Author: Sunil Kumar Sharma, Rabindranath Tagore University Bhopal
Abstract
What is a scam and what can be the reason for it in our India or any other country, in this article we will know about the scam related cases, along with which we will also know about the scams that happened in India. Do you know, the literal meaning of scam is to deceive someone and betray him, that is, when a person makes a relationship with another person which is related to any business, and a person deceives him by giving some kind of assurance or uses his money for his own benefit, then we call it a scam. If there is a place where the maximum scams happen, then it is our India, because in our India there are such people who get the post of a minister, then they misuse that post and along with that they also commit a scam of money including the post without it. The literal meaning of scam is that through which cheating or deceiving takes place. All these are games of trust in which fraudulent schemes, especially to earn quick profits, cheating etc. are included in which after winning the trust of a person, that person is cheated.
If we try to understand scam in simple language then we can use some examples.
Recently a movie was released in which the scam has been defined very well, Bhaskar is the cash manager of a bank in which his job is to make withdrawals on time to the people i.e. bank holders, although he belongs to a poor family due to which it is quite possible for him to maintain himself with that salary. Then a person who does the work of transporting TVs from abroad, in which he is in dire need of money, and that person comes to Bhaskar for money and Bhaskar withdraws 10 lakh rupees from that bank for his own benefit, so a person without any information and without responsibility betrays himself and the bank people in which the scam has been explained very well.
Similarly I would like to draw attention towards another film which involves road construction scam, this film is based on Akshay Kumar who has brought forward such an issue. In which he has told them that how a contractor does a scam of money, in that movie Akshay acts as a contractor in which he has shown how much scam takes place in the construction of a road, in the material which is used for the construction of the road, they use low cost material and construct it and also do a scam of money,
There are ministers in India who have misused their position, the first case of which is Lalu Yadav Prasad, when he committed a scam. He was a railway minister then and during this time he committed the fodder scam due to which he had to face a lot of loss and he was also removed from the post of minister. Then its called “SCAM”
Now come too the Point
today we discuss about that case law, in the case Satyam Computer Services Limited was a company that was involved in a fraud, and this company was one of the largest IT companies in India. It was also famous and successful at the national and international level with its global customers, investors, and partners, it was ranked among the top companies in Asia in 2008. In early 2009, when the dealings with this company came to light, i.e. its black deeds came to light, i.e. its fraudulent activities started to come to light, then the company’s links started falling, the company had committed fraud in some areas such as, tampering with financial statements, falsifying bank documents and board decisions, as well as fraud in running sales, etc. When this was discovered, it was found out by various government officials and when the company was investigated, it was found that there was fraud in the balance sheet of the company. There has been a fraud of about 7800 crore rupees in this, due to which it was found out that the company’s assets were not as much as they actually were. Under which the IT Act was exposed.
This company was founded in 1987 by Ramalinga Raju. Before the scandal broke out, it had a revenue of around 1 billion and was on the verge of success but something happened to the company due to which the smell of scam started coming from the company. The company was headquartered in Hyderabad and in the coming days, the company established its presence in various regions of India. The company was a rising star and a household brand in the IT business across the world. Within less than five months of winning the Global Peacock Award, it became the focus of attention for a big scam.
Issue of this case
Did B. Ramalinga Raju intentionally defraud the company’s investors and shareholders?
Is the scam a case of fraud and forgery under the Indian Penal Code (IPC)?
Did the audit firm PricewaterhouseCoopers (PwC) show negligence in accounting practices?
Were the corporate governance policies and accounting practices in India adequate?
Arguments
Prosecution’s arguments:
Ramalinga Raju caused huge losses to investors and shareholders by presenting fake figures in the balance sheet. PwC showed gross negligence in auditing, which further fueled the scam. This fraud caused a severe blow to India’s corporate credibility.
Defense’s arguments:
Raju claimed that he took this step to keep the company stable in the market, not for personal gain. He also said that his intention was to compensate the investors’ losses. PwC argued that they had no prior knowledge of this fraud.
Fact
Verdict in Satyam Scam (CBI vs Ramalinga Raju)
On 9 April 2015, the special CBI court convicted a total of 10 accused including Satyam scam’s main accused B. Ramalinga Raju and his brother B. Ramaraju. The court said in its verdict that it is the biggest and most serious scam in Indian corporate history, which not only broke the trust of investors and shareholders, but also caused deep damage to the credibility of the Indian corporate sector. The court sentenced B. Ramalinga Raju to 7 years of rigorous imprisonment and also imposed a fine of Rs 5.5 crore. Similarly, his brother and other senior officials were also given the same punishment. The court clearly mentioned that Ramalinga Raju and his associates manipulated the company’s financial documents in a planned manner and defrauded a large number of investors. In addition, the role of audit firm *PricewaterhouseCoopers (PwC)* was also questioned in this scam. PwC was found guilty of negligence in accounting practices, resulting in suspension of their license and heavy fines imposed on them. The court said in its judgment that such economic crimes not only harm investors but also have a negative impact on the entire society and economy. The case highlights the flaws in Indian corporate governance and underlines the need for transparency and accountability in the sector. The judgment sent a message that strict action will be taken against those guilty of financial fraud and breach of investor confidence, so that such scams can be prevented in the future.
Widespread impact of the judgment
This scam and the court’s decision had wide-reaching effects:
Legal reforms:
The Companies Act, 2013 was implemented after the Satyam scam, ensuring transparency and accountability in corporate governance and accounting practices.
Empowerment of SEBI:
The Securities and Exchange Board of India (SEBI) further tightened its rules to prevent financial fraud.
Investor protection:
Additional rules were made to protect investors from fraud.
Strict monitoring of PwC and other audit firms:
New guidelines were implemented after this case to increase the accountability of audit firms.
Court’s final opinion on the scam The court made it clear that the Satyam scam was not just an economic crime, but it was also a violation of ethics and professional integrity. Ramalinga Raju and his associates committed fraud in a planned manner for personal gain and to increase the market value of the company. The court also said in its verdict that the scam was a warning to the Indian corporate sector and it proved that no economic system can remain stable without transparency, accountability, and ethics.
Conclusion
The Satyam scam is a turning point in the history of Indian corporate world, which exposed the weaknesses of the country’s economic structure and corporate governance. The case showed how the trust of millions of investors and shareholders can be broken by manipulating financial data by the top level management. The court verdict termed the scam not only as an economic crime but also a serious violation of ethical and professional duties. The conviction of B. Ramalinga Raju and his associates made it clear that the judiciary of India takes economic crimes seriously. The scam also proved that no company or economic structure can remain stable without financial transparency and accountability. After this episode, concrete steps were taken towards improving corporate governance and accounting practices in India. The Companies Act, 2013 and strict regulations of SEBI put in place new arrangements to prevent such scams. Along with this, strict monitoring and accountability was fixed on audit firms. The Satyam scam taught us the lesson that ethics, honesty and transparency are the foundation of any company’s success. This scam is a reminder that economic progress is possible only when ethics and law are followed.
FAQS
1. What mainly happened in the Satyam scam and how was it exposed?
Answer – In the Satyam scam, the company’s founder B. Ramalinga Raju and his associates cheated investors and shareholders by manipulating financial data. The company’s financial documents were falsified, including balance sheets, bank statements and sales figures. The scam came to light in 2009 when government officials investigated the company and found that a scam of Rs 7800 crore had taken place.
2. Which sections of the Indian Penal Code (IPC) were violated in this scam?
Answer – Crimes like cheating (section 420), forgery (section 468), and breach of trust (section 406) were violated in the Satyam scam. Along with this, provisions of IT Act and Company Law were also found to be violated.
3. What decision did the court give in the Satyam scam?
Answer – The court convicted B. Ramalinga Raju and 9 other accused. Ramalinga Raju was sentenced to 7 years rigorous imprisonment and a fine of Rs 5.5 crore. Other co-accused were also given similar punishment. The court said that this was the biggest scam in the corporate history of India, which broke the confidence of investors and shareholders.
4. What changes took place in corporate governance in India after the Satyam scam?
Answer – After the Satyam scam, Companies Act, 2013 was implemented in India, which ensured transparency and accountability in corporate governance and accounting practices. SEBI also tightened its rules and made new policies to protect investors.
5. What conclusion did the court give regarding this scam in its judgment?
Answer – The court said in its judgment that the Satyam scam was not just an economic crime, but a serious violation of ethics and professional integrity. This served as a warning to the Indian corporate sector. The court also made it clear that such frauds not only harm investors but also have a negative impact on society and the economy.
