Last week Ramalinga Raju, one of India's ten richest men, was enjoying the lifestyle to match his $1.3 billion fortune; yesterday he shared a holding cell with 40 other inmates and only one Indian-style squat lavatory among them.

As “how-the-mighty-fall” contrasts go, it could hardly have been more dramatic.

Mr Raju, the founder and chairman of Satyam, the giant Indian software company, spent the weekend in jail in the southern city of Hyderabad after admitting that he had orchestrated the country's biggest corporate fraud.

Confessing to a swindle worth at least $1 billion (£660 million), he said that he had wildly inflated the company's profitability and assets for years.

B. Rama Raju, Mr Raju's brother, was also arrested on charges of criminal breach of trust, criminal conspiracy, cheating, falsification of records and forgery.

The Indian Government appointed a new board at Satyam yesterday as the authorities scrambled to salvage the country's reputation for sound corporate governance in the wake of its biggest business scandal.

The three new directors are one of India's most prominent bankers, an IT expert and a former regulator.

The swiftness of their appointment underscored the level of concern in Delhi over damage caused to India's image by the scandal, experts said.

When the fraud was unveiled on Wednesday, India's benchmark Sensex index fell by 7.25 per cent in a single session, a steeper drop than that which followed the Mumbai terror attacks in November.

The new directors — Deepak Parekh, chairman of HDFC, India's second-largest private sector bank; Kiran Karnik, former president of the National Association of Software and Service Companies, the technology lobby group; and C. Achutan, a former official at the Securities & Exchange Board of India — are expected to meet tomorrow.

It is not clear whether they will fight to save Satyam, which is said to employ 53,000 people, wind it up or search for merger partners.

Analysts said that the course of action would be dictated by the extent of Mr Raju's deception.

PricewaterhouseCoopers, which had audited Satyam's accounts for seven years, has said little, but a crisis team made up of several senior executives has hurried to India.

Institutional investors are aghast that Mr Raju was apparently allowed simply to overstate the amount of cash in the company's accounts by $1 billion.

On Saturday, Vadlamani Srinivas, the former Satyam chief finance officer, was arrested.

The move came after Indian officials and investors said that they doubted Ramalinga Raju's assertion in a confessional letter released on Wednesday that he alone was responsible for the fraud.

Angry investors are seeking compensation, both in India and in the United States, where Satyam was listed on the New York Stock Exchange and where several class-action suits have already been filed against the company and its senior management.

The company was valued at $330 million at Friday's stock market close, a fall from more than $7 billion six months ago.

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts