Case: Cbi Hyderabad Vs. Subramani Gopalakrishnan

(a) On 07.01.2009, B. Ramalinga Raju (A1), the then Chairman of M/s Satyam Computer Services Limited (in short M/s SCSL) addressed a confessional letter to the Board of Directors revealing certain financial irregularities in M/s SCSL. As per this letter, the balance-sheet as on 30.09.2008 showed inflated (non-existent) cash and bank balances of Rs. 5,040/- crores, an accrued interest of Rs. 376/- crores which is non-existent and an understated liability of Rs.1,230/- crores on account of funds arranged by him and an overstated debtors position of Rs. 490/- crores (as against Rs. 2,651/- crores reflected in the books). He also revealed several other factual details which resulted an increase in artificial cash and bank balances(b) He also revealed several frauds and cooking books of accounts ever happened in Indias corporate history. Due to the fraud on the part of the persons in Management including the Financial Advisors, Auditors, etc., many investors suffered loss and on the complaint of one of such investors, a First Information Report (in short FIR) was registered on 09.01.2009 by the Andhra Pradesh State Crime Investigation Department against the then Chairman, Directors and Auditors of M/s SCSL and others under Section 120-B read with Sections 409, 420, 467, 468, 471 and 477A of the Indian Penal Code (in short `IPC). Considering the magnitude of the offence, investigation was entrusted to the CBI and a regular case being RC.No.4(S)/2009 was registered by the CBI, Anti- Corruption Branch, Hyderabad, on 20.02.2009(c) Due to fudging of the company accounts and manipulation of records by showing incorrect and inflated figures in the balance-sheets by the Chairman, M.D. and other Directors of the Company which were certified by the Auditors, the value of the shares of the Company suddenly dropped causing huge financial loss to the shareholders. The drop in the value of the shares was due to dishonest and fraudulent acts committed by the aforesaid functionaries, who were managing the affairs of the Company and were associated with its functioning and day-to-day affairs4) With the above brief facts, let us consider the allegations leveled against the Respondents herein (A4 and A10) and the role played by themThe role of S. Gopalakrishnan (A4), Partner and In-charge of M/s Price Waterhouse in CC 1/2010:(a) He affixed his signature on the financial statements as partner of M/s Price Waterhouse, the Statutory Auditors for M/s SCSL from the financial year 2001 till 2007(b) He was a partner in the firm `M/s Price Waterhouse, Bangalore and not in `M/s Price Waterhouse(c) In the agreement entered into between M/s SCSL and M/s Price Waterhouse, instead of affixing his signature, he signed as `M/s Price Waterhouse which is contrary to the established practice and procedure(d) By virtue of his status as a Statutory Auditor, it is incumbent on his part to verify the bank balances and FDRs claimed to be held by M/s SCSL besides other investments, liabilities and sales of the Company before certifying the statutory Audit Report which forms the basis of Annual Financial Statement of the Company(e) The presentations made by him to the Audit Committee about the health of the Company were misleading(f) As a consideration for his acts in accommodating the accused persons, he received an exorbitant audit fee from M/s SCSL over and above the market rate which reflects a quid pro quo arrangement(g) Letters generated on the letter-heads of M/s Price Waterhouse were recovered from the computer systems of M/s SCSL. These letters were supposed to be written by the Auditors addressed to the banks seeking confirmations about the balances(h) Though deficiencies were found in Information Technology General Check, no substantial and elaborate examination of the financial accounts was conducted by him(i) Control deficiencies identified in the integrated audit were not brought to the notice of the Audit committee(j) The above overt acts of A4 reveal the offences punishable under Section 120-B read with Sections 420, 419, 467, 471 and 477A of IPC5) The role of Sri S. Gopalakrishnan (A4), in CC 3/2010:(a) He failed to comply with the Audit & Assurance Standards while conducting Statutory Audit in case of M/s SCSL(b) He failed to point out the existence of forged and fabricated invoices in the Invoice Samples(c) As a quid pro quo for his role he received very high remuneration(d) The above overt acts of A4 reveal the offences punishable under Section 120-B r/w 420, 471 & 477A IPC. The role of Sri V.S. Prabhakara Gupta (A10), Head Internal Audit, M/s SCSL in the Supplementary Charge-sheet:(a) He was the Associate In-charge - Internal Audit and was the Global Head of Internal Audit of M/s SCSL during the relevant period of time(b) He had intentionally not included auditing of Oracle Financials (OF) in the Internal Audit Plan of M/s SCSL till 2007 even though the system was operational since 2002(c) He intentionally submitted a prioritization plan to the Audit Committee for postponing the audit of many items including Oracle Financials citing several irrelevant reasons(d) With regard to anomalies pertaining to the invoices no correctional measures or follow up action was taken(e) He did not properly follow up for the restoration of the access to the offshore books of accounts for the Internal Audit team(f) He intentionally flouted the laid down procedures mentioned in the Internal Audit Manual(g) The above overt acts of A10 reveal the offences punishable under Section 120-B r/w Section 420 IPC.

Reasoning: we are unable to accept the stand of the learned counsel and hold that the High Court is not justified in granting bail for him21) It is also relevant to note that there is difference between yardsticks for cancellation of bail and appeal against the order granting bail. Very cogent and overwhelming circumstances are necessary for an order directing the cancellation of bail already granted. Generally speaking, the grounds for cancellation of bail are, interference or attempt to interfere with the due course of administration of justice or evasion or attempt to evade the due course of justice or abuse of the concessions granted to the accused in any manner. These are all only few illustrative materials. The satisfaction of the Court on the basis of the materials placed on record of the possibility of the accused absconding is another reason justifying the cancellation of bail. In other words, bail once granted should not be cancelled in a mechanical manner without considering whether any supervening circumstances have rendered it no longer conducive to a fair trial to allow the accused to retain his freedom by enjoying the concession of bail during the trial. We have already pointed out that the issue before us is not for cancellation of bail granted earlier, the question is whether in the facts and circumstances of the magnitude of the scam, the bail granted in favour of all the main accused have been cancelled and the Respondent Nos. A4 and A10 being external and internal auditors respectively, their role being paramount in inflating processing assets and bank balances of M/s SCSL, we are of the view that the High Court is not justified in granting bail22) In view of the specific allegation by the prosecution that A4 and A10 were party to the criminal conspiracy showing inflated (non-existent) cash and bank balances reflected in the books, inflated proceeds over a period of last several years, frauds and cooking books of accounts, we are satisfied that the High Court ought not to have granted bail to these respondents. Considering the subsequent order of this Court dated 26.10.2010 cancelling the bail in respect of other accused and issuing directions based on which the trial has to be concluded within the schedule time, viz. 31.07.2011, we hold that the High Court committed an error in granting bail to these respondents A4 and A10