Has Government bungled on the appointment of Directors to the Satyam board?

Ministry of Company Affair's desperation to shore up the fortunes of Satyam Computers even if it involves transgressing the law smacks of cover-up and more

By Sanjay Kapoor Hardnews Exclusive

Under which legal provision of the Company Law did the Indian government appoint three new directors to the disgraced Satyam Computers? Legal experts claim that the government does not have the power to appoint Directors unilaterally in a publicly listed company till it has been recommended in writing by the tribunal that is hearing the dispute in the case. In the absence of tribunal, Hardnews magazine learns that the government chose to appoint individuals that clearly have a "conflict of interest" with the job they are holding. Legal experts believe that any court can set aside their appointment as it is clearly "bad in law". Government, at best, can only change and chop managers and not Directors.

Kiran Karnik is not only a member of Satyam promoted entity, EMRI, meant to provide health services in certain states; he is also a member on the board of software companies like EXL Services etc. Similarly, Deepak Parikh, the Chairman of HDFC, has had close links with Satyam. HDFC has invested millions in Satyam. Interestingly, HDFC managed to sell its stake a few days before the dung hit the ceiling. Informed sources told Hardnews that a cabal of investors and heavyweights were in the loop about the coming financial firestorm and cleverly cut their losses and got out. What is also intriguing is the fact that the signature on the letter that Ramalinga Raju wrote when he owned up his crime, does not match with the one that has been initialed in the company's last annual report. Satyam's is a case of fraud and deceit and the Andhra Police should have first verified who signed the letter on his behalf, before taking the next step. There is likelihood that Raju may disown in a court of law that he had nothing to do with the letter and he was made to sign under "duress". If that happens, then it can knock the bottom off the case. "An interesting game is being played by different actors to save Satyam. One wonders who is directing it," claimed an industry watcher.

The purpose of bringing to the fore all these issues was to share with Satyam watchers the strange happening in the government and the country's financial establishment. Allegations of a massive "cover up" have begun to billow out ministry of Company Affairs. Clearly, the endeavor is to limit the damage that Satyam was causing to country's much vaunted Information Technology sector as well as scores of those big daddies that invested in it. If Satyam was not treated as an "aberration" and helped, a similar contagion could consume Wipro and Infosys. Troubling thoughts, such as these, have spread panic in finance ministry, which is now headed by Prime Minister Manmohan Singh. He is reportedly under tremendous pressure from many ministers in his government including Kamal Nath to sort out this mess. Satyam's fraudulent ways are preventing the government from throwing a lifeline. Now the government realizes that Satyam does not have 53,000 employees, as it has been claiming. They are far less.

Similar, may be the case of many other software and real estate companies that resorted to deceit and fraud to bloat themselves. The big bubble is bursting- can the government breathe life back into it?  

Comments

Governments to power to appoint directors

Please do not go by what media reports.

The Government moved and application to the Company Law Board under the provisions of the Indian Companies Act, 1956 (Section 402) and caused a new board to be appointed.

The Government (which includes the CLB) is within its powers to do so.

More on this at my website http://www.sathyamurthy.com/2009/01/12/satyam-two-in-one/