Satyam had to file suit before merger with Tech Mahindra

The civil suit filed by Satyam against its former board of directors, employees and auditors is seen as key to keeping the liability on the alleged wrong-doers alive as the company prepares for merger with Tech Mahindra.

“It is a legal necessity. Once the merger process is triggered and the proposal goes through, the company would never get an opportunity to keep the issue live and hope to recover some monies from the former board of directors and other associates,” a source said, pointing out that Satyam as an entity will cease to exist after the merger.

Satyam is said to be at an advanced stage of pursuing the merger and an application in the court would always give the combined entity legal authority to pursue the case against the former management.

Some also believe the Mahindras would lose their right to sue the wrongdoers on completion of three years of taking over the company due to issues related to limitation, though this was not confirmed by those tracking the developments closely.

“Only a few contracts would be covered under this and we are not sure how many of those named as defendants would come under the clause of limitation,” said the source.

Interestingly, Satyam is believed to be claiming damages to the tune of over Rs1,000 crore by putting together the payouts it had made in various litigations including Upaid and SEC.

“For now, the payouts are quantifiable to the tune of about Rs250 crore. However, it would be in excess of Rs1,000 crore once the settlements that have been reached with various parties are fully paid. So, without quantifying the exact damages, the company would reserve a right to bring the fresh payouts to the notice of the court subsequently,” said the source.

The company would also seek damages on intangibles, including reputation and customers, primarily due to the fraud committed by the company’s founder B Ramalinga Raju and his associates.
According to sources, the civil suit filed in Hyderabad court on Monday included about 123 people as defendants including the three accused in the case — B Ramalinga Raju, his brother B Rama Raju and former CFO Vadlamani Srinivas. Ram Mynampati, who played a key role in managing the company after the arrest of the Rajus only to fly away to the US later, has also been named as a defendant.