‘There Is No 100% Guarantee’

Since the Satyam accounting scandal came to light this January, the ministry of corporate affairs has been in a tizzy. It has been accused of being too lax in regulation. It has also been blamed for over-regulation. Minister for corporate affairs Salman Khurshid spoke to Pragya Singh on what has changed after the scam. Excerpts:

Why haven’t prosecutions started in the Satyam case?

All is on course. The Enforcement Directorate has not given a deadline either way as far as prosecution goes. The basic material the government needed—including financial data from Satyam—is now ready. Coordination meetings have been going on for the last couple of days with different agencies and the Andhra Pradesh government. We had asked the solicitor general for some clarifications before prosecution could begin. When it will finally begin is really for the state government to answer.

What are the queries for the solicitor general?

Several, but most importantly we wanted his legal opinion on whether Ramalinga Raju and others can be tried in only one court or in different jurisdictions where the frauds have been committed or complaints have been made.

You say the basic facts are ready. Was the fraud a result of systemic errors or the personal greed of one person?

What has happened is, steps taken to prevent frauds have not been able to do so. Despite preventive measures, there has been a fraud. But that doesn’t mean that if we didn’t take those preventive measures, a fraud wouldn’t happen.

What about the systemic issues?

The new (Companies) Bill will have a clear early warning system in place to detect frauds before they happen—but even that may not be a 100 per cent guarantee against fraud. In addition, a model is ready for the fraud prevention system that SEBI is putting in place as a pilot project. We’ll get feedback on this pilot. We also want company boards to have greater confidence and accountability, that’s what the Companies Bill will try and do. The independent directors’ greater confidence is good for the government and good for shareholders.

The accounting standards bodies have said that there should be an independent audit oversight body and results of companies must be declared differently—in a ‘segmented’ way. Will the government agree to these proposals?

We are thinking about this, we have a range of opinions and proposals on this subject. Give me till November to decide about the need for the oversight body and the segmented accounts. We’ll definitely decide by this November.