Raju

Jan. 9: B. Ramalinga Raju — the disgraced founder of Satyam Computer Services — surrendered tonight before Andhra’s police chief just hours after the Centre sacked the entire board of directors of the software company.

The two events capped a day of fluid developments in three cities — Hyderabad, Delhi and Mumbai — as investigators struggled to make some sense of how Raju committed the biggest financial fraud in India’s corporate history.

Ramalinga Raju was arrested along with his brother Rama Raju, the former managing director of Satyam, and three others whose names were not disclosed. Srinivas Vadlamani, the chief financial officer, will be arrested shortly.

Police said the Raju brothers had been arrested under five counts of the Indian Penal Code: cheating (Section 420), criminal breach of trust (409), forgery (468), falsification of documents (471), and criminal conspiracy (120-B). The charges carry imprisonment of up to 10 years.

Sources said they would spend the night in the DGP’s office under guard and would be produced in court tomorrow. Later, they could be transferred to Chanchalguda, the city jail for undertrials where actress Monica Bedi was kept earlier.

High drama preceded Raju’s arrest — and it was evident that there had been hectic behind-the-scene negotiations before it took place.

Raju didn’t want to be arrested from his home at the upscale Jubilee Hills in full view of his neighbours. So, his advocate S. Bharat Kumar rushed to the police headquarters after learning that the state CID — with the consent of capital market watchdog Sebi and the ministry of corporate affairs — had filed a case this evening.

Raju was supposed to be arrested at 9pm. But he wanted to give himself up. A couple of frantic calls was made and the state government relented.

Unprecedented action

L’affaire Satyam has turned into a monumental fraud that has called for unprecedented action. On Friday, the Centre moved an application before the Company Law Board (CLB) seeking the supersession of the Satyam board.

This is the first time in Indian corporate history that the Centre has made an application for the removal of the entire board of a private company.

The Centre announced plans to create a new slate of directors at Satyam comprising 10 government nominees. Late tonight, Satyam welcomed the decision.

The ministry of corporate affairs approached the company law board with an application under Sections 401 and 408 of the Companies Act seeking supersession of the Satyam board.

The supersession means that the Satyam board will not meet tomorrow as scheduled. The new board is expected to meet within seven days.

Late tonight, the government was scrambling to put together a team of eminent people to head the scam-tainted company. But it appeared that it was finding it difficult to come up with 10 good men who would see the software maker through its hour of crisis.

Premchand Gupta, the minister of corporate affairs, said the new team of directors would be put together by the weekend, adding that it would not consist of anyone who was from the same line of business.

This meant that the government had rejected Andhra chief minister Y.S. Rajasekhara Reddy’s request to form a board of Wipro chairman Azim Premji, Infosys chief mentor N.R. Narayana Murthy and TCS managing director S. Ramadorai.

Other names have been bandied around, notably HDFC chairman Deepak Parekh who appeared to be reluctant to take up the onerous task. Parekh told a television channel that there could be a conflict of interest as he was on the board of WNS, a frontline business process outsourcing company.

Hide and seek

Raju’s arrest raises a lot of questions: how many investigation teams are pursuing him and are they starting to work at cross-purposes?

Raju has been trying to dodge a team of officials sent by Sebi to investigate the fraud. Early in the day, Raju’s lawyer Bharat Kumar appeared before the Sebi team and sought three days’ time before he came before them. The request was rejected. It was then decided that Raju would appear before the Sebi team at 4pm tomorrow.

With his arrest by the state CID, it wasn’t very clear whether Raju would now keep his date with the Sebi team which had gone to the Satyam headquarters in the morning and seized several documents.

The Sebi officials had also gone to Raju’s house in the afternoon but he wasn’t there. He had been holed up in one of his numerous guest houses.

The Andhra government has also instituted a probe into the deals and contracts that were given to Satyam and the Maytas twins. This is being investigated by the state CID.

V.S.K. Kaumudi, the inspector-general of CID, had gone to Satyam’s corporate office at Hitech City and taken possession of some documents. He interviewed interim CEO Ram Mynampati and other senior officials.

The Satyam stock tumbled to an all-time low of Rs 6.30 on the NSE before clawing back to close at Rs 23.75. Last year, the stock had hit Rs 544 at one point.

Satyam employees now face a harrowing prospect with rumours doing the rounds that the company may not be able to pay salaries for the next two months. The company denied the speculation.