INDIAN POLICE have arrested the former chairman and the chief executive of Satyam Computer Services, the outsourcing company at the centre of a $1 billion fraud, as the affair triggered wider falls in share prices.

B Ramalinga Raju, Satyam’s former chairman and founder, was detained yesterday on charges of cheating and forgery. B Rama Raju, his brother and co-founder, was arrested on charges of criminal breach of trust, criminal conspiracy, cheating, falsification of records and forgery, police said.

The arrests came as the scandal afflicting India’s fourth-largest outsourcing company threatened to create contagion in the stock market, with investors selling off real estate stocks. Earlier, Prem Chand Gupta, minister for corporate affairs, said he had dissolved Satyam’s board and would appoint new directors.

The government has faced heavy criticism for its delayed response to the scandal, which is being described as “India’s Enron”.

The scandal is risking confidence in the country’s information technology outsourcing industry. – (Financial Times service)