Consumer body rejects Satyam shareholders' compensation plea

12 May 2009 ET Bureau

NEW DELHI: India’s apex consumer disputes panel has declined to entertain a petition by retail shareholders of fraud-hit Satyam Computer Services seeking a compensation of about Rs 5,000 crore for the lost value of the company’s shares.

The National Consumer Disputes Redressal Commission (NCDRC) on Monday rejected to entertain the petition, the first of its kind here, citing lack of infrastructure to handle such cases.

“We do not have the infrastructure to deal with such kind of petition ... the Central Bureau of Investigation (CBI) and the Company Law Board (CLB) are already seized with the matter,” an NCDRC bench comprising justice KS Gupta and member Rajyalashmi Rao observed. The Satyam scam had came to light in January.

The petitioners, Midas Touch lnvestors Association, a privately-funded investor protection group, had argued that the scam had affected about 3 lakh retail shareholders and they must be compensated. The petition was the first investor redressal complaint in India after the Satyam crisis, filed in line with the various suits pending in US courts against the company, also listed on US bourses.

Virendra Jain, director of the organisation, said they were exploring other options to get justice for small investors. After Raju’s confession, Satyam’s share price had plunged from Rs 544 in May 2008 to Rs 11.50 in January 2009.

It is currently hovering at around Rs 40-45.

Satyam has since been taken over by Tech Mahindra after the company won a public bid monitored by the government-appointed board of the company.

Besides the disgraced promoters, the Midas petition also names Satyam’s former independent directors and the ex-auditor PwC as respondents liable to pay compensation. Midas’ contention was that independent directors and auditors are appointed by shareholders at the annual general meeting for a service. If they fail in their duty, those who hired them — the shareholders — have a right to compensation under consumer protection law.