Open Access Research Article
THE GREAT RISE AND FALL - UNDERSTANDING THE NUANCES OF SCAMS IN LIGHT OF SATYAM SCAM IN INDIA
Article Details
THE GREAT
RISE AND FALL - UNDERSTANDING THE NUANCES OF SCAMS IN LIGHT OF SATYAM SCAM IN
INDIA
Author: Komal
Jain,
3rd Year Institute of
law,
Nirma University
Contact:
8290988864
INTRODUCTION
One of the most
significant risks to which businesses are exposed has emerged as corporate
frauds and it is rapidly becoming a major threat. Fraudulent incidents are
increasing at an alarming rate. Corporate fraud occurs when a company or
organization intentionally alters or conceals information in order to appear
healthy. A company can commit fraud by falsifying accounting records,
concealing debt, or failing to notify shareholders about executive loans and
bonuses. Falsification of financial information, such as false accounting
entries, bogus trades intended to inflate profits or conceal losses, and false
transactions, will assist the organization in attracting funds from lenders and
investors.[1]
Whereas, A scam is a
plan or a deal including cash. It might be executed by a solitary individual or
a little gathering with the sole aim of focusing on a particular casualty and
generally may take a structure or bogus commitments or on occasion even danger
and pressure if the "People in question" succumbs to such a
scamster's calls, messages and so on. A scam includes you making or approving
the instalment yourself. You are convinced to purchase a phony thing, hand over
your security code or move an amount of cash, not understanding that you are
being conned by a crook.
In this Research article, we will be dealing with
in-depth analysis of what loopholes exist in corporate governance leading to
scams that hit economy with a setback. The research would take place in
reference with the famous Satyam scam which shattered the economy. We will deal
with the history, the leadings and even the repercussions of the how abouts of the
scam and it's dimensions in the corporate setup and the events that followed on
Disclosure of Scandal. The research explores the resulting Effect of the Satyam
Scandal on Changes in Corporate Governance Strategies in India.
LITERATURE
REVIEW
1.
Harshit
Saxena, Lifting of Corporate Veil, SSRN pp. 1-24, (December 14, 2010).
Available at SSRN: https://ssrn.com/abstract=1725433. (Last Accessed on October 28, 2022). The focal motivation behind this paper is to explore
the concept of limited liability. In this paper's first section there was a
brief overview of the idea of a company as a separate legal entity. The law of
piercing the corporate veil is also covered by the author. Further the author
has shows common law justifications for lifting the veil that have been put
forth frequently to figure out why courts don't follow the separate entity
principle. This literature got us clarity on the very important principle, lifting
of the corporate veil and its application. We could understand how a company
and its holders are separate entities and hence we were able to understand the
point of separate liabilities of all those influential position holders whose
actions lead to the conduction of the whole scam. The document was apt in
chronology that helped in a good flow of events and hence better understanding
of the scam.
The paper is one of the most
detailed papers and in it a comprehensive research work can be seen. All in the
entire author has done a great research and came up comparative analysis of
various countries regarding corporate veil.
2.
Satyam Scam of Corporate Governance, SRCC pp. 1-6,
Available at SRCC: https://www.srcc.edu/sites/default/files/Satyam%20scam%20of%20corporate%20governance.pdf,
(Last Accessed on October 28, 2022). The paper has shown the time line
which depicts the development of the Satyam Computer Services Ltd. To make the
readers understand it has also make the confessions of the persons involved
available for the readers and has depicted the Corporate Governance Issues to
know as how the scam had completed and the paper has also incorporate aftermaths
of the scam. This literature has helped us by having a brief history of Satyam
computers and its operations. The language being easy and on point made it
easier for us to understand it and its nuances in an efficient manner. We could
also derive the main authorities and influence people involved in the scam,
with their positions and actions that led the whole scam to take place.
However the paper is a very
brief study of the satyam Scam which fails to provide complete and proper
details to its readers but to have a basic understanding of the Satyam scam one
can refer this paper.
3.
Akanksha Tomer, Corporate Fraud: An Analysis (April
27, 2018), Available at: https://www.mondaq.com/india/white-collar-crime-anti-corruption-fraud/696380/corporate-frauds-an-analysis,
(Last Accessed on October 28, 2022). The paper has talked about and
described the White collars crimes and has discussed the corporate frauds
taking place in India and how the companies use various modes of operations in
order to commit this crimes and frauds. Further the author has also discussed
the types of Frauds and went on further discussing the nexus between the frauds
and Indian Companies Act, 2013 with describing punishments for various offences
given under the said act. In our present research this literature got us
clarity on what are corporate frauds per see. We got to understand how the
corporate frauds come into being, reasons for committing a fraud, some basic
features that are common in every fraud and how the corporate governance was
changed magnanimously by the Satyam scandal. Thus, the paper is on more of the general side of describing
the frauds and how they are committed and not entirely focusing on the Satyam
Scam.
4.
Susmit Pushkar & Susanah
Naushad, What Changed
in the Legal Landscape Post Satyam Scam (January 11, 2018), Available at: https://www.moneycontrol.com/news/opinion/what-changed-in-the-legal-landscape-post-satyam-scam-2480623.html,
(Last Accessed on October 28, 2022). As the name suggests the author has
mentioned the changes that took place post the Satyam Scam. This literature got
me clarity on the events that transpired after the satyam scam took place. I
could understand that SEBI had to change its listing agreement in to
incorporate the role of audit committees in case fraud or irregularity took
place and the Companies Act 1956 got replaced by the Companies Act ' 2013 due
to the Satyam scam. The Act provided for corporate fraud as a criminal offence.
It outlined the responsibility and accountability of auditors and independent
directors, who are expected to play a more active role. The document was apt in
chronology that helped in a good flow of events and hence better understanding
of the scam.
However the article just talked about the
changes the author could have cited his opinion as well about the reforms that
took place and what could have been done further in this scheme. Overall the
paper is a good read for the audience to know the aftermath changes in the
governing laws and regulations.
5.
Bhasin, Madan Lal, Corporate Accounting Fraud: A
Case Study of Satyam Computers Limited (October 20, 2015). Open Journal of
Accounting, 2013, 2, 26-38, https://ssrn.com/abstract=2676467.
This paper talks about the frauds and has analyzed the magnitude of the frauds
and how the corporate entities are susceptible to frauds. The paper has also
analyzed how the growing number of frauds has undermined the integrity of
financial records, reports of accounts and financial reports and how such
frauds have impacted the interests of investors’ confidence regarding the
effectiveness and reliability of the financial statements. The paper had also
analyzed the global cases of corporate frauds and the loopholes in the
accounting and the systems of accounting followed, to compare the scams in
India and scam in foreign land. Commenting upon this paper, we can say that in
order of including various aspects relating to frauds such as its in land and
foreign aspects, the detailed study of samples of corporate accounting scams
overseas might deviate the reader from the actual case study of the Satyam
scam.
RESEARCH
QUESTIONS
1. What is the jurisprudence and perception of Satyam Scam that took
place in India?
2. What are the consequences of scams in the business and corporate
systems?
3. What are the major reasons of companies and
motive behind it for committing such crimes?
METHODOLOGY
We will use majorly two types of methodology.
Firstly, quantitative research could be used in investigating and describing
fraudulent financial reporting practices. Secondly, an appropriate interpretive
research approach is required to understand why and how a specific company is
engaged in fraudulent financial reporting practice. Also, such method will also
be used for case study conducted as part of this research. Also, we will
carefully research and analyse data from books, various articles, journals and
number of web references.
EVOLUTION
OF SCAMS – TERMINOLOGY EXPLAINED
The
repercussions of a corporate fraud are not only detrimental to the nation’s
prestige and pride; however, it also has dire outcome for stakeholders,
employees working in the company, people who invest in the company, and the
people who buy shares of the company. In recent times, there has been an
unprecedented progress and advancement of business activities due to the
opening of the world’s economy and the absolute preference was given to the
ease of doing business by the legislature, that primarily laid emphasis on
making more flexible laws to help attract investors and create more ideas for
business expansion, but they didn’t take into consideration the consequences of
fraud that would occur and as a result made no laws to prevent it from
happening.
Corporate
governance is a very significant element of how businesses function. If
corporate governance is not up to the work, then there are good chances that
even some of the businesses who enjoy good turnover and revenue may turn out to
be unsuccessful. Wide number of institutions like SEBI have given some rules
and regulations on Corporate Governance on a regular basis whenever the need
arises. To ensure that there is a good corporate governance structure in place,
it is necessary for the board of directors to have meetings and conferences
frequently, have control over the affairs of the company, be absolutely certain
about the roles and duties everyone will have, and regularly be aware of the
risks present.[2] It is
often noticed that whenever there is complacency by the directors and the top
management in following a basic code of corporate governance, scandals and
frauds are more likely to occur. The regulatory mechanism in place is not up to
the mark, and a serious overhauling done to shift the focus from the protection
of investors interest to safeguarding of all stakeholders interest and also a
very comprehensive code for Corporate Governance needs to be developed.
HOW DOES A
CORPORATE FRAUD TAKE PLACE?
A corporate
fraud comes into play whenever an there is deliberate modification and
obscurement of confidential data by an enterprise for window dressing a report
or any document of some sort to make it look in better condition than it
already is. Companies employ a wide range of ways of operation to do such
scandals and frauds, which may be inclusive of giving false details in the
prospectus of a company at the time of its formation, tampering with the
financial statements, debt altering. Misleading fiscal statements, fictitious
deals to inflate earnings, the publication of confidential data that falls
under the purview of fraudulent activity, and the exhibition of fictitious
operations that lure in prospective financiers and shareholders for financing
are all illustrations of the facet of falsifying banking details.
REASONS TO
COMMIT CORPORATE FRAUDS
It is possible
that there may exist various factors or reasons due to which an enterprise may
have defrauded. Some of them may be for earning more money, entries of which
are not entered in the books of account, exhibiting a fictitious appearance of
the enterprise for market play and misleading regulatory authorities to save
taxes.
According to a
survey by the Commission on "Prevention of Corruption" in India,
"the expansion of technology and scientific progress is pushing to the
formation of public sphere with a massive column in line and a small commanding
clique, stimulating the expansion of monopoly, the birth of a bureaucratic
sector, and sophisticated organizational procedures.
For even the
modern cultural, geopolitical, and economical systems to behave legitimately,
uncompromising devotion to elevated principles of moral conduct is necessary.
The Vivian Bose Commission probed the Dalmia Jain network of enterprises in
1963, and its findings exposed the how major businesses engage in deception,
fabrication of accounting, database meddling, as well as similar illicit
conduct for self interest and tax dodging.
AN
ASSOCIATION BETWEEN CORPORATE FRAUD AND CORPORATE GOVERNANCE
A crucial aspect
of how corporations work is corporate governance, and it can end up causing
even the finest financially viable corporations to collapse. Despite the
existence of federal and state administrative institutions and policies being
created to deal with issues, the key objective of each of these rules is to
defend the aspirations and concerns of those parties concerned, primarily
shareholders.
The paradigm of
Indian corporate governance was changed forever by the Satyam Scandal. Between
the period when this problem first broke in 2009 and the moment R. Raju was
held liable in 2015, the administration and agencies took a variety of measures
to strengthen corporate governance in India. An improvement-recommendation
working force was constituted by the Confederation of Indian Industries in 2009
under the direction of senior cabinet secretary Naresh Chandra. On the
suggestions of the task group, the Ministry of Corporate Affairs created
Voluntary Parameters for Corporate Governance in 2009. A committee dedicated to
business ethics and governance was established by the National Association of
Software and Services Companies.
To improve
internal audit function, investor protection, and disclosure rules, the Audit
Committee provided suggestions. The SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015 (hereafter referred to as the
"LODR"), were established by SEBI in 2015 and are effective to all
quoted firms. The LODR set out rigorous criteria on the tracking of significant
occurrences and genuine and alleged wrongdoing. The SFIO has a legislative
existence and just acquired the authority to undertake arrests under the new
Companies Act. The SFIO has been proactively probing into incidents of business
fraud.
Multiple
regulations have exhaustive clauses to prosecute fraudulent activity, such as
the Benami Transaction (Prohibition) Act of 1988, the Foreign Exchange
Management Act of 1999, the Information Technology Act, the Income-tax Act of
1961, and the Fugitive Economic Offenders (FEO) Act. Besides a number of
statutes and guidelines released by different authorities, several
institutions, such as the SEBI, have periodically published norms and standards
on corporate governance. The Ideal Corporate Governance Code, for instance, was
released in 2009 by the "Confederation of Indian Industries (CII)".
SATYAM SCAM
- TOPPLING THE INDIAN ECONOMY
(MAGNITUDE AND
REPERCUSSIONS)
The Satyam scam
was a corporate fraud involving money worth Rs. 7000 crore where its chairman,
Ramalinga Raju admitted to the fact that the accounts of the company had been
manipulated. It was on the date of Jan 7, 2009 when an email had been sent to
SEBI and various stock exchanges across the country by Ramalinga Raju, where it
had been confessed by him that inflation had been done to the cash and bank
accounts of the company. In an interview given by him, sometime before his
infamous remark became viral where he was riding a tiger and didn’t have the
knowledge as to how to get off of it, he said that the company was in
possession of cash balance of around Rs 4000 crore which could be exploited to
generate an additional sum of Rs 15000-2000 crore.
When Satyam's
financial accounts contained significant inconsistencies, the investment bank
DSP Merrill Lynch's auditors were able to identify the scam (Caliyurt &
Idowu, 2012). The company had recruited the bank to identify a partner or a
purchaser. The bank cut all cooperation with Satyam after learning about
financial irregularities.
Raju was
apprehended and arrested on charges of criminal conspiracy, breach of trust,
and forgery 2 days after the admission was made. Compared to 2008 highs of Rs.
544, the shares dropped to Rs. 11.50 on that day. 112 sale documents for
various land transactions were uncovered during a CBI raid on the home of the
youngest Raju brother. A total of 13,000 fabricated personnel records were also
discovered by the CBI, which asserted that the fraud cost over 7000 crores of
rupees.
Following the
discovery of the fraud, PriceWaterhouseCoopers was subject to an investigation
and was forced to halt operations. Credit Suisse also stopped cooperating with
Satyam, and the prizes handed to the business and its executives were revoked.
Investors lost approximately $2.28 billion as a result of the shares' sharp
decline. The involvement of participants in the fraud was detained and looked
into. The company's stock price dropped by more than 70% while the Ensex index
plummeted by more than 5%. For the purpose of finding a remedy to lessen the
issue and avert the company's demise, the government selected new board members
(Caliyurt & Idowu, 2012). Within 100 days, the board had to identify a
buyer for the business.
PwC reportedly
asserted that their lack of desire to identify the scam was a consequence of
their dependence on responses disclosed to them by the administration. In light
of the criminal conviction, PwC's licence was terminated for a duration of two
years. Additionally, investors grew dissatisfied with other PwC-audited
corporations. These companies' share values dropped by 5% to 15% as a result.
The Sensex fell 7.3% as a result of the scam revelation.Therefore, there was a
crisis on the Indian stock exchanges. Upon realising the potential effects this
could have on prospective FDI and capital marketplaces, the Indian
administration acted swiftly. They immediately created a new management to
Satyam when they started their investigation. Within a hundred days, the board
aimed to sell the business.
The SEBI revised
the Listing Agreement in April 2014 to add clauses addressing the creation of a
vigil system, the function of the Audit Committee in scenarios concerning
concerns of deception or abnormalities, and the obligations of the Chief
Executive Officer and the Chief Financial Officer with in terms of financial
transparency and notification to the Audit Committee. The SEBI (Listing
Obligations and Disclosure Requirements) Regulations, 2015 ("LODR")
were established by SEBI in 2015 and are relevant to all firms listed. They set
forth rigorous criteria for the filing and exposure of significant occurrences
as well as real and probable wrongdoing.
With the new
Companies Act 2013, the Companies Act 1956 was eventually abolished (Act). With
various features that will benefit a wider range of stakeholders, the new Act
has made a marked break from the previous one, raising the firm's regulatory
expenses in the process. According to the Act, it is illegal to commit
corporate fraud. For reporting incidents of fraud against auditors, cost
accountants, and corporate secretaries, it lays out very specific reporting
requirements. It lays out precisely the responsibilities and objectives of
autonomous administrators and auditors, that are intended to assume a more
proactive role.
Despite the fact
that it has ten years since the infamous Satyam Computer scandal and the
accompanying legal regulations, Tech Mahindra CEO C P Gurnani reckons that
enhanced information insights are still necessary to close the gaps since
business disparities are still challenging for algorithms to identify.
In any case,
following the Satyam Computer fraud, the now-crisis-hit IL&FS had bought
Maytas Infra, a company that Raju had championed. The government took over the
board of the IL&FS group last year, which has debts totaling more than Rs
94,000 crore. Raju acknowledged to fabricating the books of accounts and
inflating revenues for several years, which led to the discovery of the Rs
7,800 crore scam at Satyam Computer in January 2009.
The company was
previously run as a distinct organisation, Mahindra Satyam, following Tech
Mahindra's takeover in April 2009. The two companies, Tech Mahindra and
Mahindra Satyam, joined in 2012. Regarding the revival at Satyam Computer, Tech
Mahindra contends that it gave local clients who had supported the firm at the
moment of the acquisition profits that were approximately eight times their
initial outlay.
MASTERMINDS
BEHIND THE VEIL
A company being
a separate legal entity ( as was firmly established in the landmark decision in
Salomon v. Salomon & Co. Ltd.), gives rise to a distinct liabilities to its
members controlling it. In Satyam scam, the same thing happened in which the
founder, officers and other employees were the masterminds behind the whole
scam. But lifting of corporate veil is an established principle that saves the
company from the wrong done by the people working/ in authority of the company.
In the Satyam computer scam case 10 people were found guilty.
These are all
the Masterminds behind the veil:
1.
B Ramalinga Raju
·
The founder of Satyam computer services was the
prime perpetrator of the whole scam.
·
He basically overvalued Satyam’s assets in
billions on the balance sheet. The company faked to have around $1 billion in
bank loans and cash.
·
They kept on inflating their income virtually
and faked bank statements.
·
He went on to the extent of faking interest
revenues from fictitious banks, creating false pay accounts.
·
They created a lot of fraudulent invoices in order
to show increased revenue.
·
Mr Raju also transferred a large sum of money to
his personal account which he used for his personal benefits.
2.
Role played by brothers of Ramalinga Raju
·
B Rama Raju –
·
B Rama Raju was the company’s CFO, the company’s
worldwide head of internal audit, and also one of the company’s managing
directors. He misused his very influential position and became one of the
masterminds behind the scam.
·
He assisted his brother in the whole conspiracy,
be it falsification of records or creating false accounts and manipulating
financial statements. He sold his family shares in Satyam and received a large
sum of money. He also declared high dividends when the company was making low
profits.
a.
B
Suryanarayana Raju -
·
He was the other brother of Ramalinga Raju, the
founder of Satyam scam.
·
He had appointed many employees as directors of around 300 companies to support fraudulent acts. He was
also held liable for criminal breach of trust and misappropriation of records
like his other brothers.
3.
Role played by Vadlamani Srinivas
He was
the Chief Financial officer of Satyam computers. Again, being in an influential
position, he created and presented a rosy picture of the company to the audit
committee in which financial statements were corrupted and records
misappropriated. He showed inflated sales invoices into the statements to
attract more investors and customers.
4.
Role played by PWC Auditors –
a.
Subramani
Gopalakrishnan – The whole
suspicion about the involvement of Price Waterhouse Coopers (PwC), a global
auditing company, as a contributor in the scam arose when the fact that Satyam
paid double money as any other corporation would normally do to an Auditing
company. Even after doing auditing in Satyam for good nine years, auditors like
S. Gopalkrishnan failed to detect the defects in the records; or let's say
intentionally did not do so.
b.
T Srinivas
– He was a partner with S. Gopalkrishnan, the statutory auditor, in the
Price Waterhouse Coopers. As an auditor,
they failed to detect the fraudulent invoices and defects in financial
statements. When the whole scam was exposed, he was held legally liable for the
defects in the figures and accounts, along with S. Gopalkrishnan.
5.
Role played by former employees-
a.
G.
Ramakrishna - For seven to eight years, he was in control of areas where actual
fraud was committed on a constant basis.
b.
D.
Venkatpathi Raju - He got checks totalling Rs 1,425 crore and deposited them in
the company's accounts but neglected to record them in the account books.
c.
Ch
Srisailam - He generated 7,561 bogus sales invoices. He supplied invoice
numbers, client names, and quantities to assist in the creation of fraudulent
invoices.
6.
Role
played by V.S. Prabhakar Gupta.
He was the former Internal Chief Auditor
of Satyam Computer Services. The investigating agency had charged him for
breach of trust, forgery, cheating and fabrication of accounts.
7.
Role played by the board of directors
·
Satyam computer services’ board consisted of
nine people. Five members of the board were independent, as required by the
Indian Listing standards. A number of well-known business giants were on
Satyam's Board of Directors, which may have contributed to the company's lack
of oversight. The Board of Directors included:
-
Harvard professor and corporate governance
expert: Krishna Palepu
-
Dean of the Indian School of Business: Rommohan
Rao
-
co-inventor of the Pentium Processor: Vinod
Dham
·
Satyam reported in SEC regulatory filings that
it lacked a financial specialist on its Board of Directors in 2008. Following
it, concerns were raised regarding the Board of Directors' lack of
independence. On December 16, 2008, the Board was chastised for its approval of
Satyam's acquisition of real estate enterprises in which Mr. Raju had a
considerable stake. Following a shareholder revolt, the Board of Directors
reversed the authorisation. Krishna Palepu, Rommohan Rao, and Vinod Dham all
resigned from the Board within two days of the transaction's annulment.
·
The botched transaction gave investors the
impression that the Board of Directors was not aggressively monitoring Satyam.
Furthermore, the Board of Directors should have seen some of the same warning
flags that the auditor, PwC, did not. Furthermore, the fact that Mr. Raju cut
his Satyam shares significantly in the three years preceding the discovery of
the fraud should have concerned the Board of Directors. Mr. Raju's interest in
the firm fell from 15.67% in 2005-2006 to 2.30% in 2009.
|
Mr.
Ramalinga Raju
Former CFO - Vadlamani Srinivas
Pic credit –
www.newindianexpress.com
|
B Rama Raju (Former Managing Director
Pic credit – www.business.rediff.com
Former PwC Auditors-
Subramani Gopalakrishnan and T Srinivas
Pic credit-
nytimes.com
|
A THEORY OF LOOPHOLES - ARE WE LOSING CONFIDENCE ON EXISTING LAWS ?
All corporate
governance regulations were flagrantly broken by Satyam. The Satyam fraud
served as a prime example of "negative" corporate governance. It had
not demonstrated a positive relationship with the stockholders and employees. A
problem with corporate governance developed at Satyam as a result of the
company's failure to meet its obligations to numerous stakeholders.
It is widely
known that a shareholder has the right to information from the company,
including information on merger and acquisition plans. Investors anticipate
open communication within an organisation. Even the financial reports and
records are theirs to obtain. The aforementioned requirements were never met in
the instance of Satyam.
Any organisation
has a responsibility to the government, which includes paying taxes on time and
complying by the rules and laws that the government has established. In the
current instance, the business did not pay advance tax for the 2009 fiscal
year. The rule required advance taxes to be paid four times a year, however
this wasn't done by them. The directors approved the management's choice
despite not having confidence from the shareholders.
The scam clearly
shows the loopholes in auditing process and defining the role and
responsibility of auditors. The SFIO inquiry alleged that because the
accountants used Satyam's tools rather than independent testing processes, they
were negligent in fulfilling their statutory obligations and reporting
requirements.
By granting the
corporation a pass and presenting the accuracy of the books of accounts, the
accountants in this case not only failed to give a clear image to the public
but also committed fraud. The Satyam case highlights the problems with
controlling and regulating auditors' behaviour. Unfortunately, despite
monitoring the company's accounts for the past nine years, PWC has not yet
discovered such a significant fraud. In addition to auditors, a number of other
factors, such as independent directors, the institutional investor community,
SEBI, retail investors, and professional investors—all of whom had access to
the company's models and comprehensive information—also played a role in the
financial deception.[3]
In response to
the fraud, the government overhauled the regulatory system. The new Companies
Act of 2013 fixed the responsibilities of the auditor and independent directors
among other reforms. Clause 49 of the listing requirements was revised in 2014
by market regulator SEBI to enhance corporate governance.[4]
Auditors used
bank statements the company gave totalling Rs 3,800 crore in the Satyam scam.
It turned out to be false. Auditors are required by the new regulations to
confirm the legitimacy of bank statements.
The fraud highlighted numerous issues with
corporate governance procedures, including unethical behavior, deceptive
accounting, questionable roles for auditors, an inefficient board, a lack of
independent directors, and failure to disclose pledged shares.
But the Satyam episode was
helpful in a manner. To guarantee stronger corporate governance standards, a
number of modifications and initiatives were made. In addition, the Government
amended the Companies Act in 2013 with a slew of measures to ensure
transparency and accountability in corporate affairs. These changes followed
the introduction of a warning system by the Minister of Corporate Affairs that
could detect signals from businesses that were breaking the rules.
CONCLUSION
Satyam scam
changed Indian legal system in many ways and it had a huge impact on the Indian
economy as well. Following the Satyam scandal, corporate governance must be in
accordance with the amended Companies Act and other guidelines. This scandal
has also highlighted the role of dishonest external auditors, forcing the
government to implement checks and balances.
Though total
prevention is impossible, fraud prevention would be a desirable outcome for
corporate governance programmes. Better corporate governance measures
implemented by corporations themselves, as well as strict application of laws
by regulatory bodies by awarding stiffer penalties to fraud perpetrators, can
help to prevent these fraudulent practises. Better public awareness is required
when investing in corporations. Furthermore, corporate accountability should be
developed in order for the money invested by the public to be profitably
utilised and serve the interests of the public at large. Thus, good governance
is required, based on effective representative democracy, with a strong opposition
derived from working people, that is well-informed and does not rely solely on
rhetoric. This will significantly reduce the incidence of corporate fraud.
Thus, white collar crimes can be avoided by promoting good corporate
governance, which includes reasonable transparent processes within the
corporation for detecting improper activities of its executives.
[1] Ahmad,
Tabrez & Malawat, Tabrez & Kochar, Yashowardhan & Roy, Ayan,
Satyam Scam in the Contemporary Corporate World: A Case Study in Indian
Perspective, Corporate Finance: Governance, Corporate Control &
Organization eJournal.
[3] Madan Lal Bhasin, The Creative
Accounting Practices: An Experience of A Developing Economy, 5, International
Journal of Management and Social Sciences Research (IJMSSR), 2016.
[4]
The Economic Times, https://economictimes.indiatimes.com/news/company/corporate-trends/lesson-from-satyam-corporate-governance-evolves-not-execution/articleshow/50476372.cms?from=mdr
(last visited October 20).
Article Information
THE GREAT RISE AND FALL - UNDERSTANDING THE NUANCES OF SCAMS IN LIGHT OF SATYAM SCAM IN INDIA
Authors: Komal Jain
- Journal IJLRA
- ISSN 2582-6433
- Published 2022/12/01
- Volume 2
- Issue 7
About Journal
International Journal for Legal Research and Analysis
- Abbreviation IJLRA
- ISSN 2582-6433
- Access Open Access
- License CC 4.0
All research articles published in International Journal for Legal Research and Analysis are open access and available to read, download and share, subject to proper citation of the original work.
Disclaimer: The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of International Journal for Legal Research and Analysis.