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Satyam verdict may have wider implications

Legal, tax, accounting, management, government and regulatory practices will need to comb through the fine print of the ruling to ascertain its implications on their destiny.

, ET Bureau|
Updated: Apr 09, 2015, 12.58 PM IST
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Legal, tax, accounting, management, government and regulatory practices will need to comb through the fine print of the ruling to ascertain its implications on their destiny.
Legal, tax, accounting, management, government and regulatory practices will need to comb through the fine print of the ruling to ascertain its implications on their destiny.
HYDERABAD: It is not just the 60-yearold founder of Satyam Computer Services, B Ramalinga Raju, and his associates who are awaiting the verdict today, in India’s largest accounting fraud. Several dozen corporate entities and individuals are also looking toward judgement day with a mixture of anticipation and dread.

Legal, tax, accounting, management, government and regulatory practices will need to comb through the fine print of the ruling to ascertain its implications on their destiny.

Financial and criminal liabilities of various entities and individuals involving thousands of crores of rupees will be determined when additional chief metropolitan magistrate BVLN Chakravarthi pronounces judgement after a trial that’s lasted 50 months. Satyam’s founder confessed to the Rs 7,136 crore fraud on January 7, 2009, sparking a series of events that led to his prosecution and the company’s takeover by Tech Mahindra.

The verdict will also indicate the outcome of several ongoing legal disputes between and against various stakeholders associated with Satyam.A senior corporate lawyer who is part of some of the disputes involving Tech Mahindra and Raju, said, “The CBI (Central Bureau of Investigation) court’s verdict will have far-reaching implications on the outcome of a number of ongoing cases in various courts, forcing many parties involved to rework their strategies pertaining to ongoing legal fights and move appellate bodies.” The lawyer didn’t want to be named.

He said some of these legal cases include tax demands of more than Rs 600 crore on Tech Mahindra; Enforcement Directorate cases against Tech Mahindra, Price Waterhouse and others; a claim of Rs 1,230 crore by Raju familyowned entities against Tech Mahindra; market regulator Securities and Exchange Board of India’s case against independent directors; Price Waterhouse’s case against Tech Mahindra; and Tech Mahindra’s cases against Raju and Price Waterhouse, among others.The same advocate, who is arguing cases involving alleged fictitious sales by Satyam under Raju’s management and tax claims on such revenue by the income tax department now, said, “If the CBI court terms them fictitious sales, then it will affect the cases involving tax claims by the tax authorities. If the CBI court confirms criminal liability of Satyam’s erstwhile auditors, then it will raise questions on liabilities of the auditing firm Price Waterhouse. There will be many such implications.”

CBI special public prosecutor K Surendra told ET, “If the accused are acquitted, they will go scot free. If they are convicted for three years, the court will grant them bail. If the imprisonment is above three years, then the accused will be taken to the jail from the court room itself and will be given the option to move the appellate court for bail later.”The maximum punishment the CBI court can award for criminal breach of trust under section 409 is life imprisonment and seven years for offences such as cheating, he said.

“We will look at appealing against the verdict either if the accused are acquitted or if we think the sentence imposed was inadequate,” said Surendra. The Satyam fraud forced the government and regulators to revamp corporate law. The verdict may throw light on further gaps that need to be addressed to control fraud, said senior Supreme Court advocate Nirup Reddy.

“The CBI court verdict could also throw light on larger probe needed on involvement of various entities,” Reddy said. The CBI charged Raju and nine others in the accounting fraud. They were arrested weeks after Raju confessed to cooking the books of Satyam for years. Tech Mahindra, through a government board-conducted auction, bought a majority stake in Satyam in April 2009 and merged the scam-tainted firm with itself in March 2012.

Raju and a few prime accused in the case spent more than 30 months in judicial custody in Hyderabad’s Chanchalguda central prison before they obtained bail in the last quarter of 2011.
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