Satyam Computer Services former Chairman B Ramalinga Raju can face up to 10 years imprisonment along with a fine, which may extend to Rs 25 crore (Rs 250 million), in the financial fraud that led to erosion of investors wealth by whopping Rs 10,000 crore (Rs 100 billion) in a day.
(Earlier, reports had stated that the jail term could be of 7 years).
Market regulator Securities and Exchange Board of India already has ordered an enquiry into the issue to find out if Raju has violated the various regulations pertaining to dealings in securities market.
The regulator would look into various statutory violations, which include unfair trade practices, insider trading regulation and take over code. The enquiry would be conducted by a SEBI General Manager, Sunil Kumar, who had been designated as investigating authority.
Under the SEBI Act, imprisonment and monetary penalty could be awarded "if any person contravenes or attempts to contravene or abets the contravention of the provision of this Act or of any rules or regulations made there under".
This would mean that Raju could be punished for violating the securities regulation and as well as for abetting officers of Satyam to commit financial fraud, corporate law practitioners said.
In addition to violation of the SEBI norms, Raju can also be tried for other offences like misappropriation of funds and breach of trust under various sections of the Indian Penal Code and Companies Act.
More significantly, noted Supreme Court lawyer Fali S Nariman said that the country needs to put in place system to check such corporate frauds and financial irregularities.
"It has grave implications on corporate morality... It is disquieting that it is happening all over the world. I am very disturbed and itís a very bad sign," he added.
Expressing similar opinion, another senior Supreme Court advocate C A Sundaram said, "If the admissions (made by Raju in his resignation letter) are true, it is a very serious matter. It would be violation of (the) SEBI (code), Company Law and the IPC."
Sundaram stressed that to restore the confidence of the investors, the government agencies should conduct a complete probe in this issue.
Meanwhile, Pallavi S Shroff, Partner of Amarchand Mangaldas, a corporate law firm, said that SEBI would have to investigate the entire issue.
"We must know about what has happened inside Satyam. This is a case of serious fraud and has eroded confidence of investors," she said. Shroff also informed that the government under section 408 the Companies Act could request the Company Law Board to appoint administrator/director on Satyam's board.
Another senior advocate and corporate law practitioner U K Chaudhary expressed that the concept of good corporate governance in Satyam was only on the paperbook and was never followed. For that, Raju could be imprisoned for seven years under various provisions of the Company Law.
Image: B Ramalinga Raju, chairman, Satyam Computer Services, in his office in Hyderabad. | Photograph: PK/Reuters
Also read: The Satyam fiasco: Complete Coverage
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