The Securities Appellate Tribunal (SAT) on Friday directed the Securities and Exchange Board of India (Sebi) to re-look its July 2014 order banning Satyam Computer’s founder B Ramalinga Raju and four others from markets for 14 years and asking them to return Rs 1,849 crore worth of unlawful gains with interest.
SAT said that Sebi’s order uniformly restraining all the appellants from accessing the securities market for 14 years without assigning any reasons is “unjustified”. The tribunal also said the quantum of illegal gain that was directed to be disgorged by each appellant is “based on grounds which are mutually contradictory and also without application of mind”.
“….we set aside the impugned order to the extent it relates to the period for which the appellants are restrained from accessing the securities market and the quantum of illegal gain directed to be disgorged by the appellants and remand the matter to the file of the WTM of Sebi for passing fresh order on merits and in accordance with law,” said the SAT order passed by its presiding officer Justice J P Devadhar and two members Jog Singh, and C K G Nair.
The appellate tribunal has now given Sebi four months to pass a fresh order in the case. It has also directed Raju and four others to co-operate with the regulator and not access the securities market till a fresh order is passed.
The four others in the Satyam Computer Services Ltd scam facing the prohibitory orders include Raju’s brother B Rama Raju (then managing director of Satyam), Vadlamani Srinivas (ex-CFO), G Ramakrishna (ex-vice president) and V S Prabhakara Gupta (ex-head of internal audit).
SAT on Friday said the Sebi order based on two sets of “mutually contradictory” show-cause notice issued in the Satyam case is “not clear as to who had made illegal gains and who should be directed to disgorge the illegal gains arising on sale/transfer of Satyam shares by the connected entities”.
In its 65-page, July 2014 order, Sebi had said these five persons “ committed a sophisticated white collar financial fraud with pre-meditated and well thought of plan and deliberate design for personal gains and to the detriment of the company and investors in its securities”.
The regulator further said that the “financial frauds as found in this case are inimical to the interests of the investors in securities and endanger the market integrity”.
“I am convinced that this is a case where befitting enforcement action is necessary to send a stern message to the market to create an effective deterrence,” Sebi’s WTM Rajeev Kumar Agarwal had said. On January 7, 2009, Raju – the then Chairman of Satyam Computer – had sent an email to the Sebi, wherein he admitted and confessed to inflating the cash and bank balances of the company, besides understating liabilities and other financial mis-statements.
After the fraud came to the light, the government had ordered an auction for sale of the company in the interest of investors and employees of what was known at that time as the country’s fourth largest IT firm.
The company was acquired by Tech Mahindra Ltd, then renamed as Mahindra Satyam and eventually it was merged with Tech Mahindra.