Govt dissolves Satyam board; Raju surrenders

Markets regulator says it would file a complaint only after completing its investigation; 5 more class action suits filed

India’s ministry of corporate affairs (MCA) moved decisively on Friday to address the fallout of the country’s biggest corporate fraud, the satyam scandal, and dissolved the company’s board, which was supposed to meet on Saturday, and said it would appoint 10 nominee directors on a new board that would meet within the next seven days.

A few hours after the ministry’s announcement, Satyam chairman B. Ramalinga Raju surrendered to the Andhra Pradesh police.

The ministry’s move means there will be no meeting of the company’s board on Saturday. Corporate affairs minister P.C. Gupta didn’t name the nominee directors on Friday, but it is likely that the board it puts in place will have a few bureaucrats, bankers and software industry heavyweights.

The announcement came even as no attempt was made to arrests Satyam Computer Services chairman, who on Wednesday shocked peers, analysts and investors with the admission of falsifying accounts to the tune of at least Rs7,136 crore.

The head of India’s stock market regulator Securities and Exchange Board of India (Sebi) said it would file a complaint against Raju only after completing its investigation.
Sebi also announced that companies that are part of the Bombay Stock Exchange’s Sensex index, the National Stock Exchange’s Nifty index, and some others would have to have their financial results reviewed by a committee appointed by the regulator.

Five more class action suits were filed on Day 3 of the Satyam scandal and the Indian Railways said it would likely cancel a contract it had awarded the software services firm.

MCA’s action came after the Company Law Board, the apex legal and regulatory body governing companies in India, allowed it to: restrain the current board from doing anything (it ceased to be the firm’s board at 6pm on Friday); pick 10 nominee directors; and hold a board meeting within seven days.

While television channel CNBC TV18 said the ministry would announce the new board later in the day, no announcement had been made till the time this paper went to press (see www.livemint.com for the latest updates on Satyam). Gupta, however, added that the government had no plan to take over the management of the company. He also said the Andhra Pradesh police were taking “necessary action” against Raju. Earlier in the day, several political parties had demanded that Raju be arrested immediately.