Huge losses to investors aside, the Satyam scandal has caused "serious damage" to India Inc's reputation as well as the country's regulatory authorities outside, the government has said.
Seeking to dismantle the existing board and to nominate ten new directors at the beleaguered IT firm, the Centre has said in its petition before the Company Law Board that the "interests of the company will not be safe in the hands of the present board of directors."
"The admission of fraudulent manipulation of the financial affairs has created an adverse impression in the minds of the trade, business and industry across the world. "This has also resulted in serious damage to the reputation of Indian Corporate sector and the regulatory mechanism in the eyes of the world," the government said. Allowing the government to nominate 10 new directors, the CLB said in its order that the "present board of directors stands suspended with immediate effect" and the new board should meet within seven days of its constitution and "take necessary action to put the company back on the road." It also asked the new board to submit periodical reports to the Centre and the CLB on the company's state of affairs. The CLB also observed that the residual board members at the company after a string of resignations are those "who were also party to the impugned decision to invest substantial funds in the companies related to Raju, the decision of which was the starting point of the downward trend in the fortunes of the company."