Mumbai: India’s stock market regulator on Thursday asked B. Ramalinga Raju, the main convict in the accounting fraud at erstwhile Satyam Computer Services Ltd, and nine entities linked to him to return over 1,800 crore of illegal gains made by them.

The Securities and Exchange Board of India (Sebi) also sought an additional 1,500 crore as interest on the amount dating back to 7 January 2009, the day Raju, Satyam’s founder, admitted to fudging the books of the company over several years to the tune of 7,136 crore.

On 10 April, a special court sentenced Raju, and nine others to seven years of rigorous imprisonment after convicting them. All 10 have challenged the verdict.

Thursday’s order by Sebi appears to be a follow-up to an order issued by it in July last year barring Raju and four others from the markets for 14 years and asking them to return 1,849 crore of illegal gains along with interest.

That order was passed against Ramalinga Raju, his brother B.

Rama Raju (managing director of Satyam at the time the fraud took place), Vadlamani Srinivas (ex-chief financial officer), G. Ramakrishna (ex-vice president) and V.S. Prabhakara Gupta (ex-head of internal audit).

Thursday’s order fixes the individual liability of Raju, his two brothers, and other individuals and companies related to the then promoters of the firm.

While passing the order, Sebi’s whole-time member Rajeev Kumar Agarwal said prohibitions on insider trading are intended to ensure that insiders in a company do not breach their fiduciary duty towards investors and other stakeholders. In the present case, the 10 entities were found to be guilty of misusing insider information to make illegal gains by trading in the shares of Satyam.

“…the spirit behind prohibition of insider trading is that the insiders must disclose or abstain. They should not take the position adverse to the interest of the general investors and should not place their interest or the interests of those to whom they communicate the unpublished price-sensitive information," the 39-page order said.

“It has to be kept in mind that in respect of contraventions of relating to the insider trading, the violator should face the consequences otherwise the objects of the regulations and also of the regulatory jurisdiction would get defeated. In my view, the enforcement actions for such violations as found in this case should have effective deterrence," it said.

The entities were directed to pay back the money within 45 days by way of a demand draft in the name of Sebi.

Those against whom the latest order has been passed include SRSR Holdings (controlled by the Raju brothers); IL&FS Engineering and Construction (formerly known as Maytas Infra that was controlled by Raju and his two sons); Raju’s mother B. Appalanarasamma, and his two sons Teja Raju and Rama Raju Jr.; his brother Suryanarayana Raju and B. Jhansi Rani (wife of Suryanarayana); Chintalapati Srinivasa (then director of Satyam), his father Anjiraju Chintalapati (since deceased) and Chintalapati Holdings Pvt. Ltd.

Acknowledging that IL&FS had acquired Maytas and renamed it IL&FS Engineering and Construction Co. after the fraud, Sebi said the latter wasn’t involved in the fraud, but added that “unlawful gains made on account of insider trading by Maytas and lying with IL&FS Engineering and Construction Co. cannot be allowed to be retained by it".

Under the terms of the order, Ramalinga Raju and Rama Raju have to return over 56 crore that they earned through sale or transfer of shares held by them in Satyam Computer.

SRSR Holdings has been asked to return 1,258.88 crore. The third brother Suryanarayana Raju has been asked to return nearly 90 crore and his wife 8.5 crore. Raju’s mother Appalanarasamma has to return 8 crore, while the unlawful gains made by Raju’s two sons are estimated at about 95 crore.

Sebi said SRSR Holdings served as a front for the promoter group and the Raju brothers to obtain funds through pledges of shares of Satyam Computer with active involvement and the direct or indirect connivance or collusion of Ramalinga Raju and Rama Raju who were its directors and also “insiders" in possession of “unpublished price-sensitive information".

At the same time, Anjiraju Chintalapati, the Raju family matriarch Appalanarasamma and other family members and related companies also made unlawful gains from the sale or transfer of shares while in possession of “unpublished price-sensitive information" with complicity and involvement of the two Raju brothers, Sebi said.

After the Satyam fraud came to light, the government ordered an auction of the company in the interest of investors and employees of what was then the country’s fourth largest information technology services firm. The company was acquired by Tech Mahindra Ltd in the auction.

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