Caught in a ‘class’ of its own
HYDERABAD: If there was one point that the three-member Satyam board repeatedly sought to drive home at its maiden press meet it was that “Satyam’s rescue act will be difficult and time-consuming.” Liquidity might be the priority but sooner or later, it will have to grapple with a host of legal issues.
Satyam faces over a dozen class action lawsuits filed on behalf of shareholders besides the ongoing battle with Upaid in the US. As a result, even after the company comes up with the restated financials including real operating margins and profits, it’ll remain unattractive.
Industry analysts say that Satyam may not be solvent enough to tackle such claims.
“It is difficult for any potential buyer to only absorb the operating business of Satyam without exposing themselves to the sword of growing contingent liabilities,” said Gaurav A Parikh, Chairman & Managing Director of Scriptech Group of Companies based in Mumbai.
Surprisingly, no investor in India has lodged even a single complaint so far. Corporate lawyers cite Satyam as an isolated case and hence investors were caught unawares.
“We do not have a precedent in India and hence investors haven’t reacted to the situation so far. But an opportunity exists and there can be law suits filed against the company,” said Harpreeth Oberoi, partner & corporate lawyer, Jotwani Associates based in Delhi.
As for the lawsuits filed in the US, after the proceedings, the court may either impose a penalty or/and imprison the directors involved in the accounting fraud.
The penalty or settlement of damages can run into hundreds of millions of dollars.