'We Will Put More Emphasis On Stringent Norms'

Corporate India’s reputation has been scathed by the Satyam Computer Services fiasco andunion minister for company affairs, Prem Chand Gupta, is trying hard to limit the damage. Gupta speaks to Outlook Business’ Sebastian PT about the Satyam ‘aberration’and how the stringent provisions in the New Companies Bill will help plug many loopholes. Excerpts:

Many find it hard to believe former Satyam chairman B Ramalinga Raju’s claims that accounts were only inflated. What is your take?

There seems to be a case of siphoning off funds and the numbers in the balance sheet (of Satyam) do not appear to be correct. But at this moment (as on January 17, 2009), I wouldn't want to comment more as the SFIO (Serious Fraud Investigation Office) is investigating the case. We are determined to get to the truth and the SFIO has been told to submit its report within three months.

Does the Satyam scam point to a failure of India's company laws? Do you think the proposed International Financial Reporting Standards can prevent such fiascos in future?

The International Financial Reporting Standards will be applicable from April 1, 2011. It can't be implemented overnight because we have to give a lot of time to our corporate sector, institutes and chartered accountants to familiarise themselves with the IFRS requirements. However, if someone has made up his mind – just like a suicide bomber – to commit a fraud or a scam, then he will just do it. It is difficult to check such people. We are not saying that the government will do nothing:we do have to take the necessary precautionary measures. It is a lesson for us to learn. We will put more emphasis on stringent norms that will seek more transparency in a company's reporting system and our corporate sector should also self-regulate with more accountability.

Even the new Company Bill that has been tabled in Parliament provides more scope for self-regulation by companies. Post-Satyam, do you think such provisions warrant a re-look?

The new Companies Bill is pending in Parliament and is with the Standing Committee on Finance and Corporate Affairs. The honourable Committee consists of eminent persons and, before they finalise their report they take views from various stakeholders, experts and chambers of commerce so as to include different possible precautions. So, whatever is left out (in the Bill) would be taken care of after we have received the final note from the Standing Committee.

We have tried to keep a balance by giving the corporate sector more autonomy and freedom on one hand while defining obligations on the other. That means, while they will not be required to come to the government for permissions, they will have to come up with more declarations and transparency in reporting. We have also prescribed that one-third of the board of a listed company should consist of independent directors, who are persons of repute.

Also, the penal provisions have been strengthened and are more stringent. The penalty can be as high as the offence and loss value. There is a provision for special courts for speedy trial and many of the offences that are at present in the list of 'compoundable offences' have been removed in the new Companies Bill and have been put in the list where there can be no compounding and they would have to face the process of prosecution.

Many fear that the Satyam scam isn't an isolated case and there are many similar scams, across sectors, which may erupt any time. Comment?

I personally feel that Satyam is an aberration. I feel that our corporate sector is mature enough not to commit such things.

Do you think that the Institute of Chartered Accountants of India (ICAI) is doing a proper job? Government revenue officials say that they do point out auditors who cook books to the ICAI, but the regulator only looks the other way.

ICAI is an independent entity and has been formed by a parliamentary Act. We have, through amendments to the Chartered Accountants Act in 2006, made the necessary changes for the better functioning of the body. They are capable enough to take a view on any complaint. ICAI should be able to take a quick decision on all cases, including Satyam.

But recent media reports said that the Income-Tax Department found ICAI itself violating auditing norms and certain exemptions had to be withdrawn…

I can't commit on this.

What are the damage-control measures taken by you to salvage Corporate India’s reputation in the wake of the Satyam saga?

The quick action taken by the government in appointing six eminent persons to the Satyam board has been appreciated by all. In fact, the actions taken by the government and SEBI in a co-ordinated manner have bought credit to the whole episode. This has sent across the right message and I have been getting calls from the US and other countries appreciating our efforts.

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