Legal Correspondent

New Delhi: The Supreme Court will hear on Tuesday a special leave petition (SLP) filed by the Securities and Exchange Board of India (SEBI) for a direction to interrogate B. Ramalinga Raju and B. Rama Raju, former chairman and managing director respectively of Satyam Computer Services, on the financial scam in the company.

A Bench, comprising Chief Justice K.G. Balakrishnan and Justice P. Sathasivam directed the matter to be put in the ‘mentioning list’ after Solicitor-General G.E. Vahanvati sought early listing of the SLP.

The SEBI said in its plea that it approached the Andhra Pradesh High Court for a direction to permit it to interrogate the brothers, who were in judicial custody in connection with the scam. But the High Court refused permission and posted the matter for February 9. In view of the urgency, the SEBI was constrained to move the apex court, the SLP said.

“Worst fraud”

The fraud in Satyam was the worst in the history of the country. In less than one month, the market capitalisation fell from Rs.15,000 crore to Rs. 2,000 crore. Domestic investors of the company were devastated and foreign investors’ confidence was shaken, the SLP said.

The balance sheet of Satyam as on September 30, 2008 “carries an inflated [non-existent] cash and bank balances of Rs. 5,040 crore [against Rs. 5,361 crore reflected in the books], an accrued interest of Rs. 376 crore [non-existent], an understated liability of Rs. 1,230 crore on account of funds arranged by Ramalinga Raju and an overstated debtors position of Rs. 490 crore [against Rs. 2, 651 crore reflected in the books],” the SEBI said.

The market regulator pointed out that it was a specialised agency which had the competence and expertise to investigate matters pertaining to frauds in transactions in securities. That a case of this magnitude had not arisen in the Indian corporate history before and the SEBI being an expert body had the statutory duty to conduct a comprehensive and meaningful investigation in this behalf.

It said the scam had large-scale national and international ramifications in relation to a listed company, and the two brothers, instead of appearing before the SEBI as was obliged under the law, sought adjournment and thereafter they were arrested. The finding of the trial court that the SEBI was not an investigative agency and that there was no provision in law under which it could interrogate the two respondents was contrary to law.

The High Court ought to have interfered with the trial court’s findings but it simply adjourned the hearing to February 9. The SLP sought the quashing of the impugned order and a direction to interrogate the brothers in custody.

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