Satyam's old directors may be kept out of other boards too

NEW DELHI: The government is set to disqualify all the nine directors of the superseded Satyam Computer Services board from sitting on the boards of other companies in the country, a senior official of the ministry of corporate affairs, who asked not to be named, told ET.

That means Satyam���s disgraced founder Ramalinga Raju���s brother B Rama Raju and all independent directors, who were previously on its board, have to step down from the companies where the hold board positions now, and would be barred from taking up future board positions.

The ministry would request the Company Law Board (CLB) to examine if these persons are fit enough to sit on the board of any other companies in the country, said the official. Section 388 B of the Companies Act empowers the government to move CLB to disqualify a director who failed in his duties as a director in one company from sitting on the board of any company.

However, the move to permanently bar these people will have to be supported with evidence of wrong doing or negligence. For this, the government has to wait till the findings of ongoing investigations.

The independent directors on the previous board included former Cabinet secretary TR Prasad, technocrat Vinod Dham, academician M Rammohan Rao, Naval Research Board chairman VS Raju and management consultant Mangalam Srinivasan.

Ramalinga Raju���s brother B Rama Raju and professor Krishna Palepu were the other directors, besides Ramalinga Raju.
The existing Companies Act, 1956, does not distinguish between an executive director and an independent director, making both equally liable for the company���s offences.

However, independent directors can tell the court that they are not involved in the day-to-day affairs of the company and therefore, cannot be held responsible for the actions of the promoters or other executives. The new Companies Bill, which the government recently placed before the Parliament, addresses the issue by defining ���key managerial persons��� responsible for legal compliance of a company. This include the CEO, managing director, chief financial officer and company secretary.

The board position that B Rama Raju holds in other companies could not be immediately ascertained. His son Rama Raju junior is on the board of Maytas Properties and is the vice-chairman of the company.

Mangalam Srinivasan, who was the longest-serving independent director in Satyam, was the first to resign from the board on December 25, 2008.

Ms Mangalam is a board member of Technology Frontiers (I), as per news reports that could not be immediately verified.

Academician Mendu Rammohan Rao, another independent director on Satyam���s previous board, was the Dean of the Indian School of Business, and was on the board of many companies like Bharat Electronics, Mazagon Docks, Moschip Semiconductor Technology and Krishna Fabrications. Mr Rao has stepped down from his positions in Bharat Electronics, ISB and the selection panels for RBI deputy governor and Sebi chairman.

Another independent director Vinod Dham, who resigned from the Satyam board on December 29, 2008, is an inventor and venture capitalist. According to BSE website, Mr Dham is on the boards of Hellosoft, Montalvo Systems and Newpath. He recently resigned from the board of Sasken Communication Technologies, where he was an independent director.