"On the basis of information available, the government finds a strong possibility of the affairs of these two companies having been conducted by its current management with fraudulent intent, breach of trust to the stakeholders, and persistent neglect of the obligations and functions."While it seems reasonable to assume that funds diverted from Satyam would have found its way to Maytas, the question that arises is - in what way is the current board performing its duties to the detriment of its shareholders. If it is, the government needs to explain how. If it is not, it appears that there is an arbitrary exercise of power by the government.
In fact, if the allegation that Maytas received funds owed to the shareholders of Satyam is taken to court, it is probable that the current Board will represent the interest of shareholders of Maytas better than a Government appointed board - that will take its instructions from Mr Gupta. This is the point I was seeking to make in my interview on CNBC on Friday.
The other allegation, made by EAS Sarma in the same interview, - that there was political patronage that helped Maytas in building its business - raised the hackles of Mr. Gulabchand. More so since I pointed out that there cannot be any company involved in the real-estate and infrastructure space that would not have been the beneficiary of political goodwill.
Most systemic clean-ups happen when there is a scam. The financial markets were cleaned up with the setting up of SEBI and the NSE - when the BSE had become dysfunctional and was working for brokers more than investors. One can only hope that the current scam leads to a clean up - not only in the bankruptcy laws of the country - but more importantly, in the clean up of the real estate markets and the appointment of a regulator for the sector. A well functioning real estate market has the potential to unleash huge economic potential while simultaneously bringing a large part of the unaccounted economy above gound.
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