Satyam case: SEBI bars Raju, 4 others for 14 years; seeks return of ₹1,849 cr

Our Bureau Mumbai | Updated on November 27, 2017 Published on July 15, 2014

B Ramalinga Raju (file photo).


Orders them to restitute unlawful gains in 45 days with 12% interest

Five-and-a-half years after the Satyam Computer Services scam broke, the erstwhile top management — B Ramalinga Raju, ex-Chairman; B Rama Raju, ex-Managing Director; Vadlamani Srinivas, ex-CFO; G Ramakrishna, ex-VP (Finance); VS Prabhakara Gupta, ex-Head (Internal Audit) — has been banned from the securities market for 14 years.

In an order on Tuesday, market regulator SEBI also directed the five to return unlawful gains of ₹1,849 crore within 45 days, with 12 per cent interest from January 7, 2009, to date. The order comes into force immediately and the amount will have to be paid to SEBI through a demand draft.

The SEBI order comes just ahead of a verdict expected on July 28 from a special court, which is handling the multi-crore accounting fraud case.

SEBI found that the five failed to produce any material to contest the allegations/charges levelled against them despite having several opportunities to do so.

Guilty on multiple counts

The regulator found them guilty of preparing fake bank statements, inflating sales, mis-stating the books of accounts, creating mismatches in tax deduction numbers, providing false CEO/CFO certification of truth and fairness and actively concealing the company’s true financials.

Further, it held them guilty of making announcements of bonus shares, buy-backs and ADS issues and of making other announcements based on the manipulated financial position. It also found them guilty of selling and pledging the company’s shares while possessing unpublished price-sensitive information about its adverse financials (insider trading).

“…true, fair, adequate and timely disclosures of the financial position of a company form one of the basic tenets of governance in listed companies and are essential for maintaining the integrity of the securities market. In this case, the noticees, apart from the contraventions, have failed to observe their fiduciary duties and have violated the principles of corporate governance in general and the obligation of CEO/CFO certification stipulated in Clause 49 of the listing agreement, in particular,” said SEBI.

Tejesh Chitlangi, Partner IC Legal, said: “The violation of several provisions of SEBI PFUTP (prohibition of fraudulent and unfair trade practices) Regulations, insider trading regulations and the SEBI Act has been established and 14 years debarment along with disgorgement of wrongful gains has been ordered.”

However, he added, “the challenge with the latter would be the realisation part, since the disgorgement amount along with the interest runs into several thousand crores and the fate of recovery in such instances is pretty bleak, the NSEL fiasco being a case in point.”

How the scam unfolded

It all came out when B Ramalinga Raju, Founder-Chairman of the then $2-billion Satyam Computer Services, dramatically stepped down on January 7, 2009, admitting to faking company financials for ₹7,136 crore. This included ₹5,040 crore of non-existent cash and bank balances.

The company’s market capitalisation had plunged from over ₹12,000 crore to ₹2,705 crore in a single trading session. After the clean-up of its books by a Government appointed committee, Satyam was eventually bought by Tech Mahindra and merged with itself.

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Published on July 15, 2014
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