The scam-hit Satyam Computer founder B Ramalinga Raju, brother Rama Raju and ex-CFO Srinivas are in "protective custody", former Securities and Exchange Board of India (SEBI) Chief M Damodaran said here today.
He was replying to a query during a seminar of 'Venture Capital-Leverage' at IIM-A on inability of SEBI to question Ramalinga Raju due to some alleged legal restrictions.
Referring to his definition of protective custody, Damodaran said, "This is a peculiar case in which the police produced a person before the court and was granted judicial custody, not police custody."
Normally, cops insist for police custody in order to talk to them first and extract vital details. That is why they arrest people, he added.
"Instead, the police happily handed them ovr to judicial custody, so that SEBI needs to get court's permission first," Damodaran said.
"That is why I say that Ramalinga Raju, his brother Rama Raju, and Chief Financial Officer (CFO) Vadlamani Srinivas are in protective custody," he added.
"I don't know how the law will help when the state decides to provide protective custody," Damodaran said.
Referring to media reports, Damodaran said, "I read in some newspapers that they are availing mosquito nets, I don't know how brave the mosquitoes are to go near him."
What the courts did is another story, he added.
"The lower court took a preposterous position that it was not a court that handles cases related to securities law. The SEBI application did not say that a case of Securities Law needed to be judged by that court."
"All that it said is that there is this gentlemen who is in your custody we need to talk to him to find out that his violations are of the law that we administer," Damodaran said.
"We (SEBI) are not saying that as and when the case is ready we will bring it to this court, so the jurisdiction of that court to decide the securities law case was not a factor. Yet that judge chose to say that he needs to find out the right forum," he added.
"The High Court went one step further and decided to serve notice," he said adding, "Here is a man who has confessed to a crime and nevertheless the confession is in public domain, but you say that I need to talk to this guy to find out what is that this man has done and to gather evidence."
"And the court says we will issue him (Raju) notice to check out whether a dialogue can take place or not and he has any objection in talking to you (Sebi)," said Damodaran.
On whether their is a need for change in regulations post the Satyam scam, the former SEBI chief said the model of audit adopted by the Indian public sectors banks is the best and is recommended for the corporate world.
"The model of audit adopted by the Indian public-sector banks happens to be the best as they have more than one auditors at any one point of time," Damodaran said.
"PSU banks overlap auditors so that at any point of time there is one who is doing audit for (the) last four years and there is also someone who is in his first or second year," he said, adding, "So even when a company phases out the older one, the other one doing audit for last two years can takeover and is familiar with company's practices."
According to Damodaran, after the Satyam scam, the corporate world will see several paragraphs of disclaimers in the reports.
"It's not only the auditors, but also corporate lawyers who are proposing to put additional disclaimers," he said.
"This is the kind of dangers we need to safeguard against hereinafter" he added.