The Biggest Money Racket Of All Time 

The Biggest Money Racket Of All Time 

                                                                                              Author:- Rafiya Nazneen,   A Student of Madhusudan Law University, Odisha

                                                                            

Abstract 

There are tremendous Information Technology companies in India. And these companies recruit alot of employees every year and provide them the training for doing for boosting there productivity. Scams in company’s have became a part of the modern society with the growing companies more and more threats of scandald and corporate scams have taken place. The SATYAM Computers Scam is one of the biggest corporate scams in India. This research paper flows through the critical analysis of the biggest scam of all time of the Satyam Computer Company. It firstly tries to establish the factual aspects of the case then departs to the elucidation of the Scam then gave the glimpses about the confession made by the guilty and simultaneously provides the timeline of the events with the judgement and afterwards provides the steps taken by the Government.  The research brings out the awareness about the methodology behind the scams. 

I. Introduction 

In this developing era, the information technology has became the most essential part of our daily life. It has made the world a better place for living. The companies which are based on the working of technologies like machine learning, marketing, networking, internet, AI and mobile technologies, etc. IT companies tries to make new technologies as to meet the needs of the society. In 1987, Ramalinga Raju, a businessman who previously had a cotton business made a IT based Company SATYAM Computer with his brother in Hyderabad. 

                                                             PETITIONER – 

M/s. SATYAM COMPUTER SERVICES , LIMITED 

                                                                    VS                     

                                                             REPONDENTS –  

DIRECTORSTE OF ENFORCEMENT, GOVERNMENT OF INDIA , HYDERABAD AND 9 OTHERS                          

COUNSEL FOR PETITIONER  : Mr. S. RAVI, SENIOR COUNSEL 

COUNSEL FOR RESPONDENTS  : Mr. NAGARAJ, A.S.G. FOR ED AND

                                                            Mr. NARENDER REDDY, SENIOR COUNSEL

BENCH :   HONOURABLE SRI JUSTICE V.RAMASUBRAMANIAN

                                                                                AND

                   HONOURABLE MS. JUSTICE J. UMA DEVI

II. Factual Background

The SATYAM Computer began with 20 employees and very quickly expanded to become a global company with operations in more than 60 countries worldwide. After Tata Consultancy Services Limited (TCS), Infosys, and Western India Palm Refined Oils Limited (Wipro), it was fourth-largest software industry in 1990s. In the year of 1991 SATYAM Computer got listed in the Bombay Stock Exchange. Also in 2001, it was listed on the New York Stock Exchange. SATYAM started to establish Customer-Oriented Global Organisation training program in 2000 and also signing contracts with international companies including Microsoft, Emirates, i2 Technologies, etc. At that time SATYAM Computer was at its peak in the IT Sector. In the financial year of 2004, SATYAM company’s revenue was almost Rs. 25,400 million. By the year of 2008, it increased by more than thrice of such revenue. 

Once Real Estate rates starting growing in Hyderabad. Thus, Raju started buying land properties in Hyderabad agressively and areas around it. Even to buy properties, he had opened approximately 360 companies.  He started to buy real estate properties in the name of his companies, also in the name of his other companies – Matyas Infra and Matyas Properties, his family members, and in his name and even in the name of its employees. Which turn into trouble in the future as SATYAM became the focus of the public because of its case of scam. Raju also got the confidential information about the construction of the METRO that is what will be the route for the METRO and he therefore started to buying lands near the proposed metro route, as he knew that once the METRO comes into function, the price of the land near the METRO will be sky-scraping. 

The profit Raju gets from the Real Estate, some of that goes into SATYAM Company and Raju could show the fake financial amounts such as profits, benefits, etc. And thus, could easily fill the void between the actual amount of the sales and the fake figures made up by Raju in the sales. So as to project more sales in SATYAM Computers Company, Raju started providing many fake sales invoices of about 7,500 in toto. Using such fake invoices, Raju exhibit fake sales, profits  and for this sale he made plenty of fake bank statements to show that the money from profits is in the bank. That meant he showed a lot of cash reserve that did not exist.

II. The Satyam Scam 

For many upcoming years, Raju kept doing fraud by faking the sales, profits, and even other figures in the statements, invoices, etc of the SATYAM. When people saw that there is a rapid growth in SATYAM which attracted investors to invest in this growing company and because of which SATYAM Company’s share price in the market kept on growing and its in the result the promoters of the company kept selling their shares for more value. The more and more the Company SATYAM grew, the aperture between Raju’s fake figure in the invoices and the actual figure become voluminous. This gap became a huge amount. In the year 2008, the Real Estate drastically slowed down because of the recession period and the Raju’s plan of selling his properties and fixing the the giant gap between the actual and the manipulated figures had failed. After which Raju made a new scheme to fill this gap. According to this plan, SATYAM Computer would buy a 51% stake in Maytas Infra and Maytas Properties. By this money would go to the promoters of Maytas. The properties – Maytas Infra and Maytas were owned by his family members. 

Raju thought this scheme would help him to secure his company to eliminate the huge gap between the between the genuine figures and the fake figures of the amount in the statrments and invoices. But in fact there was no transaction of money because those were his family’s businesses.With such approach the long gap between the fake and the genuine figures will get filled. With the plan on the day of 16th December of 2008, SATYAM Computer’s Board of Directors gave affirmation to this plan with that approval Raju sanctioned this idea without taking the due approval from the shareholders of the company. But SATYAM’s investors didn’t like this decision, especially the institutional investors of the company. After this decision, SATYAM’s stock fell rapidly.

III. Raju’s Big Confession 

An investor in Uniyed States filed a suit against the SATYAM Company and because of that there was a drop of 55 percent in stocks of SATYAM in New York Stock Exchange. Thus, due to this SATYAM Company decided to cancel the project of acquiring Maytas Infra and Maytas Properties. In the response of this event, 4 independent Directors of SATYAM Company resigned. After all the plans failed, Raju confessed on 7th January 2009 that SATYAM Computer Company has been manipulating all the financial statements from many years. Raju revealed that there is a huge difference of ₹7000 crores between the actual and the manupulated amounts in the statements. After the confession Raj with other directors of the Company were questioned about how they were manipulating the statements of the company.On the date of 9th January 2009, Raju with his brother B Rama Raju got arrested. After that, the Government of India appointed new members in SATYAM’s Boards of Directors to save thd company. In April 2009, Tech Mahindra bought 51% stakes in SATYAM Company and changed the Satyam Company’s name as Mahindra SATYAM. Later on,  in June 2013, Mahindra SATYAM was merged with the Tech Mahindra.

IV. Timeline of the Satyam Scam Incident – 

The first event took place on 24th June 1987: Satyam Computers Company was launched in Hyderabad, India.

In 1991: It was listed in Bombay Stock Exchange.

In 2001: Gets listed on New Year Stock Exchange and it’s revenue crosses $1 billion.

In 2008: The SATYAM Company’s revenue crosses the amount of $2 billion.

On 16th December 2008: Satyam Computers Company had announced the acquisition of a 100 percent share in Maytas Properties and Maytas Infra, these two companies were owned by Chairman Ramalinga Raju’s sons. 

On 23th December 2008: Satyam Computers Company was barred from conducting any type of business with the World Bank’s direct contracts for a term of eight-years because, the company was found doing ineligible contracts. 

On 26th December 2008: After the World Bank’s declarations about the Satyam Company, Mr. Mangalam Srinivasan, a director of Satyam, resigned from the company. 

On 28th December 2008: Another three additional directors had resigned from Satyam Company. 

On 6th January 2009: Promoter’s stake fell to 3.6 percent.

On 7th January 2009: Even Raju resigned after he made confession that he inflated the company’s financial statistics and he also claimed that the company’s cash and bank accounts on the balance sheet were changed and made 50,400 million Rupees.

On 8th January 2009: The Company attempting to reassure it’s customers and investors that it could keep the firm viable following the admission by its former CEO of India’s.

On 11th January 2009: The Government of India intervened in the Satyam Company’s issue, and appointing three new Board of to save the company and its employees. Deepak Parekh, Executive Chairman of Housing Development Finance Corporation, C. Achuthan, Director of the National Stock Exchange and previous member of the Securities and Exchange Board of India, and Kiran Karnik, former President of NASSCOM were the new members of the Board. 

V. The Judgement

According to the Central Bureau of Investigation, Raju was into the money laundering. At firstly started sending money to the Europe and afterward he started to send it to India. And with that he purchased many apartments. After that Raju and 47 other people along with Raju and on his almost 160 companies for money laundering. At last they seized all his and his family’s property. On 10th April 2015, the CBI court sentenced Mr. Raju and his brother B Rama Raju, with the CFO, Srinivas Vadlamani and the two PWC partners along with five other people, to imprisonment of 7 years. Raju and his brother were fined for the compensation of 5.5 Crore Rupees. After the confession of Raju, the investors of Satyam Company incurred the loss of 14,162 Crore Rupees. AND LIC also being an investor of SATYAM Company, incurred the loss of 950 Crore Rupees. 

VI. Government’s Reaction to Satyam Scam 

Many scam cases have taken in India but one of the biggest scam of all time is the SATYAM SCAM. For controlling such case after the case of Satyam Scam, the Government of India made some necessary steps as – The Companies Act, 1956 was being abolished, and a new statute was made called The Companies Act, 2013. A new bit was introduced for the auditor rotation which requires the auditors to be replaced after every five years and after every ten years to change the audit firms. It it was also added that the Director’s Responsibility Statement must be a separate part in the Board of Directors’ Report.

VII. Conclusion

Scams are become very common nowadays. In India, starting from Mundhra Scandal (1958) to Nirav Modi – PNB Bank Fraud Case. This scam teaches the essence of moral, ethical, and social values of the corporate world and how the influence of human determination, and love for power, glory, luxury, money effect the human to do such big scams. For checking such scams the government must make strict rules and regulations for effective outcomes. 

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