A decade after Satyam Computers Chairman B Ramalinga Raju wrote that fateful letter addressed to his board members confessing the deliberate discrepancies in the audit books of the company, similar instance surfaces in the case of Café Coffee Day.
What happened to Café Coffee Day?
Café Coffee Day founder-owner VG Siddhartha, who is the son-in-law of the former Chief Minister of Karnataka SM Krishna wrote a similar letter to the board members before he went missing.
A letter has surfaced in media on Tuesday allegedly from the CCD owner, India Ahead News in any way does not endorse or vouch for the authenticity of the letter. In the letter VG Siddhartha apologized to the board members and confessed that he had failed to create a right profitable business model despite his best efforts.
He said in the letter “I fought for a long time but today I gave up as I could not take any more pressure from one of eth private equity partners forcing me to buy back the shares, a transaction I had partially completed six months ago by borrowing a large sum of money from a friend. Tremendous pressure from the other lenders, lead to me succumbing to the situation.”
“There was a lot of harassment from the previous DG income tax in the form of attaching our shares on two separate occasions to block out Mindtree deal and then taking position of our Café Coffee Day shares, although the revised returns have been filed by us. This was very unfair and led to serious liquidity crunch,” he added.
Taking the entire responsibility of all the transactions VG Siddhartha said it is only him that is accountable for all this and not any of his auditors or the management. Café Coffee Day currently bears a debt burden of 6,550 crore as on March 2019.
What happened during Satyam Computers case?
Ten years ago in a big blow to the markets, Satyam Computer Services Chairman B Ramalinga Raju wrote a similar letter to its board members that began with lines- “It is with deep regret and tremendous burden that I am carrying on my conscience that I would like to bring the following facts to your notice”
Ramalinga Raju informed in the letter that he overstated cash and bank balances of Satyam to the tune of Rs 5,040 crore as on 30 September, and that he showed non-existent interest earnings of Rs 376 crore. He even invented debtors who owed 490 crore to Satyam Computers.
All this he said was done for the company to maintain the investor confidence and that neither he nor the Managing Director took a rupee/dollar from the company and has not benefitted financially due to inflated numbers.
What happened after Satyam was exposed?
Satyam crisis was a wakeup call for the industry and the governments alike as to how things can go wrong within the existing regulations. The move triggered a slew of measures taken by the government including addition of several provisions to the Companies Act 2013.
The government undertook reforms in corporate management by making the presence of independent directors on the Board mandatory to safeguard the interests of the minority shareholders.
Stringent measures were taken in Auditing field, and licenses of auditors were cancelled by ICAI if indulged in such discrepancies and fraudulent practices.
A whistleblower policy was added into the Companies act 2013 in public interest.
Despite all these measures the corporate mismanagement is a cause of serious concern. On one hand the financial system is burdened by the Non-performing Assets and willful default of loans by fugitive economic offenders like Nirav Modi and Vijay Mallya.
On the other hand people like Café Coffee Day founder-owner VG Siddhartha and Satyam Chairperson Ramalinga Raju who own up their mistakes though too late and take the moral responsibility for their actions.
What is the way forward?
The government needs to set up a committee to review the situation and suggest measures to be undertaken for effective resolution of such troubled entities. Loopholes in the existing regulations that allow these discrepancies need to be plugged. There is a need for more democratic management of corporate entities.