a Board for 15 years, you as a director tend to simply trust them (promoters),” he noted.