Satyam Computer Services Limited, one of the India’s largest IT companies shocked his investors and other interested persons when his founder-chairman Ramalinga Raju admitted one of the India’s biggest corporate frauds. He admitted that the accounts of the company was been manipulated and shows a funds of 1.5 billion US dollars (70 billion Indian rupees) which was never in existence.
He disclosed details of the fraud in a resignation letter to the company’s board of directors forwarded to stock exchange authorities as well as the regulator of the country’s capital markets, the Securities and Exchange Board of India (SEBI). Soon after his disclosure the share prices of Satyam came down by 78%. He said, "It was like riding a tiger, not knowing how to get off without being eaten,"
The accounts were not manipulated in a single day. It was continued from the past several years. Satyam computers balance sheet and books of accounts were audited by one of the worlds most reputed firm of auditors “price water house coopers”.
Satyam computers which is the fourth largest IT Company of India and which holds a good share in the portfolio of majority of mutual funds presented an unexpected truth. Satyam's stock is listed on the New York Stock Exchange; it had business operations in 66 countries and counted 185 companies in the Fortune 500 list as its clients and customers.
The downfall of Satyam began from December itself when the World Bank barred Satyam computers to offer his services for the next eight years on the charge of bribery and corruption. Raju was aware that the hidden truth of the company can be disclosed any time thus he made an item to acquire two companies held by his sons – Maytas Properties and Maytas Infrastructure for 1.6 billion dollar. So that he can bridge the gap. But his plan failed when the investors opposed it on the charge of misuse of company funds.
With that Raju felt that he was in a broken boat and there was no way out. He was soon sacked by the government. As the companies act 1956 has a provision regarding “lifting & piercing up of corporate veil” which contains a clause that although a company has a separate legal existence no one can take shelter under that flaw and if any one will be found to provide illegitimate benefit to any person the government can break the wall of corporate veil.
The government created a new board of Satyam computers in order to see the benefits of 53000 workers working under the company. The board is also in search of a new auditing firm to look after the accounts of the company with retrospective effect.
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