Twenty four hours after India?s biggest accounting fraud surfaced, the authorities have still not seized the records of Satyam Computer Services Ltd. The delay could prove costly for subsequent investigations.
Instead, as Thursday was a gazetted holiday, the entire office of the registrar of companies (RoC) in Hyderabad was on leave. The only agency that had moved quickly was the Securities and Exchange Board of India, the officers of which had in the morning visited Satyam?s once iconic offices at Info City in Hyderabad.
But Sebi only has a limited mandate to investigate the offences of companies, as it does not have the powers to seize records. The RoC office was of course waiting for an instruction from the government in Delhi, which came late on Thursday.
According to legal experts, the first thing the authorities should have done is to change the passwords of the computer records so that nobody could tamper with the records. The seizure of management correspondences and account books could follow later. This is the procedure in many states in the US to ensure the integrity of the records.
This should have been executed soon after Raju made the admissions about the Rs 9,440-crore fraud to the company?s board members, Sebi and the stock exchanges. KN Vaidyanathan, CEO of Alchemy Capital Management, said, ?immediacy is the key in getting to the truth and beyond.? He explained that there were too many layers in the company that must have been involved in the fraud. ?It is too simplistic to accept the confession that books have been cooked. This is not like dumping inventory on distributors on the balance sheet date. IT services companies run the most democratic and federal accounting systems?that starts with the programmer. Accounts departments will have hundreds of people preparing statements daily?both for clients and internal management.?
The lapse is also because this is the first time Indian investigating agencies are faced with an accounting fraud of such magnitude. A vital link in the process is securing e-mail records to corroborate the contents of Raju?s letter. Instead, the onus of providing the evidence could now shift on to the company?s management, led by interim CEO Ram Mynampati. The company has offered to make available all records to the government agencies by January 14, after the government on Thursday ordered a probe into the books of accounts of eight subsidiaries of Satyam. The inspection would be conducted as per the provisions of section 209A of the Companies Act.
Diljeet Titus, managing partner of the corporate law firm, Titus & Co, told FE, ?Immediately after Raju?s admission of cheating and breach of trust, the RoC should have filed a one-line FIR based on which the Hyderabad police should have seized all important records and correspondences. A detailed FIR could have followed.?
Titus said that due to the lapse, it will now become difficult for the investigating agencies to probe the complicity of other officials, as they would have enough time to destroy evidence.
?It appears the company has been forging existing transactions or fudging new transactions. Therefore, there is a lot of electronic evidence, which can be collated from the computer systems and networks that has to be secured before it is deleted. If electronic forging has been done, the company will be booked under the Section 464 under the Indian Penal Code by the IT Act 2000 for creating false electronic records plus section 466 for forging an electronic record. An overriding Section 66 will apply against the offence of hacking defined as d iminishing the value or utility of information residing in a computer. The fact that this kind of information would be available with the top management of the company, which itself is now in charge of its operations, is worrisome, as this kind of evidence can be easily deleted,? said cyber law expert Pavan Duggal.