Two days after shocking the country by admitting to Rs 7,800-crore fraud, Satyam [Get Quote] founder Ramalinga Raju and his brother Rama Ramju were arrested on Friday night as part of the crackdown by state authorities and the central government, which disbanded the tainted IT firm's board on a day of fast-paced developments.

Complete Coverage: The Satyam fiasco

Fifty four-year-old Raju, who stepped down as Chairman after admitting to the fraud on Wednesday, and Rama Raju, who resigned as CEO and MD of the company, were arrested by the police on charges of criminal conspiracy, cheating, forgery, misappropriation of funds and criminal breach of trust.

Director General of Police S S P Yadav said that the company's Chief Financial Officer Valdamani Srinivasan would be arrested on Saturday.

Yadav said Raju was booked under various sections of IPC that include criminal breach of trust, cheating and forgery. All the sections, under which the FIR has been filed against the two brothers, are non-bailable.

The police continue to interrogate Ramalinga Raju and his brother at the Director General of Police office well past the mid-night.

Director CB-CID V S Kaumudi told media persons outside the Director General of Police's office that the cops would seek custody of the brothers when they are produced before the court on Saturday. He said they were arrested on the basis of a complaint filed by an investor.

Raju, whose whereabouts were a matter of speculation ever since he made the startling disclosure on Wednesday about the Rs 7,800 crore financial fraud, had been in hiding and was summoned to appear before the SEBI on Saturday.

Commenting on the decision of Raju to surrender, senior partner of the law firm Titus and Company, Diljeet Titus said, "By taking the decision, he (Raju) is trying to mitigate his penalty and reduce the term of conviction."

He further said that 'on the basis of his January 7 letter, the government can initiate civil and criminal action against him. It is a letter of confession'.

The government, Titus said, can file a supplementary FIR as well in the case.

Raju has been booked under the sections of IPC that include 120-B, 409, 420, 468 and 471. These sections pertain to criminal conspiracy, criminal breach of trust, cheating, forgery and using forged documents as genuine. Under these sections, he can face imprisonment up to 10 years and fine.

Earlier this evening, the government disbanded the current board of Satyam Computer and announced that it would nominate 10 directors on its board.

Corporate Affairs Minister Prem Chand Gupta said in New Delhi that the names of the new members would be announced soon for the board, which would meet in the next seven days.

The existing board of the company was scheduled to meet on Saturday to discuss the crisis that has engulfed the company and its over 50,000 employees.

Founder of Satyam B Ramalinga Raju, who has been summoned by market regulator SEBI on Saturday, had resigned as Chairman after disclosing staggering financial fraud. Five other directors had also resigned leaving the strength only at three.

Announcing the decision, Corporate Affairs Minister Prem Chand Gupta said: "The current board ceases to exist and there would not be any meeting on Saturday. The new board will meet in the next seven days."

The government's decisive action came nearly 60 hours after the startling disclosure by Raju, presumed to have strong political friends, that put the company and its over 50,000 employees fate in limbo.