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The Satyam Scam: In perhaps one of Corporate India's worst unfolding chapters, Mr B.

Ramalinga Raju, Founder-Chairman of the $2-billion Satyam Computer Services,


dramatically stepped down after admitting of faking financial figures of the company to
the tune of Rs 7,136 crore, including Rs 5,040 crore of non-existent cash and bank
balances. The startling disclosure by Mr Raju, considered one of the poster boys of
Indian IT, jolted the corporate world, investor community, Government and large pool of
young professionals, pushing the fourth largest Indian IT company into a crisis, exposing
it to acquisitions and leaving the future of 53,000 employees in balance. Mr Raju in his
revelation to the BSE admitted that the balance sheet for September 30, 2008,
comprised faked and exaggerated figures of revenue, profit, interest and debt. The list
includes Rs 5,040 crore of fictional cash and bank balances, non-existent accrued
interest, discreet liability of Rs 1,230 crore on account of funds raised by Mr Raju and
overstated debtors position of Rs 490 crore (as against Rs 2,651 crore).What started as
a marginal gap between actual operating profit and the one reflected in the books
continued to grow over the years. It has attained unmanageable proportions as the size
of the company's operations grew over the years, Mr Raju explained.
This scam not only raised eyes brows because of its magnitude but raised a very
pertinent question on the regulatory authorities mainly SEBI which was created after
1992 scandals rocked BSE. Analysts have dubbed Satyam scam as India's Enron. USA
passed Sarbanes-Oxley Act of 2002 in reaction series of corporate and accounting
frauds. In USA, the fraudsters were punished in 5 years in case of Enron. Harshad Mehta
who made bull run in last decade died without being finally convicted. Ketan Parikh
scam still is sub-judice and is expected to go years and years. It is this scam which
ruined hundreds of Cooperative Banks across Nation and plummeted Unit-64 a popular
mutual fund scheme of the UTI, India's largest mutual fund company. Time cannot be
riper to enact legislation on lines of Sarbanes-Oxley Act 2002 of USA to save millions of
small time investors and shareholders from the scourge of financial frauds by
unscrupulous people like Ramalinga Raju, Harshad Mehta and Ketan Parikh.
Read more at Law Teacher: http://www.lawteacher.net/free-law-essays/criminallaw/white-collar-crimes.php#ixzz3qdaWhXOh

Judicial Attitude:
The courts generally have been giving differential treatment towhite-collar criminals. Sometimes, instead
of punishing the guilty, thecourts have used cease-and-desist orders in case of white-collar criminals,a
technique which is not resorted to for ordinary criminals. As pertinentlyobserved by Taft and England, we
do not warn the burglar to desist; wearrest him forthwith. There, however, seems to have occurred
stiffeningof the judicial attitude in the U.S.A. of late as manifested in the famousGeneral Electric case of
the electrical equipment companies decided inthe year 1961. In the words of Taft and England:The plea
of

nolo

contendere

(no

contest)

by

person

formallyaccused of a crime is a backhanded plea of guilty. For decades, businessman accused of violating

anti-trust laws have placed nolocontendere

when

the

evidence

against

them

was

clearly

overwhelming. Never, until 1959, did imprisonment follow such a plea. In that year, totheir astonishment
four Ohio

businessman

were sentenced

to jail

for

anti-

trust violations. In February 1961 , 44 executives of 29 electricalequipment companies, including General


Electric and Westinghouse, pleaded guilty or nolo contendere to charges of price-fixing and rigging bids
on $

7 billion

worth

of heavy

electrical equipment.

tofines ranging up to $12,500, 23 executives, one of whom was aWestinghouse

In
vice-president

addition
were

variously sentenced to 30- and 60 days jail terms most of these sentences were actually served. The
extensive press coverage given to this incident was apparently based not upon theenormity of the
crimes involved, but upon nation wide surprise at the jailsentences meted out and upon the verbal
reprimands

by

the

sentencing judge.Taft and England also not the significance of the Time Magazinereporting the story in
the Business and not in the Crime columns.35The trial courts in India sometimes fail to realize the
gravity of white-collar criminality and, therefore tend to be contented by awarding light or even token
punishment

to

white-collar

criminals.

The

Law

Commissionhas been fully aware of the judicial smugness vis--vis white-collar crimes and the dangers
inherent in it. In its Forty-seventh Report theCommission observed.
Besides prescribing stiffer punishments for white-collar offerders, theSupreme Court has also held in a nu
mber of cases that liberalinterpretation must be given to the penal laws dealing with social
welfarelegislation to see that the legislative object is not defeated. In
Murlidhar Meghraj Laya V. State of Maharastra,
the Court observed:It is trite that the social mission of food laws should inform theinterpretative process
so that the legal blow may fall on every adulterator.Any narrow and pedantic literal and lexical
construction likely to leaveloopholes for this dangerous criminal tribe to sneak out of the meshes of the
law should be discouraged. For the new criminal jurisprudence mustdepart from the old canons, which
make indulgent presumptions andfavoured constructions benefiting accused persons and defeating
criminalstatutes calculated to protect public health and the nations wealth.In the case of,
State of Maharastra V. Mohd. Yaqub, the Court was of theview that penal provisions calculated to
suppress smuggling activitiesmust be construed liberally.It may be noted that these rulings in favor of the
liberal interpretation of penal provisions relating to socio-economic crimes are at variance withthe
ordinary rules of construction of penal status which require strictinterpretation and benefit of doubt, if
any, must be given to the accused.Finally, the Courts in India have given strict interpretation to the socioeconomic statues which do not require any mens rea either in the form of intention or knowledge for
committing an offence. This is how it should be though it may be pointed out that the courts have been
somewhatreluctant in finding mens rea excluded from statutes dealing with moretraditional offences.

Dealing with a violation of the Foreign Exchange Regulation Act, 1947 the majority in State of
Maharastra V. George heldthat the very object and purpose of the Act and its effectiveness as
aninstrument for the prevention of smuggling would be entirely frustrated if conditions were to be read
into section of the Act qualifying the plainwords of the enactment that accused should be proved to have
knowledgethat he was contravening the law before he could be held to havecontravened the provision.
Again in Tejani V. Dange a case under the Prevention of FoodAdulteration Act, the Supreme Court
said:It is trite law that in food offences strict liability is the rule not merelyunder the Indian Act but the
entire world over. Section 7 casts an absoluteobligation regardless of sinter bad faith and mens rea. If you
have soldany article of food contrary to any sub-sections of section 7 you areguilty. There in no more
argument about it.In most circumstances, the defense is faced with two competing anddifficult
alternatives: accept the prosecutions offer and plead guilty tocertain charges, or proceed to trial and allow
the court to decide theoutcome. Neither choice is easily made; each can have life-alteringconsequences.