Satyam veteran appointed new CEO

Special Correspondent

A.S. Murty

HYDERABAD: Satyam’s Board of Directors filled the vacuum at the top by appointing company veteran A.S. Murty, the global delivery head, as Chief Executive Officer here on Thursday.

It named Homi Khusrokhan, former Managing Director of Tata Chemicals, and Partho S. Datta, former Director of Finance in the Murugappa Group, as special advisors to the Board.

The Directors’ attempt to fortify the company’s finances bore fruit with banks sanctioning Rs. 600 crore for the working capital. This infusion of funds and healthy collections would help the company tide over its financial challenges, they noted.

While Mr. Khusrokhan would assist the Board in management, Mr. Datta would extend his services in the realm of finance. They, along with the Boston Consulting Group, would work ‘pro bono’ and assist the new CEO and the Board in defining priorities and in executing them effectively.

The Board, which met for two days on Wednesday and Thursday along with the newly-appointed advisors, said Mr. Murty’s appointment came into effect immediately. The meeting was chaired by C. Achuthan.

Board member Deepak Parekh said: “Mr. Murty [ASM] is a Satyam veteran of 15 years, who has been in its forefront since January 1994. He is well respected for his ability to effectively integrate the team and enable a collective decision making, which will be critical as Satyam moves into its revival phase. In our interactions over the past few weeks, we are convinced that Satyam needs an internal leader to steer it at this critical juncture and ASM has the required bandwidth and support.”

A press release quoted Mr. Murty as saying that the exercise of business continuity and confidence building among employees was stepped up. “We will chart a precise and practical 30–60–90-day plan that will encompass and address the interests of all stakeholders,” he added.

SEBI grills Ramalinga Raju

N. Rahul

HYDERABAD: Officials of the Securities and Exchange Board of India (SEBI) on Wednesday interrogated the former chairman of Satyam Computers, B. Ramalinga Raju, for nearly five hours at the Chanchalguda Central Jail here.

SEBI general manager A. Sunil Kumar, who is the divisional chief for southern States, grilled Mr. Raju with the assistance of four officers.

The SEBI team walked into the jail at 9.45 a.m. and left only at 7 p.m. though the actual interrogation lasted only from 11.30 a.m. to 5 p.m. with a break for lunch.

Mr. Ramalinga Raju’s brother and former managing director Rama Raju was not quizzed. The SEBI has been permitted by the Supreme Court to examine the two for three days.

Officials of the market regulator did not permit Mr. Ramalinga Raju’s advocate S. Bharat Kumar to be present during the interrogation, though he entered the jail with the permission of Superintendent M. Chandrasekhar.

Later, talking to the media, Mr. Kumar took exception to the denial of legal assistance to the accused during the examination.

He held that the two accused were not in possession of records. Neither were they in a proper state of mind to depose.

He said the apex court issued ex-parte orders permitting their interrogation before these exceptions were brought to its notice.

He said Mr. Raju’s counsel would file a petition in the Supreme Court seeking remedy.

The Crime Investigation Department picked up from the same jail suspended Price Waterhouse partners S. Gopalakrishnan and Talluri Srinivas for interrogation. They will be in its custody till Thursday afternoon.

The officials questioned the two on their job chart and whether they verified cash and bank balances of Satyam Computer Services periodically.

A senior officer told The Hindu that the focus of interrogation was on whether they properly vouched for the related party transactions under the Indian Companies Act.

Another important area of probe would be the inward foreign remittances made to the company on account of operations in 60 countries.

The role of auditors in verification of softex forms (proof of company’s turnover) submitted to the Software Technology Parks of India for claiming income-tax benefits would also come under scrutiny.

SEBI allowed to question Raju brothers

J. Venkatesan

NEW DELHI: The Supreme Court on Tuesday allowed the Securities and Exchange Board of India (SEBI) to interrogate in prison B. Ramalinga Raju and B. Rama Raju, the former chairman and the managing director respectively of Satyam Computer Services Ltd., in connection with the financial scam involving the company.

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

“We would never be able to go to the root of the matter” if the two brothers were not interrogated immediately, Mr. Vahanvati submitted. Every day important documents were going out.

“We should be permitted to interrogate the two brothers in prison for three days.”

Mr. Vahanvati said the SEBI had appointed A. Sunil Kumar, General Manager of SEBI, to investigate the matter.

In its brief order the Bench permitted Mr. Sunil Kumar to conduct the interrogation of the two brothers at Central Prison, Chanchal Guda, 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.

We have the expertise, SEBI tells court

Legal Correspondent

NEW DELHI: The Securities and Exchange Board of India in its Special Leave Petition before the Supreme Court in the Satyam case, said that it approached the Andhra Pradesh High Court for a direction to permit it to interrogate the Raju brothers, who were in judicial custody. But the High Court refused permission and posted the matter for February 9. In view of the urgency, the SEBI was constrained to move the apex court.

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, the SLP 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.

The finding of the trial court that the SEBI was not an investigative agency and that 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.

Online edition of India's National Newspaper
Wednesday, Feb 04, 2009

Satyam board to discuss suitors today

Special Correspondent

HYDERABAD: The Government-appointed board of directors of the embattled Satyam Computer Services will be meeting here on Wednesday for the sixth time since its constitution.

Satyam insiders indicated that the board might not appoint any Chief Executive Officer or Chief Financial Officer, especially in the wake of relaxations being considered by the Securities and Exchange Board of India (SEBI) for an open offer so that any company could buy a controlling stake. Sources said that even if the CEO and CFO were appointed, the arrangement would be purely ad hoc, as the new management might put in place these things finally. The regulator’s relaxations for an open offer assumed significance in the light of L&T increasing its stake from four per cent to little over 12 per cent.

Had L&T gone ahead to increase its stake to 15 per cent, it would have triggered an open offer, making it mandatory for the company to buy another 20 per cent.

The availability of J. P. Nayak, Whole-time Director and President (Operations) of L&T, in the city for a seminar on ‘Role of insurance in infrastructure sector,’ organised by the Confederation of Indian Industry (CII), on the day when the Satyam board is meeting assumes significance. A parallel is being drawn between this and the presence of chief of Goldman Sachs in the city on the day when the board finalised the investment banker.

Meanwhile, Spice Communications and the Hinduja Group also came forward to acquire a controlling stake in the software company, “considering its inherent strengths and customer base.” The board would deliberate upon the interest being evinced by these companies, even as Goldman Sachs and Avendus would zero in on the most possible suitor.

SEBI to amend rules for open offer

Oommen A. Ninan

— PHOTO: SHASHI ASHIWAL

VIGILANT: C. B. Bhave (right), Chairman, Securities and Exchange Board of India and M. S. Sahoo, wholetime member addressing a press conference in Mumbai on Monday.

MUMBAI: The Securities and Exchange Board of India (SEBI) on Monday decided to amend the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, to give ‘a transparent pricing’ for open offer of Satyam Computer Services.

“This amendment would be in the general context rather than as a specific case,” SEBI Chairman C. B. Bhave said after its board meeting here. However, the detailed guidelines would be announced later. Satyam’s former Chairman Ramalinga Raju had informed the company’s board on January 7, 2009, that its accounts were fudged and subsequently the Government had appointed a new board for the company. Since then many companies were showing interest in taking over Satyam.

SEBI said that it examined the request of Satyam Computer Services for exemption from certain provisions of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

“The board recognised the special circumstances that have arisen in the affairs of the company and concluded that the issue needs to be dealt with in the general context. Accordingly, it was decided to appropriately amend the regulations and guidelines to enable a transparent process for arriving at the price for such acquisition,” said Mr. Bhave.

However, these measures will be effective from the date of amendment to the regulations, Disclosure and Investor Protection (DIP) Guidelines and the Listing Agreement.

SEBI Chairman said the regulator was well aware of the urgency in the matter of Satyam Computer Services and it would announce the guidelines at the earliest.

It has also been decided to amend the listing agreement “to provide that listed entities shall declare dividend on per-share basis only.” At present, there is no uniformity in declaring dividend. Some companies declare dividend on per share basis and some as a percentage of the face value of the shares. “Declaration of dividend as a percentage of the face value has the potential to mislead the investors in case face values of the shares of two companies are different,” said Mr. Bhave.

The SEBI board also decided to reduce the period for completing a bonus issue to 15 days, where no shareholders’ approval is required as per the Articles of Association of the company and to 60 days where shareholders’ approval is required as per the Articles of Association of the company.

SEBI decided to amend the DIP Guidelines to enable the issuer company making an IPO to declare the floor price or the price band at least two working days before the date of opening of IPO subject to wide dissemination of price band through newspaper advertisements, availability in websites and the like.

“The issue advertisements shall also disclose the financial ratios calculated for both upper and lower end of the price band,” said Mr. Bhave.

It has been decided to amend the DIP Guidelines to increase the upfront margin to be paid by allottees of warrants to 25 per cent.

The board approved regulations for governance of the Investor Protection and Education Fund (IPEF). The fund may be credited by: Contribution as may be made by the board to the Fund; Grants and donations given to the Fund by the Central Government, State Government or any other entity approved by the board for this purpose; Proceeds of foreclosures of deposit/innovation of bank guarantee/sale of the securities kept in the escrow accounts by an acquirer in case of non fulfilment of its obligations under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. The Fund would be used for investor protection and promotion of investor awareness and education.

Online edition of India's National Newspaper
Tuesday, Feb 03, 2009

Apex court to hear SEBI plea today

Legal Correspondent

New Delhi: The Supreme Court will hear on Tuesday a special leave petition (SLP) filed by the Securities and Exchange Board of India (SEBI) for a direction to interrogate B. Ramalinga Raju and B. Rama Raju, former chairman and managing director respectively of Satyam Computer Services, on the financial scam in the company.

A Bench, comprising Chief Justice K.G. Balakrishnan and Justice P. Sathasivam directed the matter to be put in the ‘mentioning list’ after Solicitor-General G.E. Vahanvati sought early listing of the SLP.

The SEBI said in its plea that 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, the SEBI was constrained to move the apex court, the SLP 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, the SLP said.

The balance sheet of Satyam as on September 30, 2008 “carries an inflated [non-existent] cash and bank balances of Rs. 5,040 crore [against Rs. 5,361 crore reflected in the books], an accrued interest of Rs. 376 crore [non-existent], an understated liability of Rs. 1,230 crore on account of funds arranged by Ramalinga Raju and an overstated debtors position of Rs. 490 crore [against Rs. 2, 651 crore reflected in the books],” the SEBI 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. That a case of this magnitude had not arisen in the Indian corporate history before and the SEBI being an expert body had the statutory duty to conduct a comprehensive and meaningful investigation in this behalf.

It said the scam had large-scale national and international ramifications in relation to a listed company, and the two brothers, instead of appearing before the SEBI as was obliged under the law, sought adjournment and thereafter they were arrested. The finding of the trial court that the SEBI was not an investigative agency and that 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 simply adjourned the hearing to February 9. The SLP sought the quashing of the impugned order and a direction to interrogate the brothers in custody.

Immunity for new Satyam Board

Ashok Dasgupta

NEW DELHI: The Company Law Board (CLB) on Thursday granted immunity and wide-ranging powers to the six members of the newly appointed Board of the crisis-ridden Satyam Computer Services to enable them to discharge their functions without any threat of punitive action by government agencies.

Passing the order on an application moved by the Centre, CLB Chairman S. Balasubramanian said: “To ensure that the present Board of directors discharge its function without any apprehension of being subjected to criminal, civil or punitive action, I direct that none of the state or central government agencies shall ... initiate any action against the present directors.”

The order also exempts the current directors on the Satyam Board from any action by provident fund authorities. “I restrain the PF authorities from initiating any action against the present directors of the company without the leave of this Board,” the CLB chief said.

The CLB has also authorised the six-member Board of the Hyderabad-based IT major to raise finance in the form of loan or mortgage by pledging movable and immovable assets, including securities. “Since they have been appointed in the name and on behalf of this Board [CLB], they are like court officers and, therefore, every State or Central government entity is bound to assist and support them in their endeavours, more so, when they have joined the Board as a measure of public service,” the CLB order said.

Besides, the CLB had also made it clear that no State or Central government authorities would enforce its “regulatory, enforcement or like such powers, initiate any action, civil, criminal, punitive, coercive against the present directors” of Satyam. However, it has also told the Board to cooperate and furnish documents as and when required by the investigating agencies. “The Board of directors shall cooperate with the agencies concerned as may be necessary, whenever any information or documents are required by these agencies,” the CLB Chairman said.

The CLB also clarified that, as per its order of January 9, 2009, the new Board of Satyam is fully authorised to raise finance for the crisis-ridden company. “… this authorisation is applicable to raising of finance in the form of loan or otherwise and also to mortgage, charge and encumber any of the movable and immovable assets of the company, including providing them as securities, if need be.”

Meanwhile, there appear to be seven possible suitors for Satyam even as company’s investment bankers are trying to select the best. “So far we are aware of four [companies that have approached Satyam Computer]. But we have heard that another two or three firms are also interested,” Board member Tarun Das told the media here.

Mr. Das pointed out that the investment bankers were talking to everybody to evaluate the level of interest and seriousness of the suitors before getting back to the Board. “The process is likely to take six weeks,” he said.

SEBI will have to wait to examine Rajus

M. Rajeev & N. Rahul

HYDERABAD: The Securities and Exchange Board of India (SEBI) will have to wait for some more time to examine the former Satyam chairman, B. Ramalinga Raju, and his brother, B. Rama Raju.

The Andhra Pradesh High Court posted to Friday the hearing on its writ petition seeking to record the statements of the Raju brothers in the multimillion-dollar fraud in the IT major. Justice B. Seshasayana Reddy made it clear that maintainability of the petition should also be argued.

Solicitor-General Goolam E. Vahanvati pleaded on behalf of the SEBI that the court had plenary powers, and maintainability of the petition should not be a hindrance to adjudication.

“We had filed it under Article 226 of the Constitution which is plenary. The judge asked why it should be entertained under Article 226 if there was an alternative remedy? This was the basic issue,” Mr. Vahanvati told journalists later, adding there was only a self-imposed limitation to alternative remedy, but no absolute bar.

The arguments on Thursday were centred on the alternative remedies, with Justice Reddy suggesting that the petitioner file a fresh application. But Mr. Vahanvati contended that doing so would further delay investigation into the issue “which affected the position of the country throughout the world.”

The Solicitor-General said the lower court erred in construing the position of the SEBI and its order dismissing the market regulator’s position was “arbitrary and violative of Article 14.” The order, he argued, was in violation of enforcement of fundamental rights and the principle of natural justice, and there was an error of jurisdiction.

Meanwhile, a city court ordered police custody for D. Gopalakrishnam Raju, general manager of SRSR Advisory Services, a constituent of Satyam’s promoter group, for one day till January 31 for interrogation by the Crime Investigation Department.

Mr. Gopalakrishnam Raju was arrested last week on charges of arranging land deals of the Raju brothers.

Sixth Additional Chief Metropolitan Magistrate D. Ramakrishna, however, reserved for Monday orders on the bail applications of Price Waterhouse partners S. Gopalakrishnan and Srinivas Talluri, now in prison.

The prosecution opposed their bail application on the ground that the auditors’ role was crucial in the fraud. Had they been vigilant and had they verified the statement of accounts, the Satyam episode would not have taken place at all.

statement of satyam directors