Author: Shruti, from Shri Ramswaroop Memorial University
To the Point
Satyam scam case is an example of the corporate scam in which the fraud is generally caused by the individual of the company so that they can benefit themselves by ignoring the profit and good of their consumers and investors and the shareholders. They can commit fraud, cheat their consumers and investors and can also deceive them relating to their financial things. In this the company which has committed the fraud is Satyam Computers Services Limited. It is very famous IT company which is famous globally and across India it was ranked as the top company in 2008. In the case the scam was conducted in 2009 and Ramalinga Raju conducted the fraud who was the founder and the former CEO of the Satyam Computers Services Limited. He committed fraud in the financial statement of the company. He manipulated the statement falsely and make the wrong statement although the company is growing but he fraudulently make the false statement to attract the more investors so he got more money and can use it in real estate business but he got failed at it. He suffered loss and some anonymous person has send the details to the boards of directors and when the situation become worsen then he admitted his guilt. The asset of 7,800 crores were falsely shown to get more investors and more money. Ramalinga Raju and his brother got the 7 years of rigorous imprisonment and a compensation amount to be paid is 5.5 crores by both the brothers. Along with them 9 others were also arrested.
Use of Legal Jargon
The case includes false practices which basically means that cheating by making false statement or hiding any facts, statements and circumstances. In the case like this insider trading can also be considered if evidences are found. The violations of the rules and regulations or laws of company can be a threat to the investors, shareholders and the consumers. If their would not be a proper corporate governance than such an activity can be considered as an weak governance and management. It also focuses on the auditors liability and the task which he has to do but fails to do can cause company’s loss.
Proof
Till 2008 Satyam company is growing and getting recognized and valuable day by day. The Satyam stock price rises from 10 rupees to 544 rupees which is good for the company. The company also got the Golden Peacock Award in 2008. But at the end of the year financial problems started in the Satyam Computers Services Limited and the World Bank stop the Satyam company to participate in the projects and this duration is upto 8 years. And also the fraud by the Ramalinga Raju get revealed by the anonymous person and when the situation worsen then the Raju admitted his fault and accepted that he has made a fault and he has accepted that he has made a fraud of 7,800 crores. After the inquiry by the CBI (Central Bureau Investigation), SEBI (Securities and Exchange Boards Of India), SFIO (The Serious Fraud Inquiry Office). The Raju along with the associates got arrested for the fraud, money laundering and breach of trust. As a result of such a large scam government also took a major steps regarding the fraud and make the policy revision for the fair practices. In the place of the Companies Act 1955 the Companies Act 2013 was brought by the government as an important step. The corporate fraud is considered illegal under the act. Some major changes like audit firms to be changed after the 10 years and the auditors would be changed after the 5 years was brought. People like its shareholders, consumers and the clients faces so much problems due to this scam. The government appointed the new boards of directors and the new members were also appointed. PricewaterhouseCoopers PwC which is the independent auditor of the Satyam Computers Services Limited were also suspected but they said they were unaware of it. Company’s reputation were completely ruined and later on Mahindra takes the Company and focuses on its growth by revising the terms.
Abstract
This article discusses the reason for fraud and how the fraud is committed by the corporate individuals either the head or the clients. This article discusses how the false statement of accounts was made from 7-8 years and no one get to knows and how the people such as clients and others were affected due to such scams. What is the government role after the scam and how it affects the society is also discussed in the article. What were the investigating agencies role in investigating the frauds and how the laws changes aftermath. The punishment received is also an important to discuss and how it affects the company’s reputation.
Case Laws
Harshad Mehta Scam
Harshad Mehta who is a stockbroker has committed a fraud who has manipulated a stock prices and due to result of which the stock market crashed and which causes loss to the many people.
Ketan Parekh, the Stock Market Scam of 2001
In this case Ketan Parekh has started working in the family brokerage business and make the fraud in the stock and due to which he got arrested and cannot do trade till 15 years and also get rigorous imprisonment of 1 year.
Conclusion
Satyam scam case is one of the famous case in the corporate world where it was found that how the corporate company’s were performing the scams for their benefit by making the loss of others by fraud practices. In 2009 the scam got revealed which is caused by the Ramalinga Raju. This case focuses on the loopholes in the system of the company such as the auditing system of India and irresponsibilities of the boards of directors. This case led the government to interfere and to revise the policies so that the further scam can be avoided.
FAQS
Why the government get involved in the Satyam scam case?
The government get involved and taken actions in order to protect the IT sector reputation and the investors lose their confidence so to bring their confidence back and to maintain it, it was taken by the Tech Mahindra and new reforms and regulations were made.
Who can be the whistleblower?
According to the data whistleblower is some anonymous person who has sent the email to the one of the director of the boards about the fraud and from their it was transferred to the other directors. The name of the whistleblower is not found in the case and it remain hidden.
Does the India’s reputation has any affect of the fraud by the Satyam Computer Services Limited?
Yes, it damages the India’s reputation as foreigners will think twice to invest in company as it has committed the fraud which break the trust of the people.
