COMPANY LAW II: CIA – 3

“CASE CRITIQUE ON SATYAM’S CASE”

SUBMITTED TO: SUBMITTED BY:

DR. FINCY PALLISSERY CHIRANJIV JAIN

19213210
 INTRODUCTION

It is typically perceived as dealing with the problems that result from the separation of leadership
and control. Corporate Governance may be defined as holding a balance between economic and
social goals and between individual and commercial goals. Good corporate governance is one
where a firm commits and adopts ethical practices across its entire value chain and in all of its
dealings with a wide group of stakeholders encompassing employees, customers, vendors,
regulators and shareholders in both good and bad times.

SATYAM SCAM

Scandals are often the “tip of the iceberg”. They represent the ‘visible’ catastrophic failures. An
attempt is made in this case study to examine in- depth and analyze India’s Enron, Satyam
Computer’s “creative- accounting” scandal. Their scandal/fraud has put a big question mark on
the entire corporate governance system in India. In public companies, this type of ‘creative’
accounting leading to fraud and investigations are, therefore, launched by the various
governmental oversight agencies.

The Satyam Scam has never been an easy issue to look upon. It has its own complexities as the
very issue involves a scam of around 14000 Crore. The Satyam Scam is still regarded as an
example for following poor corporate governance practices. The relationship between the
shareholders and employees which is the very crux of every corporate organization has never
been satisfactory.

So, to throw light on the poor governance policies of one of the major IT giants the need to go
through this case study is quite vital. The Satyam Scandal basically highlights the importance of
Securities Law and Corporate Governance in emerging markets.
 ISSUES OF CORPORATE GOVERNANCE

Issues in Satyam start when on December sixteenth, 2008; its administrator Mr. Ramalinga Raju,
in a shock move declared a $1.6 billion offer for two Maytas organizations for example Maytas
Infrastructure Ltd and Maytas Properties Ltd saying he needed to send the money accessible to
assist financial specialists. The two organizations have been advanced and constrained by Raju’s
family. The thumb down given by financial specialists and the market constrained him to
withdraw inside 12 hours.

Offer costs dives by 55% on worries about Sat yam’s corporate administration. In an unexpected
move, the World Bank declared on December 23, 2008 that Satyam has been banished from
business with World Bank for a long time for furnishing Bank staff with ―improper benefits‖
and accused of information burglary and influencing the staff. Offer costs fell another 14% to the
most minimal in more than 4 years.

The one autonomous executive since 1991, US academician Mangalam Srinivasan, declared
renunciation pursued by the abdication of three progressively free chiefs on December 28 for
example Vinod K Dham (broadly known as dad of the Pentium and an ex Intel worker), M
Rammohan Rao (Dean of the eminent Indian School of Business) and Krishna Palepu (educator
at Harvard Business School).

Finally, on January 7, 2009, B. Ramalinga Raju reported admission of over Rs. 7800 crores
budgetary extortion and he surrendered as an administrator of Satyam. He uncovered in his letter
that his endeavour to purchase Maytas organizations was his last endeavour to ―fill invented
resources with genuine ones‖. He conceded in his letter, it resembled riding a tiger without
realizing how to get off without being eaten. Satyam’s advertisers, two siblings B Ramalinga
Raju and B Rama Raju were captured by the State of Andhra Pradesh police and the Focal
government assumed responsibility for the polluted organization. The Raju siblings were
reserved for criminal rupture of trust, conning, criminal connivance and imitation under the
Indian Penal Code.

The Central Government reconstituted Satyam’s board that included three-individuals, HDFC
Executive, Deepak Parekh, Ex Nasscom director and IT master, Kiran Karnik and previous SEBI
part C Achuthan. The Central Government added three additional executives to the reconstituted
Board i.e., CII boss tutor Tarun Das, previous leader of the Institute for Chartered

Bookkeepers (ICAI) TN Manoharan and LIC’s S Balakrishnan. Seven days after Satyam
organizer B Ramalinga Raju’s shameful admission, Satyam’s evaluators

Value Waterhouse at long last conceded that its review report wasn’t right as it depended on
wrong budget reports given by the Satyam’s administration. On January 22, 2009, Satyam’s CFO
Srinivas Vadlamani admitted to having expanded the number of representatives by 10,000. He
disclosed to CID authorities investigating him this aided in drawing around Rs 20 crore for each
month from the related yet imaginary pay accounts.

Andhra Pradesh State CB-CID assaulted the place of Suryanarayana Raju, the most youthful kin
of Ramalinga Raju who possessed 4.3 per cent in Maytas Infra, and recouped 112 deal deeds of
distinctive land buys and improvement understandings. Senior accomplices S Gopalakrishnan
and Srinivas Talluri of the examining firm PricewaterhouseCoopers (PwC) were captured for
their claimed job in the Satyam embarrassment. The State’s CID police booked them, on charges
of extortion (Area 420 of the IPC) and criminal connivance (120B).

CONCLUSION

The accounting fraud perpetrated by Satyam’s founders in 2009 is proof that “the science of
conduct is affected in great part by human avarice, ambition, and passion for power, money,
fame, and glory.” Scandals have demonstrated that “excellent behaviour based on solid corporate
governance, ethics, and accounting and auditing standards is urgently needed.” In emerging
nations, the Satyam case underlines the necessity of securities laws and CG. Indeed, Satyam
fraud “spurred the government of India to tighten the CG norms to prevent recurrence of similar
frauds in future.” As a result, big financial reporting frauds must be investigated for “takeaways”
and “best practices” in order to limit the frequency of similar frauds in the future.