Satyam Scam —The  Enron of India, will continue to haunt its investors and several other stakeholders for years to come. Ramalinga Raju’s attempt at cooking the accounting books of Satyam (to the tune of 5000+ crore’s)  in order to show inflated profits have resulted in the market’s crashing down. The scam which now lies exposed requires the regulators to take quick actions to prevent such lackadaisical corporate governance methods in future

Market regulator SEBI has also launched a probe into alleged insider trading in the Satyam stock and is also in touch with the exchanges for coordinated action.Commerce Minister Kamal Nath said there’s no question of the government taking Satyam over. Dalal Street also went into a shock after Raju’s admissions; the Satyam stock crashed over 77% as 30% of its investors sold, pulled the Nifty down 192 points and the Sensex by 749 points.

India Inc has been shocked by the Satyam scandal. Industry veterans have called for more rigid auditing processes and have called for a dramatic change in mindsets.

Here are the legal implications of the scam :

1. Under the Companies Act, if you present fraudulent accounts to shareholders, that in itself is an offence but the amount of punishment is not as severe as under Sebi’s law.

2. Under the IPC this is cheating under section 420 and that could involve at least 7 years imprisonment.

3. It’s a criminal offence under section 24 of the Sebi Act and could mean penalty and imprisonment of upto 10 years. The powers that Sebi has, enables it to put any person in charge and responsible for the state of affairs out of the market system for a long period of time.

4. The audit company, Price Water House Coopers, which was supposed to verify the finances of Satyam and audit its books is also liable to pay a sum of Rs. 5 lakh. The charges though will be placed on the person who has audited the account and not Price Water House Cooper.

While Satyam is all set to face a large number of problems on th legal front, it has done irreversible damage to the image of the Indian IT industry and to the face of the IT GEN  in India. As Mr. Anand Mahindra, the MD of Mahindra and Mahindra  puts :

“I am very, very angry at this development because I think it’s done incalculable and unjustifiable damage to the image of India abroad in a generic sense and particularly to the image of Indian IT which was ironically what led the creation of brand India in the past decades. It’s done damage to the credibility of corporate governance, of independent directors in India’s boards and what’s most distressing is that these people have been role models for the new entrepreneurs in India. They were role models for a whole generation of people and you’ve created perhaps cynicism and disillusionment with that same segment. So I have to say, it is a strong word, but I am angry.”

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