The Indian ministry has taken swift action and has received praise from all quarters for it’s decision to disband the Satyam Board. The board meeting scheduled for 10th January 2009, also stands cancelled.

The Ministry of Corporate Affairs dismissed the board, including the company’s interim head, late Friday night, hours after Satyam’s founder and former chairman, B. Ramalinga Raju, was arrested for doctoring the company’s accounts by $1 billion.

Raju confessed to filling the company’s balance sheets with “fictitious” assets and “nonexistent” cash in an extraordinary letter to the company’s board on Wednesday.

Raju was arrested along with his brother, former managing director B. Rama Raju, in the southern city of Hyderabad, according to S.S. Yadav, the top police official in Andhra Pradesh state, where the company is headquartered.

Raju, who has diabetes and hypertension, saw a doctor at 3 a.m. after complaining of discomfort and chest pain, said his lawyer, S. Bharat Kumar.

A local magistrate on Saturday ordered the brothers held in judicial custody until Jan. 23 while the investigation continues, said Kumar.

The brothers resigned from the company Wednesday.

The Satyam offices were largely empty because it was a weekend, “but otherwise, the business side continues,” she said.

“We are continuing our business as normal,” Hari Thalapalli, Satyam’s director of global marketing and communications, told PTI. “However, there is a movement of uncertainty due to suspension of the board.”

In the official statement, Gupta expressed concern that the scandal would bleed beyond Satyam’s offices and into the rest of the outsourcing industry, which has been a catalyst of India’s economic growth in recent years. Satyam Computer Services Ltd. employs 53,000 people - among the 2 million Indians working in the country’s booming high-tech industry, which last year brought in an estimated $40 billion. Satyam’s clients include a slew of Fortune 500 companies including Nestle, General Electric and Ford Motors.

In a statement announcing the disbanding of the board, Minister for Corporate Affairs Prem Chand Gupta condemned “the greed and misdeeds of a few persons who were at the helm of affairs of the company.”

“The current board of Satyam has failed to do what they were supposed to do,” he said.

The statement said the central government will appoint 10 people “to function as directors of the company,” but no decisions have yet been made.

Archana Uttapa, a company spokeswoman, said Satyam had not heard from authorities about who would be named to the new board or when the announcement would take place. A board meeting previously scheduled for Saturday was cancelled, she said.

“Satyam case is an aberration,” he said. “The credibility of Indian corporate sector in general, and IT sector in particular, should not be allowed to suffer because of this.”

Beginning Monday, the Bombay Stock Exchange will replace Satyam with Sun Pharmaceuticals Ltd. on India’s benchmark Sensex stock index.
Article Courtesy : Associated Press

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