The government on Tuesday decided to supersede the boards of Maytas Infra Ltd (MIL) and Maytas Properties Ltd (MPL) — companies promoted by Satyam Computers’ now-jailed founder-chairman B. Ramalinga Raju — and charged the current management of both the firms with “fraud” and “breach of trust”.
Corporate affairs minister PC Gupta said the government has moved the Company Law Board (CLB) to remove the present directors and appoint new boards.
The move is similar to the government’s decision to appoint a board for Satyam Computers and comes 40 days after it superseded the board of India’s fourth-largest technology firm. “In order to prevent further acts of fraud and to safeguard the operations of these companies in public interest, the government has moved the CLB,” the minister said.
The new boards cannot be appointed before February 24, the day the CLB will hear the government’s petition.
K Thiagarajan, the CEO of MPL, resigned two days ago and MIL CEO P.K. Madhav had resigned last month. The two companies have not appointed CEOs since then and Ramalinga Raju’s son, B Teja Raju was managing the operations of both the companies.
For MIL, the stakes are high — 2,700 employees and a raft of large infrastructure projects worth nearly Rs 16,000 crore, including the recently-awarded Hyderabad Metro Rail Project. Many of these projects would now get delayed as a new management takes stock.
MIL officials did not respond to HT’s telephone calls and emails. Government sources said preliminary investigations have established substantial evidence about how Raju and his accomplices might have diverted significant amount of funds through MIL and MPL from the technology giant’s accounts.
The first signs of possible irregularities in Satyam Computers’ accounts came to light during the abortive bid by Raju to acquire MIL and MPL for an estimated $1.6 billion.
MPL, for instance, had several transactions with group companies in the form of inter-corporate investments, advances and loans. It had acquired a land bank of 6,800 acres in Andhra Pradesh.
“Against a paid-up capital of Rs 5 lakh, MPL had made an investment of Rs 90.25 crore and loans and advances of Rs 419.63 crore,” a senior government official said requesting anonymity.
MPL has also received Rs 600 crore funds by way of unsecured loans from some of these 356 companies, he added.
Last week, the government had widened the scope of investigations into corporate India’s biggest fraud and mandated Serious Frauds Investigations Office (SFIO) to scrutinise the accounts and transactions of as many as 356 entities as it seeks to unravel the alleged multi-billion dollar Satyam Computers scam following the stunning confessions of Raju that accounts were doctored for several years.
Corporate law expert and IIM Ahmedabad faculty member Sandeep Parekh said the move to appoint a government nominated board was a right step. “This will help the government get to the bottom of the matter,” he said. “While uncertainties will remain, things can’t get worse.”
Andhra’s opposition parties termed the move a precursor to a bailout. “Maytas Infra was on the verge of total collapse,” said a top TDP leader. “The government intervention will help to bail out the company.”
With Ashok Das in Hyderabad