Government to take over management control of Satyam Computer

Existing board disbanded; 10 nominee directors soon

Mr Prem Chand Gupta

New Delhi: The Company Law Board on Friday allowed the Government to effectively take over the management control of the beleaguered Satyam Computer Services, following the Rs 7,000-crore financial fraud that shook corporate India.

It also allowed the Government to appoint 10 nominees to function as Directors of the Hyderabad-based company.

The current Directors of Satyam have also been restrained from acting as its Directors. Following the CLB order, the board meeting of Satyam scheduled for Saturday now stands cancelled. The new board is slated to meet in seven days.

Earlier in the day, the Government had moved the CLB to ensure that the operations of the company continued uninterrupted and also to protect the credibility of the Indian corporate sector in general and IT sector, in particular.

The Government’s crackdown on the crisis-ridden company and its move to disband the board also puts a question mark over Satyam’s Q3 results announcement and restatement of Q2 figures, earlier scheduled for January 17; it now needs to be seen if the company would be able to announce these numbers even by January 30.

Briefing the media late in the evening, the Minister for Corporate Affairs, Mr Prem Chand Gupta, said, “We will appoint suitable persons for the post of nominee Directors, at the earliest.”

The Minister also said that the Centre would wait for a report from the Registrar of Companies (Hyderabad), which is probing the financial irregularities. “The RoC has been asked to submit its report by January 14, after which it will be decided whether to refer it to the Serious Fraud Investigation Office,” Mr Gupta added.

According to the market buzz, former Nasscom President, Mr Kiran Karnik, had been approached by the Government for his suggestions on measures to put the company back on track. However, it is not clear whether or not he has been offered a seat on the board. When contacted, Mr Karnik refused to comment on the issue but said that overall, MCA had made a “good move” in taking over the management reins of Satyam. “I can’t remember a similar takeover in the past in the IT sector. This is virtually nationalisation of the company. It will stabilise Satyam,” Mr Karnik added.

Previously, the Satyam board - with its three surviving members – the interim CEO, Mr Ram Mynampati, Mr T R Prasad (former Cabinet Secretary), and Prof V S Raju (former Director of IIT, Delhi) - were scheduled to meet on Saturday to consider various options to tackle the crisis that arose in the aftermath of the startling confessions of financial fraud by its promoter Mr Ramalinga Raju earlier this week.

Meanwhile, the audit profession regulator ICAI is all set to despatch a notice to Price Waterhouse seeking why action should not be taken against the firm for the financial misstatements confessed by Satyam Chairman. The audit firm will now be answerable for financial statements of the company for the last five years.

In an interview to a TV channel, HDFC’s Mr Deepak Parekh, welcomed the government’s move and said the first priority of such a team should be to assure the company’s clients as well as employees. Once a credible team was in place at the top, filled with people of integrity and competence, financial institutions could be approached to organise a working capital for Satyam. Mr Parekh added that while he was not personally aware of the kind of fixed assets Satyam had, he had visited the company’s main campus in Hyderabad and was impressed by it. After making an assessment of the status of the company’s fixed assets, adequate loans could be extended to it, he said.