Reconsider Satyam order: Securities Appellate Tribunal to Sebi

Regulator had fined Ramalinga Raju, others and banned them from market for 14 yrs

The Securities Appellate Tribunal (SAT) on Thursday remanded the order against Satyam Computer Services founders to the Securities and Exchange Board of India (Sebi) for reconsidering disgorgement of Rs 813 crore and ban from the market.

While setting aside the previous orders issued in 2018, the tribunal has directed Sebi to pass a fresh order within four months after giving an opportunity of hearing to all the appellants.

The capital markets regulator, in its order in November 2018, had barred Satyam’s former management—B Suryanarayana Raju, B Rama Raju, and B Ramalinga Raju— from accessing the securities market for 14 years. Further, they along with SRSR Holdings were ordered a disgorgement of over Rs 813 crore with an additional 12 per cent interest calculated from January, 2009.

“No reason has been given as to why the magic figure of 14 years of restraint was appropriate,” noted SAT in the order.

The tribunal added that the fraud found by the Supreme Court was under Sebi (Prohibition of Insider Trading) Regulations and not under Sebi (Prohibition of Fraudulent and Unfair Trade Practices) Regulations.

While sending the case back to Sebi, the tribunal has asked Sebi to reconsider the intrinsic value of shares while calculating unlawful gain, to calculate unlawful gains individually, the interest to be paid and the period of restraint. SAT has also asked Sebi whole-time member to reconsider the issue of pledge of shares.

“WTM has wrongly misconstrued the order of the Supreme Court and, consequently, the finding that B. Suryanarayana Raju and SRSR Holdings Pvt. Ltd. are equal perpetrators is without any basis,” said SAT.

On the issue of interest, it was urged before the court that Sebi has been imposing a lower rate of interest in a large number of matters.

Sebi in its order had held that the benefit of intrinsic value cannot be given as the appellants were instrumental in perpetuating a fraud.

The regulator had also noted that the pledge transaction cannot be treated as a loan transaction as it was an ingenuously structured transaction, and the amount raised by SRSR Holdings were illegal gains.