SEBI order dated November 2, 2018 (‘New Satyam Order’) modified its previous orders in the matter of Satyam Computer Services Limited (‘Satyam’), in respect of B. Ramalinga Raju, B. Rama Raju, B. Suryanarayan Raju, and SRSR Holdings Private Limited (collectively, the ‘Satyam Noticees’). In the previous orders, the Satyam Noticees had been restrained from trading in the stock market for a certain period and had been directed to disgorge wrongful gains made by them, inter alia, by falsifying financial statements of Satyam and committing insider trading in Satyam’s shares.

The key legal issue involved in the New Satyam Order was whether the benefit of ‘intrinsic value’ can be given to the Satyam Noticees while computing the disgorgement amount (by deducting the ‘intrinsic value’ of shares from the receipts from sale of such shares in order to arrive at the illegal gain). SEBI, relying on its previous decisions, held that the Satyam Noticees should not be given the benefit of discounting the intrinsic value, as it would amount to conferring undeserving benefits and may act as a moral hazard rather than as a deterrent. Therefore, only the acquisition cost and statutory dues were deducted from the sale proceeds to arise at the disgorgement amount.

SEBI also considered the point in time from which interest may be levied on the disgorgement amount. Relying on a previous decision of the Supreme Court (‘SC’) on this question, SEBI reiterated that interest could be levied right from the inception of the cause of action (i.e. date of commission of the fraudulent actions). However, SEBI did not interfere with its previous orders in this matter which had levied interest on the disgorgement amount from January 7, 2009, being the date on which Mr. Ramalinga Raju confessed that he had committed fraud with respect to Satyam’s books of accounts.