Hyderabad: The investigation by the country’s market regulator, the Securities and Exchange Board of India (Sebi) into the Rs7,136 crore accounting fraud at Satyam Computer Services Ltd suffered a setback on Friday when a Hyderabad court adjourned, to 19 January, its decision on the board’s request to interrogate and record statements of the top executives of the company who are currently in judicial custody.
Meanwhile, Satyam’s new six-member board will meet on Saturday to discuss, among other matters, how to raise funds for meeting the immediate liquidity requirements of the company.
In defence: S. Bharat Kumar, counsel for Satyam’s three top executives, at a criminal court in Hyderabad. Noah Seelam / AFP
Sebi’s petition sought judicial permission to interrogate and record statements of Satyam’s former chairman B. Ramalinga Raju, his brother and managing director B. Rama Raju and the chief financial officer Srinivas Vadlamani, who were arrested following Ramalinga Raju’s confession on 7 January that he had fudged the company’s accounts, over several years, to show inflated revenue and profits as well as non-existent bank balances.
A decision on a petition seeking bail for the Raju brothers has also been posted for 19 January, while another petition from the criminal investigation department seeking police custody of the Rajus and Vadlamani will be heard on Saturday.
On Monday, when Sebi had filed its petition before a judicial magistrate in Hyderabad, S. Bharat Kumar, the counsel for the three top executives of Satyam, had opposed this based on his argument that the stock market regulator does not have the powers to record statements of a person in judicial custody.
Admitting that argument, the court then posted the hearing of the petition to Friday, when Sebi’s lawyer argued that interrogating and recording the statements of all three executives were critical for taking the investigations forward.
Responding to this, S.R. Ashok, one of the senior counsel for Ramalinga Raju, said: “We opposed Sebi request since there are no records available with Raju, who is currently in judicial custody; secondly, we argued that the investigation officer seeking to record statement is not authorized by the chairman of Sebi to do so; thirdly, the petition seeking to record Raju’s statement was not signed by the Sebi investigation official.”
Interestingly, Ashok is a standing counsel for the income-tax department, the Reserve Bank of India and other government agencies.
On Wednesday, in an interview to television channel CNBC TV18, Sebi counsel Pradyumna Kumar Reddy had voiced his apprehension that the investigations were going to be delayed as Raju is in judicial custody.
Further, he had told the TV channel that the local police officials’ act of seizing several documents and records from the residential and office premises of the Raju brothers and Vadlamani will only further complicate the multi-agency investigation as Sebi may need access to some of those documents.
His views are similar to that of several opposition parties that had earlier alleged that Andhra Pradesh chief minister Y.S. Rajasekhara Reddy is trying to shield the Satyam promoters from central investigating agencies by taking them into custody. The chief minister has already refuted these allegations.
On Sunday, Reddy told journalists: “Ramalinga Raju’s arrest and judicial remand will in no way prevent Sebi and RoC (Registrar of Companies, an arm of the ministry of corporate affairs) officials from questioning Raju.”
Meanwhile, MMTC Ltd a state-owned importer of coal for India’s steel and electricity producers, cancelled plans to invest Rs85.8 crore for a stake in a special economic zone to be set up by Maytas Infra Ltd in which the Raju family owns a 36% stake.
And Lazard Asset Management sold its 5.3% holding in Satyam for about Rs77.7 crore, according to information filed with the stock exchanges. The transaction of 35.7 million shares was done at around Rs21.70 a share in two bulk deals on Tuesday.
In another development, industry body Federation of Indian Chambers of Commerce and Industry has replaced its auditor Price Waterhouse, which also audited Satyam’s books, with another audit firm, KPMG. Price Waterhouse is being investigated by the apex body of chartered accountants in relation to the Satyam fraud.
Meanwhile, T.R. Prasad a member of the Satyam board, which was superseded by the Central government, has resigned from the board of Taj Gvk Hotels and Resorts Ltd. In the past few days, Prasad has resigned from the boards of five other firms: Suven Life Sciences Ltd, GMR Infrastructure Ltd, Delhi International Airport Ltd, TVS Motor Co. and castings firm Nelcast Ltd.
On Friday, M. Rammohan Rao, who resigned as an independent director from the board of Satyam in the wake of the fraud, resigned from the board of semiconductor firm MosChip. Earlier, he had resigned as dean of the Indian School of Business.
Prasad and Rao had signed off on Satyam’s 16 December decision to buy two Maytas companies in a deal that would largely benefit the promoters. The deal was abandoned by the company a day later in the face of intense shareholder opposition.
C.R. Sukumar, PTI and Reuters contributed to this story.