Ramalinga Raju, once the chairman of India’s fourth largest IT company, has been sentenced under the Companies Act by a local court for overstating profits several years ago.
Other senior executives including the CFO, CEO and former managing director – Raju’s brother – have also been jailed. The six-month sentence marks the longest possible under the Companies Act.
The six-month sentence marks the longest possible under the Companies Act
In a letter in 2009, Raju confessed to having overstated revenues several times in order to hide the company’s poor performance. “It was like riding a tiger, not knowing when to get off without being eaten,” he wrote.
In July several of the group’s former senior executives faced penalties from the market regulator with fines totaling $291m (Rs18.5bn), the FT reports.
According to Business Standard, the police’s economic offences wing (EOW) filed a separate case which saw Raju and others convicted of six out of seven accusations – they included fabricating balance sheets, accounts and dividends. The Central Bureau of Investigation (CBI) meanwhile filed another case, citing forgery, criminal conspiracy and fiddling records among other misconduct.
The scandal marked one of India’s most destructive in history, driving the Securities and Exchange Board of India to tighten up its corporate governance regulations. The case led to overseas investors fleeing en masse and saw Satyam verge on bankruptcy.
Indian IT group Tech Mahindra acquired the company in 2013 to save its reputation. Mahindra did away with the brand name and seems to have prompted a recovery, with shares rising 57 percent in 2014.
But the company has nevertheless suffered from the scandal according to Anand Mahindra, the group’s chairman. “We never expected this [legal battle] to be drawn out for so long, where the person who is part of the cavalry is being targeted and fired on,” he told Indian news agency Press Trust. “We are the rescuers… we are the white knights, we are not people who did the stealing.”
