Hyderabad: Satyam Computer Services Ltd has been linked to another controversy in Andhra Pradesh, as it emerges that one of the firm’s subsidiaries owned the 134-acre plot of land over which the current owner, Dr Reddy’s Laboratories Ltd, and the state’s revenue department are now sparring.
In a notice issued on 13 January, the revenue department said the plot wasn’t Dr Reddy’s to develop or Satyam’s to have sold because it belongs to the state.
Another controversy: B. Ramalinga Raju, whose family has been in the property trade in Andhra Pradesh for nearly two decades. Bharat Sai / Mint
The controversy comes even as Satyam is fighting for survival, with its cash running out, clients deserting it and employees seeking better opportunities elsewhere in the wake of a revelation by its founder B. Ramalinga Raju on 7 January that he fudged the company’s books to the tune of at least Rs7,136 crore. The company, some of its executives and its audit firm are also being investigated by regulatory bodies and the government.
And it comes even as E.A.S. Sarma, formerly a secretary with the country’s department of economic affairs, has criticized the way successive governments in Andhra Pradesh have handed out vast tracts of land to Satyam at low prices.
At the core of the Dr Reddy’s-Satyam-Andhra government controversy is a plot of land on the outskirts of Hyderabad. The pharma firm came into possession of this land when it acquired in 2003 Satyam Institute of e-Business Ltd, a wholly owned subsidiary of Sify Ltd, itself a subsidiary of Satyam Computer.
After the acquisition, the company’s name was changed to Dr Reddy’s Biosciences Ltd, according to a spokesperson for Dr Reddy’s Laboratories, who added that the company was developing a biotechnology project on the land.
Only, according to the Andhra Pradesh revenue department, the land was neither Satyam’s to sell, nor Dr Reddy’s to buy because it is so-called assigned land or land whose ownership rests with the state and which is meant to be distributed among the landless poor. The company refutes the claim.
According to a senior revenue department official, who did not want to be identified, revenue officials recently found Dr Reddy’s developing the land and moved to stop the company.
The deputy collector of Ranga Reddy district, Venkateswar Rao, said “notices were served on both Dr Reddy’s Labs and Satyam Computer”, but declined further comment.
In its annual report for 2003-04, Sify said: “On 3 July 2003, the company sold its entire stake in the subsidiary Dr Reddy’s Bio Sciences Limited (formerly Satyam Institute of E Business Limited) to Dr Reddy’s Laboratories Limited at a profit of Rs85,675.”
It didn’t mention the value of the transaction. The spokesperson of Dr Reddy’s declined to give details of the deal value but admitted that the company received notices from the revenue department. “Dr Reddy’s Biosciences Ltd has received notices from the deputy collector and tehsildar on 13 January 2009 under Rule 3 of the AP Assigned Lands (Prohibition of Transfers) Rules, 1977. The allegation is that about 134 acres of land in survey No. 227/2, Bahadurpally village was assigned land, the transfer of which is prohibited under the AP Assigned Lands (Prohibition of Transfers) Act, 1977.”
The spokesperson added that the land belongs to the company: “The original pattadar (title owner) of the land in question was granted a patta (title) in 1942 and he, as well as the legal heirs, have been in continuous possession of the land till it was sold to Satyam Institute of e-Business Ltd in 2000 by registered sale deeds. The AP Assigned Lands (Prohibition of Transfers) Act, 1977, has no application whatsoever and Dr Reddy’s Biosciences Ltd is in the process of responding to the notices received.”
Sarma said Andhra Pradesh had typically seen misuse of assigned land. “There has been rampant encroachment of government lands, including the waste lands called poramboku, in the last 20 years or so in the state after the traditional village officers system was removed. As a result, no proper land records were maintained and it helped encroachers grab government lands, including assigned lands, and sell them later to gullible buyers. The irony is that even the chief minister of the state, Y.S. Rajasekhara Reddy, himself was in possession of assigned land for decades, which he later surrendered to the government.”
Mint couldn’t independently confirm Sarma’s comments on Reddy.
A Satyam spokesperson declined to comment as “all such matters are under investigation by the process of law”.
Rajus and property trade
The family of Ramalinga Raju has been into the property trade in the state for at least two decades. One of the companies promoted by the Raju family, Maytas Properties Ltd, claims to have 6,800 acres of land, which was valued at Rs6,214 crore by a valuer whose name the company hasn’t disclosed. Satyam itself was allotted vast plots of land across several states.
An official at the ministry of company affairs, which is investigating Satyam, Maytas and other companies promoted by the Rajus, said the family had incorporated around 250 companies, mostly for acquiring land.
The official, who did not want to be identified, said the matter is now being investigated by regulatory agencies. “Some of this land is said to be close to the infrastructure projects taken up by the entities promoted by the Raju family. These include (land next to) the Hyderabad Metro rail project and (the) Machilipatnam seaport project, apart from agricultural land adjoining large irrigation projects that the entities...are currently executing. Detailed investigation into the transactions of these 250-odd entities of (the) Raju family is currently going on,” the official said.
Meanwhile, faced with mounting criticism from the opposition parties that it favoured the disgraced founder of Satyam, Ramalinga Raju, with generous grants of land, the Andhra Pradesh government on Sunday decided to cancel the allotment of 50 acres of land to Satyam for a development centre at Kapuluppada near Visakhapatnam.
Meanwhile, the ripple effect of the corporate fraud at Satyam Computer continued on Monday, with the London-listed Vedanta Resources Plc. cancelling a contract issued to Maytas Infra Ltd, an infrastructure firm promoted by the Raju family, citing slow progress and the failure to pay (sub)contractors.
The contract was for building a township for employees at Vedanta’s mining operations in Jharsuguda, Orissa. The deal was expected to be completed in 18 months and was worth Rs232.69 crore.
“They (Maytas) were much behind the deadline,” Shashanka Pattnaik, Vedanta’s spokesman in Orissa, said.
“The company found that they are not in a position to pump in any money into the project in view of the present crisis... Final settlement with them (is) likely in a day or two,” Pattnaik added. He said Vedanta had terminated the contract on Saturday.
Meanwhile, minister for corporate affairs Prem Chand Gupta told reporters in Delhi that the ministry’s Serious Fraud Investigation Office, or SFIO, will expand the scope of its investigation to inspect the books of Maytas Infra and Maytas Properties. SFIO is currently probing the corporate fraud at Satyam.
In an unrelated development, Maytas Infra’s chief executive P.K. Madhav resigned from the company on Monday citing personal reasons, according to a company filing to the Bombay Stock Exchange. Both Maytas Infra and Maytas Properties have been in the middle of a controversy ever since Satyam Computer announced a plan on 16 December to acquire both the companies for $1.6 billion (Rs7,776 crore today) in a deal that would have benefited the Raju family. The plan was scrapped in the face of opposition from investors and shareholders.
Madhav is also an accused in a case involving the alleged failure of Nagarjuna Finance Ltd to repay around Rs100 crore to depositors. He was a director on the company’s board and was arrested in relation to this case in December and is currently out on bail. Maytas Infra’s non-executive chairman R.C. Sinha resigned on 8 January.
Ramalinga Raju admitted on 7 January that the proposed merger was an attempt to replace fictitious assets in Satyam’s books with real assets from the two Maytas firms.
Raju, his brother and Satyam Computer’s managing director B. Rama Raju and the company’s chief financial officer Srinivas Vadlamani were subsequently arrested.
On Monday, a Hyderabad court deferred the hearing of their bail petition to 22 January. A petition from market regulator Securities and Exchange Board of India seeking a day’s custody of the three for interrogating them will also be heard on the same day. The three are currently in the custody of the police.
Lison Joseph, Sangeeta Singh and Reuters contributed to this story.