Free air tickets: Unfair trade practice?

May 22, 2008

The Delhi State Consumer Disputes Redressal Commission's decision to fine mobile phone firm Vodafone Rs 50 lakh (Rs 5 million) for offering prizes of gold coins and a Maruti [Get Quote] SX4 as part of a promotional scheme is something all marketers in the country would do well to pay attention to.

Vodafone offered subscribers 10 gold coins a day and one SX4 as a bumper prize, but the chance of winning was restricted only to those customers who used their phone to make calls for at least 20 minutes a day.

A consumer organisation filed a case before the DSCDRC arguing that Vodafone was luring subscribers into making unnecessary calls so that they could qualify for the list of customers from whom a lucky one would be chosen.

The commission has held that this qualified as an unfair trade practice under the Consumer Protection Act, for two reasons. One, it gave the impression the customer was not paying anything for participating whereas s/he actually was paying by making more calls every day. Two, the contest/lottery was meant to promote Vodafone's business interests.

DSCDRC's calculations showed that Vodafone had earned around Rs 2 crore (Rs 20 million) extra during the period the scheme was in operation and was offering gifts worth about Rs 10 lakh (Rs 1 million), so the fine was fixed at Rs 50 lakh.

Vodafone will presumably challenge the judgement, but what is important is the implication of the consumer protection law as interpreted by the DSCDRC.

Essentially, the law appears to be outlawing any promotional schemes which seek to increase the company's business -- so, if Vodafone had offered the chance to win a gold coin and an SX4 to all its customers, the commission would not have had a problem; but since they offered it only to those who used their services for more than a certain period of time a day, and this induced others to try and get into this category, the commission said the scheme was unfair.

Since this is what most marketing companies do, almost by rote, it is important to consider its implications.

Take the case of a credit card company, say, which offers a holiday for two to one of its Platinum Card holders. What is it doing this for? Clearly to let the Gold and Silver card holders know they're missing out on something and to encourage them to become large spenders so as to qualify for a Platinum Card.

Or an airline that offers free tickets to one lucky member of its frequent flyer programme, in addition to the other benefits they get. Once again, the idea is to let others know there are great benefits to be had by flying more.

After the DSCDRC verdict, it is likely that all such schemes can be classified as unfair trade practices. Perhaps it's time to take a more realistic look at the country's consumer laws.

Limited Liability Partnership

A form of general partnership that provides an individual partner protection against personal liability for certain partnership obligations.

The Limited Liability Partnership (LLP) is essentially a general partnership in form, with one important difference. Unlike a general partnership, in which individual partners are liable for the partnership's debts and obligations, an LLP provides each of its individual partners protection against personal liability for certain partnership liabilities.

In 1991 Texas enacted the first LLP statute, largely in response to the liability that had been imposed on partners in partnerships sued by government agencies in relation to massive savings and loan failures in the 1980s. The Texas statute protected partners from personal liability for claims related to a copartner's negligence, error, omission, incompetency or malfeasance. It also permanently limited the personal liability of a partner for the errors, omissions, incompetence, or negligence of the partnership's employees or other agents. By the mid-1990s, at least twenty-one states and the District of Columbia had adopted LLP statutes.

The limit of an individual partner's liability depends on the scope of the state's LLP legislation. Many states provide protection only against tort claims and do not extend protection to a partner's own negligence or incompetence or to the partner's involvement in supervising wrongful conduct. Other states provide broad protection, including protection against contractual claims brought by the partnership's creditors. For example, Minnesota enacted an expansive LLP statute in 1994. This piece of legislation provided that a partner in an LLP was not liable to a creditor or for any obligation of the partnership. It further provided, however, that a partner was personally liable to the partnership and copartners for any breach of duty, and also allowed a creditor or other claimant to pierce the limited liability shield of a partner in the same way a claimant may pierce the corporate veil of a corporation and personally sue an individual member of the corporation.

In states that recognize LLPs, a partnership qualifies as an LLP by registering with the appropriate state authority and fulfilling various requirements. Some states require proof that the partnership has obtained adequate liability insurance or has adequate assets to satisfy potential claims. All states require a filing fee for registration and also require that an LLP include the words Registered Limited Liability Partnership or the abbreviation LLP in its name.

A partnership that renders specific professional services may form an LLP and register as a professional limited liability partnership (PLLP). A PLLP is generally the same as an LLP except that it is an association solely of professionals. Each state specifies the qualifying professions for a PLLP. This business form is typically available to attorneys, physicians, architects, dentists, engineers, and accountants. New York's LLP statute restricts eligibility solely to partnerships that render professional services.

This entry contains information applicable to United States law only.

PM INAUGURATES THE PRAVASI BHARATIYA DIWAS

The Prime Minister, Dr. Manmohan Singh, today inaugurated the Pravasi Bharatiya Diwas 2009 at Chennai. Launching a new initiative called ‘The Global Indian Knowledge Network’, the Prime Minister said that this network will connect people of Indian origin from a variety of disciplines to users at the national, state and local levels in India. He added that the Network will facilitate transfer of knowledge and serve as a ‘virtual think tank’ to generate new ideas on issues such as development, education and health-care.

Following is the text of the Prime Minister’s address on the occasion:

“I am delighted to be here in the presence of such a distinguished gathering of overseas Indians. I wish you and your families a very happy, peaceful, prosperous and purposeful new year. While you are in our country, I wish you all a very pleasant stay in our country.

We have congregated in the southern most state of India and in a city where traditions and culture blend with modernity and technology with great ease.. I am sure many of you will be visiting the great temples at Mahabalipuram. They stand testimony to our sea-faring history. The ancient Tamil people, the ancient Telugu people, the people of Bengal and Orissa, have all sailed through the sea to our East, not to conquer lands but to conquer the hearts and minds of the people they came in contact with.

This Pravasi Bharatiya Diwas is our contemporary tribute to that great spirit, to that great heritage and to the excellent work you all continue to do as people of Indian origin in your respective countries. It is a tribute to your spirit of adventure and enterprise which have transformed you and the Indian Overseas community into powerful agents of social and economic change and the world admiration in distinct lands.

You come to this Conference from distant lands from all around the world. Our Chief Guest today, His Excellency Mr. Ramdien Sardjoe, the Vice President of Suriname, comes from the other side of our planet. Yet, he has inside him the blood of his Indian ancestors. His leadership and contribution to public life are a testimony to the achievements of the sons and daughters of India who have travelled to distant lands, and excelled in their respective professions. We take great pride in their achievements.

I welcome you, Mr. Vice President, to this ancient land of Bharat. I am sure your heart beats faster on this soil. Let me assure you, our hearts too beat for you and for the millions of Pravasis, every moment of our lives.

We feel proud of the great achievements of the people of Indian origin around the world. More than any other people, the people of India and of Indian origin know the meaning of tolerance and the art of living together regardless of caste, creed, religion or language.

Pluralism and the willingness to live with each other despite our differences is a deeply embedded trait of Indian culture. That is why I have often said that those who pursue the politics of exclusion, of monotheism, who divide people between “us” and “them”, betray the very idea of India. Our civilization was built on reason; on the willingness to engage in dialogue. As my friend Prof. Amartya Sen has reminded us, we Indian people have been over the centuries, an argumentative people. But I also say that we have been a consensual civilization.

The recent terrorist attacks in Mumbai were a grim reminder of the grave threat posed by extremism and terrorism to our pluralistic and liberal traditions. There are some who would not like to see India succeed. But we have shown, over and over again, that we will not allow the forces of terrorism and extremism to destabilize our polity, our economy and our society. We have taken several measures to strengthen national security, to promote national cohesion and we will continue to work with the international community to ensure that there are no safe havens and launching pads for terrorists.

Despite the global economic downturn, the fundamentals of Indian economy continue to remain strong. We expect to achieve a growth rate of about 7% this year, which will be among the highest in the world. Much of India’s growth is internally driven and I expect we can maintain a strong pace of growth in the coming years. That certainly will be our ambition.

India is actively involved in the meetings of the global G-20 countries, which are deliberating on the creation of a new global financial structure. We need to ensure that any new architecture that emerges is suited to the new challenges and vulnerabilities facing the world economy and simultaneously it must be reflective of the changes that have taken place in the economic structure over the years. Countries like India have a right to be given their due place in the evolving scheme of things.

A few months ago the international community lifted restrictions to end our nuclear isolation of the last thirty four years. The overseas Indian community, specially in the United States, played a key role in ensuring this outcome and in mobilizing congressional support for it in the United States. For this we are truly grateful to all of you. But much more importantly, this is a sign of the growing role that Indian origin communities are now playing in public policy and opinion making across the world. We applaud you for that contribution.

I am sure that each one of you would have sensed the growing respect with which India is today regarded in the world. India’s rise is increasingly being regarded as an important dimension of the emerging international world order. Our counsels on key global challenges are not just being heard, but are being actively sought and in this enterprise of changing the image of India, the overseas Indian community have played a magnificent role and I thank you for that.

The Overseas Indian Citizenship Scheme which we had announced in 2006 has elicited an overwhelming response. I am therefore happy to announce that henceforth OCI card holders who are qualified professionals – doctors, dentists, pharmacists, engineers, architects and chartered accountants - will have the benefit of practicing their professions here in our country. Further details to operationalize this benefit are being worked out.

I am happy to launch today a new initiative called ‘The Global Indian Knowledge Network’. This Network will connect people of Indian origin from a variety of disciplines to users at the national, state and local levels in India. My hope is that the Network will facilitate transfer of knowledge and serve as a ‘virtual think tank’ to generate new ideas on issues such as development, education and health-care.

I would like to say a few words about the five million Indian workers working in the Gulf. I have seen their contributions first-hand when I recently visited Oman and Qatar. I was amazed to see their grit, their determination, and how they are contributing magnificiently to processes of wealth creation in these countries.

We are therefore concerned at the rise in tensions in the region as a result of the attack in Gaza that has led to the needless loss of lives of many innocent men, women and children. India has strongly condemned these incidents and it is our hope that the international community would get together and help restore peace in the region as soon as possible. I wish to reiterate our unstinted and unwavering support for the just Palestinian cause.

We have put in place several measures for better protection and welfare of our workers overseas, including by entering into inter-governmental agreements.

I am happy to inform you that we have launched a comprehensive e-governance project on migration. Under this project, every worker will be issued a ‘Smart Card’ that will contain all details of the worker, his work contract, his employer, his insurance etc. This data will also be available to the Government of India as well as our missions overseas. The objective of this project is to transform emigration process into a simple, transparent, orderly and humane process.

Till now, at these gatherings, we have celebrated the spirit of adventure and enterprise of the global Indians. This year, let me add, that we have made contact with a distant pravasi that you have all grown up hearing about – Chanda-mama!

When Chandrayaan-I soared into the skies last October, it was not just a display of India’s technological achievements. It was the fulfillment of an ancient dream, to meet Chandamama! I assure you, ladies and gentlemen, that one day an Indian, desi or pravasi, will complete that journey and we will be able to land a man on the moon from India.

It is this sense of confidence in our future that defines the India of today. I urge you all to come and participate in this great adventure of human development within the framework of a free and open society and an open economy. I have often said no where else a billion people are trying to seek their economic and social salvation in the framework of a functioning democracy committed to respect for all fundamental human rights, commitment to the rule of law and if India succeeds it will have profound implication for the development of the rest of the country of the third world. India welcomes your participation in our social and economic development. Modern science and technology have created many new frontiers of knowledge to be harnessed for human development and well being. I hope your conference gives us more ideas on how we can work together for India’s progress and your welfare. With these words, I once again welcome you all to this magnificent Conference.”

SC moves HC against CIC order on judges' assets

NEW DELHI: Worried over the fallout of a recent Central Information Commission (CIC) order on making the assets of judges public, the Supreme Court registrar on Friday challenged it before the Delhi high court saying that this information, not being in public domain, could not be given to RTI applicants.

The high court is the appellate authority for challenging CIC's decisions — a fact that led to this unusual situation of the apex court moving a lower court over a dispute.

The apex court said information relating to declaration of assets by Supreme Court judges to the Chief Justice of India (CJI) was not a mandatory exercise under law, but driven by an informal resolution of May 7, 1997 — implying that information on judges' assets did not come under RTI's purview.

The petitioner added said the CIC had committed an error by equating the Supreme Court and the CJI as one and the same authority whereas the CJI's position was quite distinct from that of the Supreme Court in terms of the RTI Act.

"CJI is not a public authority, as defined under the RTI Act, and therefore, is not required to designate a central public information officer (central PIO) for it, or to supply information held or maintained by it," the appeal stated.

The CIC had on January 6 only directed the central PIO of the SC to furnish information as to whether any declaration of assets had been filed by SC judges or not.

But even this apparently innocuous order has led the Supreme Court to challenge the CIC order before the HC, saying that a public authority was bound to give information if these were available in public domain.

The SC registrar added that details of judges' assets was not information which was held by or under control of a public authority, since it was voluntarily furnished to the CJI, who himself could not be included in the definition of "public authority".

"There is nothing under the Constitution of India or under any other law which requires judges of the Supreme Court to declare their assets to the Chief Justice of India," said the petition, which was drafted by advocate Devdatt Kamath and settled by Solicitor General G E Vahanvati.

Quoting section 8(1)(j) of the RTI Act which imposed a ban on furnishing of personal information, the SC Registrar said any query relating to assets of judges voluntarily declared before the CJI squarely fell within the meaning of Section 8(1)(j).

Moreover, "the office of the Chief Justice of India is a distinct office. It performs certain constitutional functions and cannot be equated with or said to be part of the registry of the Supreme Court, which holds information relating to other matters of the Supreme Court under the RTI Act."

Dr. Kalam inaugurates SCAORA website at first L.M. Singhvi lecture

Dr. Kalam inaugurates SCAORA website at first L.M. Singhvi lecture
1/17/2009

Former President Dr. A.P.J. Kalam today inaugurated the SCAORA website at first Dr. L. M. Singhvi Memorial Lecture organized by Supreme Court Advocates-on-Record Association (SCAORA) and supported by Indlaw at New Delhi.

The lecture was presided over by Hon’ble Mr. Justice K.G. Balakrishnan, Chief Justice of India and attended by dignitaries from the legal fraternity.

Speaking on the topic ‘Law, Technology & Society : Dynamics’ Dr. Kalam said that scientists and technologists have to be partners with legal community and evolve with legal framework so that judiciary is able to administer justice speedily using benefits of technology.

He emphasized the need to simplify law, discard irrelevant and old Acts with certain periodicity. On the issue of terrorism, he suggested the need for evolving an aggressive Mission called National Campaign to Eradicate Terrorism (NCET) to create:
(a) Unified intelligence Agency
(b) Enact a law with stringent punishments and faster justice to the perpetrators of the crime in a time bound manner
(c) Create a sense of awareness among the people to work
(d) Implement National Citizen ID card for all citizens
(e) Equitable National development for inclusive growth.

He emphasized on the role of law in dealing with cyber attacks during a conflict among the countries as well as issues of territorial jurisdiction. Answering media persons after the lecture, he told Indlaw that technology can help in identifying the movement and flow of information and identify what kind of wrong going on.

Indlaw correspondent

3 Chief Executives of Indian Company Jailed in Fraud Case

By JEREMY KAHN and HEATHER TIMMONS

Published: January 11, 2009

HYDERABAD, India — The brothers who founded the outsourcing company Satyam Computer Services have been interrogated and jailed, and Srinivas Vadlamani, who resigned as chief financial officer after a huge fraud was disclosed there, was arrested as well on Saturday night.

Inspector General V. S. K. Kaumudi of the police crime investigation unit said that Mr. Vadlamani was being held on charges of criminal conspiracy, forging accounts and cheating as part of the same case that has been registered against the Satyam founders, B. Ramalinga Raju and B. Rama Raju.

On Sunday, Mr. Vadlamani was remanded to judicial custody by a magistrate on Sunday until at least Jan. 23. He was then sent to join the Raju brothers in Hyderabad’s Chanchalguda prison. Also on Sunday, police officials said that they had raided the residences of all three men, and removed several boxes of documents from the home of B. Ramalinga Raju’s in the upscale neighborhood of Jubilee Hills.

B. Ramalinga Raju resigned as chairman in a letter to the company Wednesday in which he confessed to faking profit and revenue. Charges being considered against Mr. Raju and his brother include cheating, forgery, criminal breach of trust and falsifying documents, the authorities said. Like Mr. Vadlamani, the two are to remain in judicial custody until Jan. 23, and will be held in the Hyderabad prison. Located in Hyderabad’s old city, the prison is a sprawling colonial-era jail with concrete watchtowers, a massive steel studded front gate and electrified wire ringing high stone walls.

On Sunday the government of India announced a new board for Satyam. P.C. Gupta, India’s minister of corporate affairs, speaking at a press conference in New Delhi, said the government had selected three “eminent persons” to serve on Satyam’s board, the minimum number of directors required under Indian law. The three are Deepak Parekh, the chairman of the Housing Development Finance Corp., Kiran Karnik, a former head of the National Association of Software and Services Companies, the country’s leading information technology trade association, and C. Achuthan, a lawyer and former member of the Securities and Exchange Board of India, the country’s market regulator.

Mr. Gupta said that the board would meet within the next 24 hours and decide who would serve as Satyam’s new chairman. The government dismissed Satyam’s old board on Friday. He said the new board could select other directors as required. In India, a board may have up to 10 members and Satyam’s former board had nine directors.

Mr. Gupta also said that the government would consider requests from Satyam’s large shareholders for seats on the board, but that it was up to the new board to decide who would be invited to join. Lazard, the French investment bank that has increased its stake in Satyam to 7.4 percent, has said it is seeking input into the company’s decision-making, but has not yet requested a seat on the board.

“All options are open,” Mr. Gupta said. “Whatever is in the interest of the company, then the necessary steps will be taken.”

In a statement released Sunday, a company spokesperson described the announcement of the new board members as “the best news we’ve received in the past four weeks.”

“This is a vital stabilizing development for Satyam, and it marks the beginning of a new chapter in the company’s history,” the statement said.

Mr. Gupta said that government investigators looking into the accounting fraud that has brought Satyam to the brink of bankruptcy have made “commendable progress in the case” over the past three days, but he declined to reveal any specifics about what investigators have uncovered.

“It is important to ensure the continuity of the company in the interest of its shareholders, employees, customers and other stakeholders both in India and abroad,” Mr. Gupta said.

Satyam, one of India’s largest outsourcing companies, is struggling to survive after the revelations of fraud, and the government has taken control of the company’s board. B. Ramalinga Raju said in his letter that no board members were aware of the fraud at the company. S. Bharat Kumar, lawyer for the Raju brothers, said in an interview that he believed the two had a “good case” for being released on bail, but the police said they intend to push to keep the brothers locked up while awaiting trial.

Satyam, which counts one-third of the Fortune 500 companies among its clients, employs 53,000 people, about two-thirds of them in India. Government agencies have moved quickly since Wednesday to shore up the company and to reassure investors that Indian publicly traded companies are safe. They passed new rules Friday that will require the largest public companies on India’s stock exchange to submit their numbers to additional review by outside auditors. Lazard Asset Management, Satyam’s largest shareholder, is agitating for a voice at Satyam. The money management arm of the investment bank Lazard has asked the Indian government to be consulted on any changes at the company, and sent letters to India’s corporate affairs minister and the market regulator, SEBI, with that request, a Lazard representative said Saturday.

Wipro, Infosys 'not to poach' Satyam staff or clients

NEW DELHI: Expressing solidarity, country's top IT majors such as Infosys and Wipro on Sunday said they will not proactively approach clients of Satyam but made it clear that they will not say 'no' if clients approach them. "We have already made the announcement that we will not poach any Satyam employee. We will not proactively approach their clients and customers either... but clients have to decide for themselves and they have the right to choose their partner at work," Infosys HR director MohanDas Pai said. "I can't say no to customers if they come to me with more businesses. We already have customers which are common with Satyam. If they are giving us more business we will not say no. It is definitely creating problems for customers," Wipro CFO Suresh Senapathy said in an interview to a Television channel. Analysts has said that over half a dozen rivals of the tainted IT firm Satyam Computer have started exploring ways to take over the business from its various clients, a global technology consultancy firm had said. Satyam is likely to see its clients as well as employees deserting it soon due to the competitive wooing by rivals and top IT firms such as Infosys would continue to shore up their market share, analysts at Forrester Research said in a report. "Large and small clients alike will look to other suppliers they already work with as an immediate fallback position as the confusion continues. More than half a dozen providers have already called Forrester to discuss competitive strategies for taking over business in joint accounts," it added. "Both clients and employees will desert Satyam as a result of competitive wooing. In our interactions with several of Satyam's employees across the organisation they showed utter frustration," Forrester Research's VP and PrincipalAnalyst, John McCart and its Senior Analyst in India, Sudin Apte said in the report. IT industry body Nasscom has also said that it will refrain from poaching employees from Satyam. The government's move to constitute a new three-member board with HDFC chairman Deepak Parekh, former NASSCOM chief Kiran Karnik and former SEBI member C Achuthanis expected to restore the confidence of the investors, employees and clients as well.

Satyam ex-CFO denies role in fudging 11 Jan 2009, 2200 hrs IST, TNN

HYDERABAD: Satyam's chief financial officer (CFO) Vadlamani Srinivas on Sunday claimed that he had no knowledge of fudging of over Rs 7,000 crore by former chairman B Ramalinga Raju.

According to sources, Vadlamani in his confession stated he wasn't aware of the fraud as his 80-member team provided him documents and he blindly signed on them.

Crime Investigation Department sleuths raided houses of the Raju brothers in Jubilee Hills and Vadlamani's residence at Habsiguda on Sunday.

Around 8am, five special teams of CID personnel reached the houses of the Rajus on Road Number 62, Jubilee Hills, and Vadlamani's house on Street Number 3, Habsiguda, armed with search warrants. During the searches, the special teams, comprising CID and city police personnel, seized several documents and copied data from computers on the three premises. The CID is also working with SEBI and Registrar of Companies in the searches at Satyam's offices in Hyderabad.

The CID sleuths said there were no raids on houses of the directors of the superseded board (the Centre named three new directors on Sunday) and none of them had been arrested. "As part of the investigation, all persons or organisations involved in the Satyam case will be questioned. But so far, Satyam's board of directors, independent directors and PwC personnel have not been questioned,'' additional DG (CID) A Sivanarayana said.

Vadlamani, who was questioned by CID officials for nearly 18 hours, was produced before VI additional chief metropolitan magistrate P Ramakrishna on Sunday evening. He was remanded in judicial custody till January 23 and was shifted to the Chanchalguda jail.

Police have sought custody of Vadlamani and their petition will come up for hearing on Monday. The CID officials were tightlipped on the revelation. "Vadlamani has to be questioned further. So, we have moved a petition seeking his custody,'' IG (CID) VSK Kaumudi said.

Satyam to carry on, protect its staff

Hyderabad, January 8

A day after disgraceful exit of its chairman B Ramalinga Raju under the shadow of the largest-ever corporate fraud, Satyam Computers today said it was exploring “strategic options, including scouting for a buyer” to bail out of the crisis and admitted that the liquidity position was “discouraging”.

In a damage-control exercise, a seven-member task force, headed by the interim CEO Ram Mynampati, appeared before the media here and assured that their immediate priority was to ensure continuity in business and protection of the interests of its employees and customers.

The interim CEO did not rule out the possibility of recommending “criminal action” against Raju, who admitted to the fraud amounting to over Rs 7,000 crore.

“We have started the process of ascertaining the veracity and accuracy of his (Raju’s) statements made in the resignation letter. Once we complete the process, we will determine the next course of action,” Ram said to repeated queries from the media.

Asserting that he had no personal knowledge about the accounting irregularities and fudging of figures, Ram, who is one of the three members now remaining on the Satyam board, said he was “shocked” over the revelations. “We have an unimaginable crisis on hand. But, we are confident of putting it behind us,” he said.

Meanwhile, the company’s chief financial officer (CFO) V Srinivas sent in his resignation today.

“We have not accepted his resignation. The board meeting (scheduled on January 10) will take a decision,” the interim CEO said.

Pleading ignorance about the whereabouts of Ramalinga Raju, he said no police complaint has been filed against him. “We have no contact with him. I do not know where he is,” Ram said.

Asked whether the company has enough liquidity to pay salaries to the employees, he said the balance sheets were being verified and immediate steps would be taken to raise the liquidity through various options.

The company would appoint an investment banker at the earliest to advise on the strategic options in the best interests of the shareholders. The interim CEO made it clear that the company would fully cooperate with the regulatory authorities.

“A team from SEBI is here and had discussions with our associates,” he said.

Asked whether a new auditing firm would be appointed to verify the records, he said “We are yet to ascertain the processes used by PwC. After we complete the process, we will take a decision.” The efforts were also on to induct new members into the Board.

“We are committed to ascertaining facts about Raju’s disclosures and working with regulatory authorities closely. Our immediate job is to ensure continuance in business, complete transparency and smooth transition of leadership,” Ram said.

The Supreme Court judgment holding a non-legislator's re-appointment as Minister beyond six months in Punjab as invalid

can a non-member, who fails to get elected during the period of six consecutive months, after he is appointed as a Minister or while a Minister has ceased to be a legislator, be reappointed as a Minister, without being elected to the Legislature after the expiry of the period of six consecutive months ?

S.R. CHAUDHURI V. STATE OF PUNJAB & ORS [2001] INSC 395 (17 August 2001)

CJI, R.C. Lahoti & K.G. Balakrishnan

DR. A.S. ANAND, CJI :

Respondent No.2, Shri Tej Parkash Singh, was appointed as a Minister in the State of Punjab on the advice of the Chief Minister, Sardar Harcharan Singh Barar on 9.9.1995. At the time of his appointment as a Minister, he was not a Member of Legislative Assembly in Punjab. He failed to get himself elected as a Member of the Legislature of the State of Punjab within a period of six months and submitted his resignation from the council of Ministers on 8.3.1996. During the term of the same Legislative Assembly, there was a change in the leadership of the ruling party. Smt. Rajinder Kaur Bhattal, Respondent No.3, was, on her election as Leader of the Ruling Party, appointed Chief Minister of the State of Punjab on 21.11.1996. Respondent No.2, who had not been elected as a Member of the Legislature even till then, was once again appointed as a Minister w.e.f. 23.11.1996. The Appellant filed a petition seeking writ of quo warranto against Respondent No.2. It was stated in the petition that appointment of Respondent No.2 for a second time during the term of the same legislature, without being elected as a Member of the Legislature was violative of constitutional provisions and, therefore, bad. The Division Bench of the High Court vide order dated 3.12.1996 dismissed the writ petition in limine. This appeal by special leave calls in question the order and judgment of the High Court dismissing the writ petition in limine.

........................................................................

Article 144(3) of the Draft Constitution which corresponds to Article 164(4) of the Constitution read:

"A Minister who, for any period of six consecutive months, is not a member of the Legislature of the State shall at the expiration of that period cease to be a Minister." During the debate on this Draft Article, Mr. Mohd. Tahir, M.P. proposed the following amendment: - "That for clause (3) of article 144, the following be substituted:

(3) A Minister shall, at the time of his being chosen as such be a member of the Legislative Assembly or Legislative Council of the State as the case may be." Speaking in support of the proposed amendment, Mr. Tahir said in the Constituent Assembly:

"This provision appears that it does not fit with the spirit of democracy. This is a provision which was also provided in the Government of India Act of 1935 and of course those days were the days of Imperialism and fortunately those days have gone. This was then provided because if a Governor finds his choice in someone to appoint as Minister and fortunately or unfortunately if that man is not elected by the people of the country, then that man used to be appointed as Minister through the backdoor as has been provided in the Constitution and in 1935 Act. But now the people of the States will elect members of the Legislative Assembly and certainly we should think they will send the best men of the States to be their representatives in the Council or Legislative Assembly. Therefore I do not find any reason why a man who till then was not elected by the people of the States and which means that, that man was not liked by the people of the States to be their representative in the Legislative Assembly or the Council, then Sir, why that man is to be appointed as the Minister." Dr. Ambedkar opposing the amendment replied :

"Now, with regard to the first point, namely, that no person shall be entitled to be appointed a Minister unless he is at the time of his appointment an elected member of the House, I think it forgets to take into consideration certain important matters which cannot be overlooked. First is this, - it is perfectly possible to imagine that a person who is otherwise competent to hold the post of a Minister has been defeated in a constituency for some reason which, although it may be perfectly good, might have annoyed the constituency and he might have incurred the displeasure of that particular constituency. It is not a reason why a member so competent as that should be not permitted to be appointed a member of the Cabinet on the assumption that he shall be able to get himself elected either from the same constituency or from another constituency. After all the privilege that is permitted is a privilege that extends only for six months. It does not confer a right to that individual to sit in the House without being elected at all. My second submission is this, that the fact that a nominated Minister is a member of the Cabinet, does not either violate the principle of collective responsibility nor does it violate the principle of confidence, because if he is a member of the Cabinet, if he is prepared to accept the policy of the Cabinet, stands part of the Cabinet and resigns with the Cabinet, when he ceases to have the confidence of the House, his membership of the Cabinet does not in any way cause any inconvenience or breach of the fundamental principles on which parliamentary government is based. " (Emphasis supplied) After the debate the proposed amendment was negatived and Article 144(3) was adopted.

The ambit and scope of Article 164(4) came up for consideration before a Constitution Bench of this Court in Har Sharan Verma v. Shri Tribhuvan Narain Singh, Chief Minister, U.P. and another, 1971(1) SCC 616. The issue arose in connection with the appointment of Shri T.N. Singh, who was not a Member of either House of Legislature of the State of Uttar Pradesh, as Chief Minister of Uttar Pradesh. The Constitution Bench referred to the position as prevailing in England. It was observed that invariably all Ministers must be members of the Parliament but if in some exceptional case, a Minister, is not a member of the Parliament, he can continue to be a Minister for a brief period during which he must get elected in order to continue as a Minister. This Court upholding the judgment of the High Court, rejected the challenge to the appointment of Shri T.N. Singh as Chief Minister in view of Article 164(4) of the Constitution. The Court opined that the Governor has the discretion to appoint, as a Chief Minister, a person, who is not a member of the legislature at the time of his appointment but the Chief Minister is required, with a view to continue in office as a Chief Minister, get himself elected to the legislature within a period of six consecutive months from the date of his appointment.

The issue was once again raised by the same writ petitioner and was considered by a Division Bench of this Court in Har Sharan Verma v. State of U.P. and another, (1985) 2 SCC 48. The writ petitioner argued that a Governor cannot appoint a person, who is not a Member of the Legislature, as a Minister under Article 164(1). According to the writ petitioner Article 164(4) of the Constitution in terms would only be applicable to a person, who has "been a Minister but who ceases to be a member of the Legislature for some reason or the other such as the setting aside of his election in any election petition". Sustenance, for this argument was sought from the provisions of amended Article 173(a) which provides :

"Article 173. Qualification for membership of the State Legislature.- A person shall not be qualified to be chosen to fill a seat in the Legislature of a State unless he- (a) is a citizen of India, and makes and subscribes before some person authorised in that behalf by the Election Commission an oath or affirmation according to the form set out for the purpose in the Third Schedule;

Relying upon the Constitution Bench judgment in Har Sharan Verma v. Shri Tribhuvan Narain Singh (supra), the Court opined:

"It is thus seen that there is no material change brought about by reason of the amendment of Article 173(a) of the Constitution in the legal position that a person who is not a member of the State Legislature may be appointed as a Minister subject, of course, to clause (4) of Article 164 of the Constitution which says that a Minister who for any period of six consecutive months is not a member of the Legislature of the State shall at the expiration of that period cease to be a Minister." "A Minister who for any period of six consecutive months is not a member of either House of Parliament shall at the expiration of that period cease to be a Member." And Article 88, which provides:

"Every Member and the Attorney-General of India shall have the right to speak in, and otherwise to take part in the proceedings of, either House, any joint sitting of the Houses, and any committee of Parliament of which he may be named a member, but shall not by virtue of this article be entitled to vote." opined:

"The combined affect of these two articles is that a person not being a Member of either House of Parliament can be a Minister up to a period of six months. Though he would not have any right to vote, he would be entitled to participate in the proceedings thereof. The petitioner admits that in the thirty-seven years of constitutional regime in this country there have been several instances where a person has held the office as Minister either at the Centre or in the State (there are corresponding provisions for the State), not being a member of the appropriate legislature at the time of appointment." (Emphasis ours) Thus, this Court once again held that a person, not being a Member of either House of Legislature could be appointed a Minister, but he could continue as a Minister for a period of six consecutive months only during which period he should get himself elected to the Legislature or else he must cease to be a Minister after expiry of that period.

Shri H.D. Deve Gowda, who was not a Member of either House of Parliament was appointed as the Prime Minister of India. His appointment was put in issue in S.P. Anand, Indore v. H.D. Deve Gowda and others, (1996) 6 SCC 734. After noticing various provisions of the Constitution, this Court while upholding his appointment observed:

"A Constitution Bench of this Court had occasion to consider whether a person who is not a member of either House of the State Legislature could be appointed a Minister of State and this question was answered in the affirmative on a true interpretation of Articles 163 and 164 of the Constitution which, in material particulars, correspond to Articles 74 and 75 bearing on the question of appointment of the Prime Minister...".

and went on to say:

"On a plain reading of Article 75(5) it is obvious that the Constitution-makers desired to permit a person who was not a member of either House of Parliament to be appointed a Minister for a period of six consecutive months and if during the said period he was not elected to either House of Parliament, he would cease to be a Minister...".

(Emphasis ours) The Bench also repelled the argument that if a non-Member of the House is chosen as a Prime Minister, it could be against national interest and the country would be running a great risk. It was observed:

"...Therefore, even though a Prime Minister is not a member of either House of Parliament, once he is appointed he becomes answerable to the House and so also his Ministers and the principle of collective responsibility governs the democratic process. Even if a person is not a member of the House, if he has the support and confidence of the House, he can be chosen to head the Council of Ministers without violating the norms of democracy and the requirement of being accountable to the House would ensure the smooth functioning of the democratic process. We, therefore, find it difficult to subscribe to the petitioner's contention that if a person who is not a member of the House is chosen as Prime Minister, national interest would be jeopardised or that we would be running a great risk. The English convention that the Prime Minister should be a Member of either House, preferably House of Commons, is not our constitutional scheme since our Constitution clearly permits a non-member to be appointed a Chief Minister or a Prime Minister for a short duration of six months...".

Thus, we find that this Court, including its Constitution Bench, has consistently taken the view on an interpretation of Article 163, Article 164(1) and Article 164(4) that a person who is not a member of the Legislature, may be appointed a Minister for a short period, but if during the period of six consecutive months he is not elected to the Legislature, he would cease to be a Minister at the expiry of that period.

The absence of the expression "from amongst members of the legislature" in Article 164 (1) is indicative of the position that whereas under that provision a non-legislator can be appointed as a Chief Minister or a Minister but that appointment would be governed by Article 164(4), which places a restriction on such a non-member to continue as a Minister or the Chief Minister, as the case may be, unless he can get himself elected to the Legislature within the period of six consecutive months, from the date of his appointment. Article 164(4) is, therefore, not a source of power or an enabling provision for appointment of a non-legislator as a Minister even for a short duration. It is actually in the nature of a disqualification or restriction for a non-member, who has been appointed as a Chief Minister or a Minister, as the case may be, to continue in office without getting himself elected within a period of six consecutive months.

It is not the case of the appellant that respondent No.2 Shri Tej Prakash Singh suffered from any constitutional or statutory disqualification to contest an election on the date of his first appointment as a Minister or even on the date of his re-appointment as a Minister. The challenge is confined to the issue of re-appointment of the respondent, without getting elected within six consecutive months of his first appointment. In this view of the matter, we have declined an invitation of learned counsel for the appellant to express our opinion on the question whether a non-legislator can be appointed as a Minster, if on the date of such appointment, he suffers from a constitutional or statutory disqualification to contest the election within the next six consecutive months. We are not expressing our opinion on the issue, as it is not directly involved in the present case and the settled practice of this Court is not to express opinion on issues which do not essentially arise in a case under consideration.

The issue before us, however, is somewhat different. The issue is : can a non-member, who fails to get elected during the period of six consecutive months, after he is appointed as a Minister or while a Minister has ceased to be a legislator, be reappointed as a Minister, without being elected to the Legislature after the expiry of the period of six consecutive months ? This issue was not considered in either of the four cases referred to above - there is no other decided case dealing with the issue brought to our notice either. With a view to consider the issue, it would, therefore, be useful to consider the constitutional scheme governing a democratic parliamentary form of Government and interpret Article 164 (1) and 164(4) in that light.

Parliamentary democracy generally envisages (i) representation of the people, (ii) responsible government and (iii) accountability of the Council of Ministers to the Legislature. The essence of this is to draw a direct line of authority from the people through the Legislature to the Executive. The character and content of parliamentary democracy in the ultimate analysis depends upon the quality of persons who man the Legislature as representative of the people. It is said that "elections are the barometer of democracy and the contestants the lifeline of the parliamentary system and its set-up".

India has to a large measure adopted Westminster form of Government. This position was recognised in Shamsher Singh & Anr. vs. State of Punjab, [1975] 1 S.C.R. 814, when Justice Krishna Iyer observed:

"Not the Potomac, but the Thames fertilizes the flow of the Yamuna, if we may adopt a riverine imagery. In this thesis, we are fortified by the precedent of this Court, strengthened by Constituent Assembly proceedings and reinforced by the actual working of the organs involved for about a 'silver jubilee span of time'." In the Westminster system, it is an established convention that Parliament maintains its position as controller of the executive. By a well settled convention, it is the person who can rely on support of a majority in the House of Commons, who forms a government and is appointed as the Prime Minister. Generally speaking he and his Ministers must invariably all be Members of Parliament (House of Lords or House of Commons) and they are answerable to it for their actions and policies. Appointment of a non-member as a Minister is a rare exception and if it happens it is for a short duration. Either the individual concerned gets elected or is conferred life peerage.

......................................................................................................................................................................................................

Constitutional provisions are required to be understood and interpreted with an object oriented approach. A Constitution must not be construed in a narrow and pedantic sense. The words used may be general in terms but, their full import and true meaning, has to be appreciated considering the true context in which the same are used and the purpose which they seek to achieve. Debates in the Constituent Assembly referred to in an earlier part of this judgment clearly indicates that non-member's inclusion in the cabinet was considered to be a 'privilege' that extends only for six months', during which period the member must get elected otherwise he would cease to be a Minister. It is a settled position that debates in the Constituent Assembly may be relied upon as an aid to interpret a constitutional provision because it is the function of the Court to find out the intention of the framers of the Constitution. We must remember that a Constitution is not just a document in solemn form, but a living framework for the Government of the people exhibiting a sufficient degree of cohesion and its successful working depends upon the democratic spirit underlying it being respected in letter and in spirit. The debates clearly indicate the 'privilege' to extend "only" for six months.

The very concept of responsible Government and representative democracy signifies Government by the People. In constitutional terms, it denotes that the sovereign power which resides in the people is exercised on their behalf by their chosen representatives and for exercise of those powers, the representatives are necessarily accountable to the people for what they do. The Members of the Legislature, thus, must owe their power directly or indirectly to the people. The Members of the State Assemblies like Lok Sabha trace their power directly as elected by the people while the Members of the Council of State like Rajya Sabha owe it to the people indirectly since they are chosen by the representative of the people. The Council of Minister of which a Chief Minister is head in the State and on whose aid and advice the Governor has to act, must, therefore, owe their power to the people directly or indirectly.

The sequence and scheme of Article 164, which we have referred to in an earlier part of our order, clearly suggests that ideally, every minister must be a member of the legislature at the time of his appointment, though in exceptional cases, a non-member may be given a ministerial berth or permitted to continue as a Minister, on ceasing to be a member, for a short period of six consecutive months only to enable him to get elected to the Legislature in the meanwhile. As a Member of the Council of Ministers, every Minister is collectively responsible to the Legislative Assembly. A Council of Ministers appointed during the term of a legislative assembly would continue in office so long as they continue to enjoy the confidence of the legislative assembly. A person appointed as a Minister, on the advice of the Chief Minister, who is not a member of the legislature, with a view to continue as a Minister must, therefore, get elected during a short period of six consecutive months after his appointment, during the term of that legislative assembly and if he fails to do so, he must cease to be a Minister. Reappointment of such a person, who fails to get elected as a member within the period of grace of six consecutive months, would not only disrupt the sequence and scheme of Article 164 but would also defeat and subvert the basic principle of representative and responsible Government. Framers of the Constitution by prescribing the time limit of "six consecutive months" during which a non-legislator Minister must get elected to the legislature clearly intended that a non-legislator can not be permitted to remain a minister for any period beyond six consecutive months, without getting elected in the meanwhile. Resignation by the individual concerned before the expiry of the period of six consecutive months, not followed by his election to the legislature, would not permit him to be appointed a Minister once again without getting elected to the legislature during the term of the legislative assembly. The "privilege" of continuing as a Minister for "six months" without being an elected member is only a one time slot for the individual concerned during the term of the concerned legislative assembly. It exhausts itself if the individual is unable to get himself elected within the period of grace of "six consecutive months". The privilege is personal for the concerned individual. It is, he who must cease to be a Minister, if he does not get elected during the period of six months. The 'privilege' is not of the Chief Minister on whose advice the individual is appointed. Therefore, it is not permissible for different Chief Ministers, to appoint the same individual as a Minister, without him getting elected, during the term of the same assembly. The individual must cease to be a Minister, if during a period of six consecutive months, starting with his initial appointment, he is not elected to the assembly. The change of a Chief Minister, during the term of the same assembly would, therefore, be of no consequence so far as the individual is concerned. To permit the individual to be reappointed during the term of the same legislative assembly, without getting elected during the period of six consecutive months, would be subversion of parliamentary democracy. Since Article 164(4) provides a restriction for a non-legislator Minister to continue in office, beyond a period of six consecutive months, without being elected, it clearly demonstrates that the concerned individual appointed as a Minister under Article 164(1) without being a member of the Legislature must cease to be a Minister unless elected within six consecutive months. Re-appointing that individual without his getting elected, would, therefore, be an abuse of Constitutional provisions and subversive of constitutional guarantees. Every Minister must draw his authority, directly or indirectly, from the political sovereign - the Electorate. Even a most liberal interpretation of Article 164(4) would show that when a person is appointed as a Minister, who at that time is not a member of the legislature, he becomes a Minister on clear constitutional terms that he shall continue as a Minister for not more than six consecutive months, unless he is able to get elected in the meanwhile. To construe this provision as permitting repeated appointments of that individual as a Minister, without getting elected in the meanwhile, would not only make Article 164(4) nugatory but would also be inconsistent with the basic premise underlying Article 164. It was not the intention of the Founding Fathers that a person could continue to be a Minister without being duly elected, by repeated appointments, each time for a period of six consecutive months. If this were permitted, a non-legislator could by repeated appointments remain a Minister even for the entire term of the Assembly - a position wholly unacceptable in any parliamentary system of government. Such a course would be contrary to the basic principles of democracy, an essential feature of our constitution. The intention of the framers of the constitution to restrict such appointment for a short period of six consecutive months, cannot be permitted to be frustrated through manipulation of "reappointment".

Framers of the Constitution have used the expression "six consecutive months", which implies that the period of six months must run continuously and not even intermittently. It would commence from the time a non-legislator is either appointed as a Minister or a Minister who becomes a non-legislator, is allowed to continue as such, and comes to an end at the expiry of that period. The use of the expression "consecutive" is significant. It cannot be defeated by interpreting Article 164(4) as permitting appointment even for a total period of six months, during the term of a legislative assembly, let alone, that the appointment of such a non-legislator as a minister can be for six months "at a time", without his getting mandate from the electorate in the meanwhile.

As already noticed Article 164(4) in terms provides only a disqualification or a restriction for a Minister, who for any period of six consecutive months, is not a Member of the Legislature of the State to continue as such. It expressly provides that he shall on the expiration of that period cease to be a Minister unless he gets elected during that period by direct or indirect election. We must also bear in mind that no right is conferred on the concerned non-member Minister even during the period of 'six months' , when he is permitted to continue in office, to vote in the House. The privilege to vote in the House is conferred only on Members of the House of the Legislature of a State (Article 189). It does not extend to non-elected ministers He may address the House but he cannot vote as an MLA. None of the powers or privileges of an MLA extend to that individual. Though under Article 177, the individual shall have a right to speak and to otherwise take part in the proceedings of the Legislative Assembly, he does not carry with him the usual "free speech" legislative immunity as provided by Article 194(2). The individual cannot draw any of the benefits of an MLA without getting elected. All these disabilities also clearly go to suggest that 'six months clause' in Article 164(4) cannot be permitted to be repeatedly used for the same individual without his getting elected in the meanwhile. It would be too superficial to say that even though the individual Minister is a person who cannot even win an election by direct or indirect means, he should be permitted to continue as a Minister for a period beyond six months, without being elected at all and represent the electorate which has not even returned him!! It would be subversive of the principle of representative government and undemocratic. It would be perversion of the Constitution and even a fraud on it.

_________................................._____________.................................

Since we have held that reappointment of Shri Tej Parkash Singh as a Minister in the State of Punjab with effect from 23.11.1996 was invalid and unconstitutional, we consider it appropriate to observe, with a view to avoid reopening of settled matters, that this judgment shall not render any order made or action taken by Shri Tej Parkash Singh, as a Minister, after his reappointment to the Council of Ministers, as bad or invalid only on account of his reappointment as a Minister having been found to be invalid. This appeal, therefore, succeeds and is allowed in the terms indicated above with cost.

...................CJI ......................J ( R.C. LAHOTI ) ......................J ( K.G. BALAKRISHNAN ) August 17, 2001.

Govt introduces National Investigation Agency bill in Lok Sabha

December 16th, 2008 - 7:51 pm ICT by ANI

New Delhi, Dec 16 (ANI): The Government today introduced a Bill in Lok Sabha to formally set up a National Investigation Agency (NIA) and another legislation to strengthen laws against terror.

Introducing the Bill, Union Home Minister, P Chidambaram said there is need for setting up an agency at the Central level to investigate offences related to terrorism and certain other acts, which have national ramifications.

“The proposed legislation provides for security of state-friendly nations with foreign states and offences under laws enacted to implement international treaties, agreements, conventions and resolutions of United Nations and other international organisations,” he added.

He further said the Bills have been brought forward as the country has been the victim of large-scale terrorism sponsored from across the border.”

The Unlawful Activities (Prevention) Amendment Bill aims at strengthening the arrangements for speedy investigation, prosecution and trial of cases related terrorism.

The Bill provides for the setting up an agency at the Central level with powers to probe terrorism and other crimes having national ramifications across the country.

On Monday, the Union Cabinet approved a proposal to set up the NIA. The Cabinet also approved a proposal to amend the Central Industrial Security Forces (CISF) Act to make it more effective in dealing with modern day challenges. (ANI)

Satyam chief Raju in Hyderabad: Lawyer 8 Jan 2009, 1553 hrs IST, TIMESOFINDIA.COM

HYDERABAD: Beleaguered former Satyam Computer founder-chairman B Ramalinga Raju is in this city and has no intention to avoid the process of law, his lawyer S. Bharat Kumar claimed on Thursday.

“My client B. Ramalinga Raju is very much available in Hyderabad. He denies reports appearing in a section of media that he is absconding or has fled from the country,” Kumar said in a statement.

Kumar said Raju engaged his services to represent him in the legal matters pertaining to his statement to the Satyam board on Wednesday. ( Watch )

Earlier in the day, market regulator Securities and Exchange Board of India (SEBI), which has ordered a probe into the Satyam scam, on Thursday swung into action despatching its investigation team to Hyderabad, PTI reported.

The committee, headed by Sebi's southern region general manager A Sunil Kumar, has reached Hyderabad and will start the investigation soon, a senior official said.

Sebi formed the special team following the confession by the IT-major's disgraced ex-chairman B Ramalinga Raju on Wednesday admitting gross manipulations in the company's balance sheets in the past several years.

Raju could face arrest and serve 7-10 years in jail. He currently remains untraceable. ( Watch )

Earlier, sources in the Hyderabad police had said that Raju could have left for Texas on Wednesday morning from Hyderabad airport. Raju has not been seen in public ever since his confession, but TV reports suggested that he could have left for Texas.

There is a petition pending over his Maytas deal for which British Telecom's Solutions firm - U-paid had demanded presence of Raju and senior directors of Satyam for questioning by its lawyers.

According to another TV report, Raju may have also flown to Dubai.

Ramalinga Raju on Wednesday admitted to a Rs 7,000-crore fraud in the Hyderabad-based company and revealed that the balance sheet of Satyam had been inflated and that he would subject himself to the laws of the land.

On its part, the Hyderabad police said they would take action against him only if a shareholder or the regulator lodges a complaint. Raju had written a letter to the board giving details of the company’s balance sheet which has serious financial irregularities including inflated cash balances running into several crores of rupees.

The 54-year-old US MBA Raju's letter of guilt and resignation to the Satyam board and Sebi on Wednesday morning sledge-hammered India Inc, dumbfounded regulators, pummelled the company's stock, knocked the bottom out of the market, and cast a long shadow over industry in general and the IT sector in particular.

Satyam stocks took a serious beating yesterday with this latest news that has shocked investors. The stocks plunged by almost 80 percent at Rs 39 per share, at day close.

Ram Myanpati is acting as interim CEO of the company, who after expressing ``shock'', swung into damage control mode.

Satyam aims to continue business, protect staff 8 Jan 2009, 1816 hrs IST, PTI

HYDERABAD: Beleaguered Satyam on Thursday embarked on a major damage control exercise to pull itself from the brink, pushed to by founder

A press conference after the resignation of Ramalinga Raju, at Satyam campus in Hyderabad. (TOI Photo) More Pictures

Ramalinga Raju, saying arranging liquidity, assuaging fears of 53,000 employees and continuing the existing business would be its top priority. ( Watch )

Not ruling out initiating action against Raju or the auditors PwC for its complicity in fudging of accounts, the acting CEO Ram Mynampati said every possible action would be considered against Raju, who quit as chairman after making startling revelations on corporate India's biggest fraud entailing about Rs 7,800 crore.

Aimed at preventing panic exodus of highly talented workforce and top management, the interim CEO said that the December'08 salaries has been paid and the management would be focusing on arranging funds, which at the present juncture was a cause for concern.

"We do not rule out recommending action against Ramalinga. Many actions are possible for Satyam's future," he said, adding that the company was not aware of his whereabouts amid reports that the disgraced founder of the country's fourth largest IT company had left for the US yesterday before the news of his resignation and disclosure became public.

On the auditor PriceWaterhouseCoopers who have been authenticating year after year the company's accounts, which Raju admitted to fudging by inflating profits and creating fictitious assets, Mynampati said: "We have not verified what process PwC took to certify financial statement. We are not yet in touch with PwC."

In the middle of the press conference held by the interim management at Satyam's headquarters here, CFO Valdamani Srinivas, who is the financial custodian of the company, sent in his resignation but Mynampati said the Board would decide on it on January 10 and anyway he has to serve notice period.

Interim CEO Ram Mynampati declared that the liquidity and cash-in-hand were not encouraging, although the company managed to pay salaries for December month.

"Some outstanding payment to vendors is yet to be made... we are verifying the liquidity and balance sheet... we have to raise liquidity in near term and are confident of raising it," said Mynampati, while adding that his appointment was legal.

On the financial irregularities disclosed by former Satyam Chairman Ramalinga Raju, Mynampati said the team was not yet in a position to answer these issues, as it is still ascertaining disclosures made by Ramalinga Raju and trying to correct financial irregularities.

He said the regulatory bodies have already started their inspection and a team of market regulator SEBI was in Satyam talking to associates.

He said the company has started to actively reach out to customers globally and has been heartened to receive strong expressions of confidence and Readers react
support from them.

"Our top 100 clients account for 80 per cent of Satyam's revenues," he said, adding that the top priority would be to clear pending contracts and continue with the business as usual.

The company founded by Ramalinga Raju in 1987 received its worst shock yesterday when he disclosed what has now become the country's biggest corporate fraud involving about Rs 7,800 crore.

Satyam is in the process of finding new investment banker as soon as possible to pursue strategic options left with the company and also expand the Board, which is now left with only three members including Mynampati.

Shareholders would be consulted on whatever options there are before the company, he said to a question on whether the company would explore merging or being taken over.

Satyam may axe 10,000 employees: Report 8 Jan 2009, 2045 hrs IST, PTI

NEW DELHI: With a big questions mark on its cash position and a minimum outgo on salary estimated at Rs 500 crore a month, Satyam may lay off over 10,000 employees next month, says a recruitment

firm.

"It is most likely that Satyam will cut 10,000 jobs

next month as the company is left with no cash to pay the salaries. The current fiasco is likely to put pressure on salaries, which may reduce by 10 per cent due to the surplus of about 20,000 people in the jobs market," Headhunters India CEO Kris Lakshmikanth said.

Satyam interim CEO Ram Mynampati while admitting that the cash position is not encouraging, the company, however, has taken care of salary for December.

Lakshmikanth said till Tuesday evening there were about 7,800 people from Satyam who had posted their resumes on job sites and by Wednesday afternoon, it has gone up to 14,000.

The uncertainty about jobs is killingly painful for the 53,000 employees of Satyam, especially when the industry is going slow on recruitment.

Further, possibility of a takeover too looks distant as the accounting fraud done by the company would make it difficult for any firm to evaluate its correct market value, which is compounding the worries of the employees.

IT-BPO union Unites Professionals general secretary Karthik Shekhar said, "In case of any lay off at Satyam, we may take legal action."

"We have received over 7,000 hits since the news break. Yesterday, in one hour we have seen over 800 hits (no of people visiting the site) from Hyderabad. People have been enquiries on how the union can help them," Shekhar added.

Strong case against Ansals in evidence tampering: Court

Indo-Asian News Service

New Delhi, January 07, 2009

There was a strong possibility the Ansal brothers had provided a job to a court employee who was sacked for tampering with trial court records in the case of the Uphaar cinema fire tragedy at their behest, the Delhi High Court said on Wednesday.

"It is a strong circumstance against you (Ansals) that you provided employment after he (Dinesh Chand Sharma) was dismissed from his job," Justice S Muralidhar said while hearing a petition of the real estate tycoons challenging criminal proceedings against them for tampering with the evidence.

Senior advocate UU Lalit, appearing for Sushil Ansal, said the Ansal brothers are not directly connected with Sharma, who was allegedly responsible for tampering with judicial documents.

The Ansals approached the high court for quashing a trial court's Feb 15, 2008, order in which it had issued summons against them and four others for allegedly tampering with court evidence.

The Ansals pleaded that the proceedings against Sushil Ansal was illegal and should be stayed as an inquiry had said it was a case of misconduct.

Besides the Ansal brothers, the trial court had also initiated proceedings against P.P. Batra, Har Swaroop, Anoop Singh and Dharamvir Malhotra.

The two brothers have been lodged in jail since Septempber after their bails were cancelled by the Supreme Court.

The trial court had convicted the brothers in November 2007 for their complicity in the Uphaar theatre fire in which 59 cinegoers were killed on June 13, 1997. The two were sentenced to two years of rigorous imprisonment.

The high court in December reduced the jail term to one year each.

Raju quits Satyam; admits to financial wrong-doings

Press Trust Of India Hyderabad/Mumbai, January 07, 2009

Satyam Computer on Wednesday plunged into a deep crisis, as B Ramalinga Raju resigned as its Chairman after admitting to major financial wrong-doings and saying his last-ditch efforts to fill the "fictitious assets with real ones" through Maytas acquisition failed.

The beleaguered IT giant, already under scanner over the aborted acquisition of firms promoted by the Chairman's family, received a rude shock days ahead of its January 10 board meeting, with Raju stepping down along with his brother and Managing Director B Rama Raju.

"It was like riding a tiger, not knowing how to get off without being eaten," Ramalinga Raju said in a letter to Satyam's board of directors, wherein he listed major financial wrong-doings over the years to inflate the profits.

Listed at New York Stock Exchange, the company could face regulatory action in the US, analysts said.

While Raju recommended DSP Merrill Lynch be entrusted the task of "quickly exploring some merger opportunities," the company informed the stock exchanges that the investment banker has terminated its engagement with Satyam.

Noting that every attempt to eliminate gaps in balance sheet, purely on account of inflated profits over several years, failed, Raju said: "I am now prepared to subject myself to the laws of the land and face consequences thereof."

Low percentage of promoter equity in the company, where four independent directors resigned in the last two weeks over the acquisition fiasco, could lead to a takeover and expose the gap, he said in the letter, also sent to regulator SEBI. The promoters' share in Satyam has now dipped to just over 3 per cent that too is pledged with lenders.

Shares of Satyam plunged by over 40 per cent immediately after the announcement of resignations, necessitating an overhaul of the Board and management.

Raju will continue as Chairman till the Board finds a replacement, even as speculation was rife that Satyam President Ram Mynampati would take over as Chairman.

Rama Raju would also continue as Managing Director, but only till the time the Board is expanded.

Ramalinga Raju requested the Board to "hold together" to take some important steps, while hoping that one of the Board members T R Prasad was "well-placed to mobilise support from the government at this crucial time."

Satyam is the country's fourth largest IT firm and has has over 51,000 employees.

Giving details of the financial irregularities, Raju said the company's balance sheet as of September 30 carries "inflated (non-existent) cash and bank balances of Rs 5,040 crore (as against Rs 5,361 crore reflected in the books."

The balance sheet also carries "an accrued interest of Rs 376 crore which is non-existent, an understated liability of Rs 1230 crore on account of funds arranged by me (Raju), an overstated debtors position of Rs 490 crore (as against Rs 2651 crore reflected in the books," Raju said.

He further said that Satyam reported a revenue of Rs 2700 crore for the September quarter and an operating margin of Rs 649 crore (24 per cent of revenue) as against the actual revenue of Rs 2112 crore and an actual operating margin of Rs 61 crore (3 per cent of revenue).

"This has resulted in artificial cash and bank balances going up Rs 588 crore in Q2 alone," Raju said.

"The gap in the Balance Sheet has arisen purely on account of inflated profits over a period of last several years (limited only to Satyam standalone, books of subsidiaries reflecting true performance).

"What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years," Raju further said.

"It has attained unmanageable proportions as the size of the company operations grew significantly... The differential in the real profits and the one reflected in the books was further accentuated by the fact that the company had to carry additional resources and assets to justify higher level of operations thereby significantly increasing the costs," he said.

"The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones. Maytas' investors were convinced that this is a good divestment opportunity and a strategic fit. Once Satyam's problem was solved, it was hoped that Maytas' payments can be delayed. But that was not to be," he said.

Raju, however, claimed that neither he, nor the Managing Director(including our spouses) sold any shares in the last eight years-excepting for a small proportion declared and sold for philanthropic purposes.

Raju further said he or the company's MD did not take "even one rupee/dollar from the company and have not benefited in financial terms on account of the inflated results."

Giving alms at a traffic signal? You can be prosecuted

New Delhi, January 06, 2009

Ever helped a beggar at a traffic intersection? Or, for that matter, bought flowers or small items from vendors while waiting for the light to turn green? Well, for your information, both these actions are punishable.

Surprised? An ordinance issued in September 2002 empowers Delhi Traffic Police to prosecute drivers who offer alms or buy anything from vendors at traffic lights.

Violation of this direction entails a fine of Rs 100 for the first offence and Rs 300 for subsequent offences under Rule 22(a) of Rules of the Road Regulations, 1989, punishable under section 177 of the Motor Vehicle Act 1988.

Most motorists are not aware about this rule and the police also hardly take any action in this regard.

In 2008, the Delhi Traffic Police did not prosecute anybody under these sections. Said a senior police officer: "What is the use? We can take action against the motorists, but the beggar or the vendor remains there, he will trouble the next motorist. What are the civic agencies doing about it?"

Asks Purujit Singh, "If motorists do not patronize these beggars or vendors, they won't survive. Action needs to be taken against drivers first. The other day, I almost bumped into a beggar at the signal near Tibetan Market at Janpath."

The traffic police said no such record (of prosecutions) was available for 2008. "We focused more on visible traffic violations," said traffic police chief S.N. Shrivastava.