SAT orders SEBI to review Satyam case

Securities Appellate Tribunal gives the regulator 4 months time for fresh order In a setback for the Securities and Exchange Board of India, the Securities Appellate Tribunal (SAT) has set aside the regulator’s order issued against the promoters and senior management of erstwhile Satyam Computer Services, which had barred them from accessing the capital market for 14 years. SEBI had also ordered the promoters and management to disgorge about Rs. 1,8000000000 of “ill-gotten” gains. SAT directed the capital markets regulator to review the matter again on merit and pass an order preferably within four months. In its ruling, the tribunal noted that the directions given by a whole time member against the appellants for disgorgement were “based on criteria which are wholly unsustainable in law and the said directions are given without application of mind.” “We set aside the impugned order to the extent it relates to the period for which the appellants are restrained from accessing the securities market and the quantum of illegal gain directed to be disgorged by the appellants and remand the matter to the file of the WTM (whole time member) of SEBI for passing fresh order on merits and in accordance with law.” On July 15, 2014, SEBI had barred B. Ramalinga Raju, the then chairman of Satyam Computer and other senior officials including the then CFO, VP (finance) and head (internal audit) from accessing the securities market for 14 years. The regulator also directed the entities to disgorge the “unlawful gains” arising on sale/ pledge of Satyam shares during the period from 2001-2008 with interest at the rate of 12% per annum from January 1, 2009, till the date of payment. ‘Calculation of gains’ “In calculating disgorgement, the whole time member is required to distinguish between legally and ill-gotten gains,” said Sumit Agrawal, Partner, Suvan Law Advisors. “The first step in such calculations is to identify the link with evidence between the unlawful activity and the profit to be disgorged. These are complicated and nuanced questions, which have multiple layers of issues of fairness and public policy and SAT has faulted the whole time member on these,” Mr. Agrawal added.