NEW DELHI/HYDERABAD - The Supreme Court Tuesday allowed the market watchdog to grill Satyam Computer Services founder B. Ramalinga Raju and his brother B. Rama Raju over the Rs.70-billion accounting fraud - the biggest in India’s corporate history.
The bench of Chief Justice K.G. Balakrishnan allowed a team of SEBI sleuths, headed by its general manager Sunil Kumar, to interrogate the Raju brothers in Hyderabad jail Feb 4-6.
The bench said Sunil Kumar would apprise the Chanchalguda jail superintendent in advance of the names of his subordinates and colleagues who would be accompanying him to interrogate the two.
The Raju brothers’ lawyer S. Bharat Kumar said in Hyderabad: ‘They (the brothers) will not challenge the decision. They will cooperate with SEBI in investigation.
‘The Supreme Court orders are ex-parte orders. However, our clients have informed me that they will follow the orders of the Supreme Court and cooperate with the SEBI,’ he said.
The two were arrested Jan 9, two days after Ramalinga Raju publicly confessed to the accounting fraud in Satyam, India’s fourth largest IT firm and a leading player in the BPO sector.
In judicial custody following their surrender to police, the two brothers are suspected to be evading a SEBI interrogation.
SEBI turned to the Supreme Court Monday to interrogate the Rajus after several legal hurdles.
Appearing for the SEBI, Solicitor General Goolam E. Vahanvati said: ‘Here is a person, who is a self-confessed fraud. Here is a person, who has to be interrogated.
‘We are not even seeking his custody,’ he said, urging the apex court to allow the market regulator to interrogate the two brothers.
A Hyderabad court on Jan 23 dismissed the SEBI’s plea for the Raju brothers’ interrogation. The Hyderabad magisterial court said the market regulator was not an investigative agency and was not entitled to interrogate suspects in criminal cases.
The SEBI last week approached the Andhra Pradesh High Court, which raised questions on the maintainability of the petition, frustrating the SEBI’s move to conduct a quick probe into the scam.
Vahanvati had prayed for an ex-parte interim order to question the accused but the high court had refused to pass such an order without hearing the Rajus. The high court had issued notices of admission to the Rajus and posted the matter for hearing on Feb 9.
Suspecting that the two brothers might be misusing their judicial custody to obfuscate their role in the crime, the SEBI contended in its petition to the Supreme Court, ‘It appears that while being in custody, the Raju brothers are organising tampering with documents and destruction of the firm’s records.’
Explaining its role, the SEBI said it is ‘a statutory Body, constituted under the SEBI Act, 1992, to regulate the securities market and protect investors’.
Terming Satyam Computer Services’ accounting fraud as ‘most serious financial scam in the country’s corporate history and having large-scale national and international ramifications’, the SEBI lawsuit said that ‘it is a specialised agency having necessary competence and expertise to probe frauds in securities transactions.’
Submitting that ‘a case of this magnitude has not arisen in the in the Indian corporate history till now’, the SEBI said: ‘As an expert body, it is its statutory duty to conduct a comprehensive and meaningful probe into the scam.’
SEBI’s petition before the high court had said there were several allegations including a strong likelihood of insider trading prior to Jan 7, when Ramalinga Raju confessed to the massive fraud.
While SEBI summoned Ramalinga Raju Jan 9, he sought a day’s time leading to the adjournment of the proceedings till Jan 10.
‘As a strange coincidence, they were arrested (by the Criminal Investigation Department of the Andhra Pradesh police) on Jan 9 night,’ SEBI said adding that they were remanded to judicial custody that was being extended from time to time.
During the arguments on the SEBI petition before the magistrate, the lawyers of the Rajus had opposed it on the ground that while in jail, they were not in a position to answer the queries of the market regulator as they had no access to the company records.
The CID, probing the fraud, had arrested Raju brothers on Jan 9 and former chief financial officer Vadlamani Srinivas the next day. All the three are in judicial custody till Feb 7.
Meanwhile, in Hyderabad, lawyer S. Bharat Kumar said he will move a fresh application Wednesday for the bail of the Raju brothers and former Satyam chief financial officer Vadlamani Srinivas before Sixth Additional Chief Metropolitan Magistrate D. Ramakrishna.
The judge on Jan 28 rejected the bail plea of the three and extended their judicial custody till Feb 7.