US law firm open to settle Satyam case out of court

18 Apr 2009,ET Bureau

MUMBAI: US-based law firm Vianale and Vianale, which filed a class action suit on behalf of shareholders of Satyam’s ADR, has said it is open to an out-of-court settlement. The firm has claimed $500 million from Satyam and the former board directors of the company.

Kenneth Vianale said that once the Manhattan Court appoints a lead counsel for the case, it could explore the opportunity of settling the case outside of court, if the management of Satyam was willing. However, a Tech Mahindra official refused to comment stating it was too early to discuss this.

Lawyers are of the opinion that an out of court settlement might be a win-win situation for both parties as Satyam could ease off the legal liabilities against itself, while the ADS holders would not have to fight a long drawn battle.

“The American shareholders know that it may be not advantageous to prolong the case in the court and for Satyam too they would want to wrap up the case as quickly as possible to avoid any uncertainty on the liabilities of the company,” said Vyapak Desai, who leads Litigation and Dispute Resolution Practice at Nishith Desai Associates.

If the company is found guilty of the charges alleged by the US shareholders, the judgement passed by US courts might not be of much significance in India. “It would be very difficult to automatically enforce the US judgement in India as decree passed in India due to lack of reciprocity on enforcement of judgements between India and US,” said Mr. Desai.

While the US law firm maintains that Satyam is still liable to pay for damages, the company’s lawyers say that Satyam’s former board of directors and auditors are accountable for the fraud committed.

“The legal liabilities are complex. They will first fall on the promoters, the original board of directors and the auditors. Tech Mahindra shareholders of the company are not liable for the misdeeds of the promoters,” said Pallavi Shroff, partner at Amarchand & Mangaldas & Suresh A Shroff & Co.

The Company Law Board had on Thursday approved of the selection of Venturbay Consultants Private Limited, a subsidiary controlled by Tech Mahindra as the successful bidder to acquire a 51% controlling stake in the Company for Rs 2889 crore.

On January 7, 2009 Satyam’s promoter and CEO Ramalinga Raju had written to the Satyam Board of directors and Sebi stating that he had overstated Satyam’s financial accounts.

According to the letter, Raju admitted to having inflated the amount of cash on the company’s balance sheet by nearly $1 billion, incurring liability of $253 million on funds arranged by him personally and overstating Satyam’s September 2008 quarterly revenues by 76% and profits by 97%