Indian business executives detained on fraud charges
Damar Harsanto, The Jakarta Post, Jakarta
The top two executives of Indian software company Polaris Software Laboratories Ltd. have been detained by police investigating fraud allegations, National Police said Tuesday.
"The two men were detained after police received a complaint lodged by Bank Artha Graha over embezzlement and deception committed by those businessmen," National Police deputy spokesman Sr. Comr. Zainuri Lubis said.
Zainuri said Arun Jain, the chief executive of Polaris, and company vice president Rajiv Malhotra were being investigated for alleged embezzlement and deception under the Criminal Code.
The charges carry maximum jail sentences of four years.
Zainuri could not provide detailed information about the alleged offenses, saying police were still investigating.
"We have not reached any conclusion in the case, whether it is merely a business dispute resulting from negligence, which can be settled under civil law, or if it is purely a criminal case," Zainuri told The Jakarta Post.
Zainuri said the businessmen were in custody at the National Police Headquarters' detention center.
Meanwhile, Dow Jones Newswires quoted a source as saying that Polaris had sent its senior executives to Jakarta last week to resolve technical problems involving the implementation of a new software system at Bank Artha Graha, a Jakarta-based, medium- sized bank owned by an Indonesian Army foundation.
Polaris has a US$1.3 million contract with Bank Artha Graha to install a software system at the bank.
Bank Artha Graha management, angry over problems with the system, terminated the contract on Nov. 27, demanding immediate repayment of $660,000 it had already paid to Polaris, and a further $10 million in compensation, the source said on condition of anonymity.
The company offered to take the dispute to arbitration in Singapore, which is allowed for in the contract, the source added. Later, Bank Artha Graha management called the police to arrest the men.
In a filing with the Bombay Stock Exchange Monday, Polaris said it is petitioning Indian government officials to secure the release of the company's management.
Meanwhile, AFP reported that a senior Indian diplomat would visit the Ministry of Foreign Affairs to seek the businessmen's release.
The case is likely to renew concern over the country's weak legal system, which has partly deterred foreign investors from returning to Indonesia.
In June this year, the local unit of Canada's giant insurer Canada Manulife Corp. was controversially declared bankrupt by a Jakarta court after a dispute with a former local partner.
The decision dealt a serious blow to foreign investor confidence here. The court ruling was later overturned by a higher court following pressure from the Canadian government.