Class action suits by aggreived investors for damages and compensation could now take a big toll on Satyam’s finances . The next spell of trouble is certain to be a probe by agencies like the CBI that could mean a long prison term of up to seven years as well as civil law suits. But what India lacks at this stage is that there is no coordination mechanism among the bodies to investigate the case. The nearest to that is the Serious Fraud Investigation Office, under the ministry of corporate affairs. But despite coming up about four years ago the agency is yet to secure any major conviction.

Corporate affairs Minister Prem Chand Gupta said he has asked the Registrar of Companies, Hyderabad, to probe into the incident and file a report by January 14. If Satyam officials are found guilty, the ministry will refer the case to Serious Fraud Investigation Office, he said.

This is being done under a series of Sections from 235 to 249 of the Companies Act. Inspectors of SFIO will soon seek all the documents of the company, its subsidiaries, group entities and promoter firms to find out why and how the entire fraud happened. But commerce and industry minister Kamal Nath said the government has no intention of taking over the management control of Satyam. Also, since Satyam is listed on Nasdaq, it has to deal with the US civil and criminal laws under which there could be greater penalty, like long jail terms and major compensation as well.

This comes in the wake of one of the biggest frauds in India Inc’s history, the details of which were out on Wednesday in the resignation letter of the company’s chairman B Ramalinga Raju. Gupta too said theUS Securities and Exchange Commission could undertake its independent probe in the matter without consulting Indian authorities. The US laws governing such crimes are the respective laws in the states as well as the Securities Act, 1933 and the Securities Exchange Act 1934, said Rahul Singh, assistant professor, National Law School of India University.

Market watchdog Sebi, that had received Raju’s letter about his resignation from Satyam, is also in coordinating with the corporate affairs ministry on the future course of action, including probe on insider trading. Sebi can take action under its regulations on fraudulent and unfair trade practices, Somasekhar Sundaresan, partner, J Sagar Associates said. Regulator for chartered accountants, the Institute of Chartered Accountants of India (ICAI) said it was collecting all information about the issue. “All the chartered accountants found guilty in this episode will be banned from practicing, for lifetime,” ICAI president Ved Jain told Fe. Lawyers say the strongest provisions to prosecute and convict the wrongdoers are under the IPC. If the main perpetrators of the financial crimes are found guilty, as per the IPC they can be sentenced to seven years rigorous imprisonment, while the abetters of the crimes face prison term ranging from six months to 3 years.

The sections of IPC that could be applicable include Section 464 and 465 (forgery), S 477A (falsification of accounts ? attracting a maximum of 7 years imprisonment), Sections 418, 419 and 420 (cheating ? maximum jail term of 7 years), Sections 405 and 406 (criminal breach of trust), Section 415 (false representation and inducement), section 478 (knowingly cheating a person whom you need to otherwise protect, like shareholders).

The Centre could also hand over the case to the CBI as per the request by the state government concerned, said Diljeet Titus, senior partner, Titus & Co Advocates. It can also press the Economic Offences Wing of the home ministry into service. Those liable for such action include the CMD, CFO, and finance department of the company, besides internal and external auditors, financial and legal advisors and any professional in-house or external consultants. “What is important to look at is the intent and conduct of the persons involved. Prima facie, since there is an intent and conduct to defraud or cheat, it points out to an immediate criminal investigation, charge sheet and conviction on all fronts,” Titus said. A corporate lawyer said as per Section 408 of the Companies Act, the Centre, through the Company Law Board, can appoint new directors in Satyam’s board of directors. This is usually done when the affairs of the company is conducted in an oppressive manner.

In the mean time, any shareholder and creditor of the company can make an application to the court or CLB under Section 203 of the Companies Act to stop the entire Raju family and the present team from managing the affairs. Even minority shareholders of Maytas can do the same and the court would listen to them, corporate lawyers said. Titus said under the law of torts, Satyam can be sued for damages by shareholders for breach of fiduciary duty or the duty to protect the interests of shareholders. “If proved, the damages can be unlimited. This is because the alleged wrongful acts of Satyam officials have eroded the value of the company and its networth. Besides, there are reports if exit of customers, distributors, suppliers, management and the directors,” he said.

Under Section 628 of the Companies Act, the wrongdoers attract 2 years imprisonment for making false statement on any official documents. However, the breather is the company can be simultaneously run, but sale or disposal of assets outside the ordinary course of business is not allowed. For instance, while it could sell old computers and buy new ones, it will not be permitted to sell off its other assets till case is over.

Legal recourse

• The Registrar of Companies, Hyderabad, has been asked to probe and file a report by January 14. If Satyam officials are found guilty, the ministry will refer the case to Serious Fraud Investigation Office

• Also, since Satyam is listed on Nasdaq, it has to deal with the US civil and criminal laws under which there could be greater penalty

• As per the IPC they can be sentenced to seven years rigorous imprisonment, while the abetters of the crimes face prison term ranging from six months to 3 years

• The case could also be handed over to CBI

• The Economic Offences Wing of the home ministry can also be pressed into service