MUMBAI: Ramalinga Raju’s problems just don’t seem to end. After the unprecedented furore over Satyam Computers’ aborted plan to buy into Maytas Infrastructure and Maytas Properties — controlled by the Raju family — for a whopping $1.6 billion, the UK-based Upaid Systems has alleged that Satyam’s buyback proposal is yet another ploy to divert resources out of the company.
Upaid, a UK-based mobile services payment company with 40 employees and 1,000 patents, has already filed a motion in the Texas district court, seeking depositions of top Satyam officials in connection with the Maytas deal. Upaid and Satyam are locked in a two-pronged legal battle. One, a forgery case filed by Upaid against the Satyam management seeking damages of over $1 billion; second, a disparagement case levelled by Satyam against the little-known British company for allegedly besmirching its reputation.
“The manoeuvrings by the Satyam management this week has been outrageous. I would say that any action by the Satyam management which takes cash out of the company is a cause of concern for us,” Simon Joyce, CEO and founder, Upaid, told ET.
“As per Satyam policy, we will not comment since the matter is sub-judice,” said a Satyam spokesperson. The fresh set of allegations clearly weighed on investor sentiments as the stock fell 4%, giving up half the gains that it made after the share buyback proposal was announced on Thursday.
Analysts feel that Upaid’s motion is clearly aimed at weakening Satyam’s case as disgorgement, now that their conduct — especially relating to the related-party transaction in the Maytas deal where bulk of Satyam’s reserves would have been transferred to promoters — has come under severe criticism from investors and industry leaders alike.
Some are also questioning why Satyam has not provided for any contingent liability, although the charges in the fraud case — in case it goes against them — could add up to a huge liability for the country’s fourth-largest IT company. The next hearing for the case is scheduled in June 2009.
“I am astonished that no such provision has been made in this regard,” Mr Joyce said. Some legal experts, however, say that it’s up to the Satyam auditors — PricewaterhouseCoopers in this case — to take a call on the need for a provision for contingent liability on the forgery case, depending on when the liability could arise.
The forgery case, it may be mentioned here, dates back to early 2000, when Satyam was working on a contract job for Upaid. Upaid says that it ran into problems with Qualcomm and Verizon and had to settle the case with them under grossly unfavourable terms, what it describes as forgery by Satyam officials. “We lost out on a huge opportunity, which is in excess of a billion dollars,” Mr Joyce claims.
However, what’s interesting is that Satyam Computers was a shareholder in Upaid, holding around 25% some eight years ago. Although the parting was “cordial”, the two erstwhile partners are surely in for some ‘not so cordial’ times ahead.