The recent order by the Securities and Exchange Board of India (SEBI) against the promoters of Satyam Computer Services is a significant development in the long-running Satyam scam case.
Overview of the SEBI Order
- Order Details: SEBI has directed B. Ramalinga Raju, the former chairman of Satyam Computers, and five others, including his brothers and former executives, to pay back Rs 624 crore of unlawful gains made from stock sales. The total amount, including 12% interest per annum accrued over approximately 15 years, comes to Rs 1,747.5 crore, which needs to be paid back by January 2024.
- Breakdown of Unlawful Gains: The illegal gains were made by each individual as follows: Ramalinga Raju – Rs 20.43 crore, Rama Raju – Rs 20.43 crore, Suryanarayana Raju – Rs 51.44 crore, SRSR Holdings – Rs 518.36 crore, V Srinivas – Rs 9.58 crore, and G Ramakrishna – Rs 3.83 crore.
- Market Ban: In addition to the financial disgorgement, Ramalinga Raju and Rama Raju are restricted from the securities markets until July 2028. However, this is subject to the Supreme Court’s decision on their appeals.
The Satyam Scandal Background
- Scandal Revelation: The Satyam scam, one of India’s biggest corporate frauds, came to light on January 7, 2009, when Ramalinga Raju admitted to manipulating the company’s accounts. Investigations revealed that they traded in the company’s shares while in possession of unpublished price-sensitive information.
- Raju’s Manipulation: Ramalinga Raju admitted to inflating revenue figures annually, creating a growing gap between book and actual profits. His attempt to bridge this gap by acquiring Maytas Infrastructure and Maytas Properties ultimately failed, leading to his confession.
SEBI’s Role and Actions
- Investigation: Under Section 17 of the SEBI Act, 1992, SEBI conducted an extensive investigation into Satyam’s conduct, including inspecting financial statements and documents held by its auditors, Pricewaterhouse Coopers.
- Post-Scandal Actions: SEBI aimed to sell off Satyam as a last resort to save the company. They collaborated with the government-appointed Board Of Directors, accountants, bankers, government officials, and lawyers, restoring the company’s stability and confidence within 100 days.
- Strategic Investor Selection: SEBI relaxed takeover norms to facilitate the selection of a strategic investor for Satyam. This process eventually led to Tech Mahindra acquiring a 51 percent stake in Satyam through a global competitive bidding process.
This comprehensive response brings together various aspects of the SEBI order and the background of the Satyam scam, providing a holistic view of the case and SEBI’s role in addressing one of India’s most significant corporate frauds.