Mumbai: Information technology services firm Mahindra Satyam, formerly Satyam Computer Services Ltd, has agreed to a $70million legal settlement with British firm Upaid Systems Ltd to end all outstanding disputes, the Hyderabad-based firm informed stock exchanges on Wednesday after trading hours.
According to the agreement approved by the board, Mahindra Satyam will first make a payment of $45 million within 10 days of getting regulatory approval and a payment of $25 million within a year of the first payment.
The settlement requires the British firm to give Mahindra Satyam a worldwide royalty free licence to all its patents, besides withdrawing all pending legal actions initiated by it.
New role: Mahindra Satyam’s newly appointed chairman Vineet Nayyar. Prashanth Vishwanathan / Bloomberg
Upaid initiated legal proceedings against Satyam Computer in April 2007 in the US alleging fraud, forgery, misrepresentation and breach of contract involving transfer of intellectual property rights. The disputes related to a project that the firms jointly worked on in the late 1990s. Upaid had sought damages of at least $1 billion for the cumulative losses it claimed to have suffered as a result of Satyam’s actions. Satyam was an outsourcing vendor for Upaid at that time.
However, class action lawsuits, or multiple cases that are argued as one, brought by investors in Satyam’s American depository receipts (ADRs) listed on the New York Stock Exchange, are outstanding.
In January, Satyam’s founder and chairman B. Ramalinga Raju admitted to a years-long accounting fraud worth Rs7,136 crore, the largest in India’s corporate history. In April, Tech Mahindra Ltd, a division of the Mahindra group, acquired a 43% stake in Satyam Computers. The new entity was branded Mahindra Satyam. Late in November, the Central Bureau of Investigation said it had uncovered an additional fraud of Rs4,739 crore committed by Raju and his associates, taking the overall extent of the fraud to Rs11,875 crore
“The settlement may have a short-term effect that is likely to show up as a spike in the share price,” said a Mumbai-based analyst with the investment advisory arm of a national private sector bank. “Upaid had problems with the earlier management at Satyam and not the current one, so an out-of-court settlement was expected at a maximum of $100 million.” He did not want to be identified as he is not authorised to speak to the media.
Also on Wednesday, following a board meeting, Mahindra Satyam appointed Vineet Nayyar as chairman, inducted two additional directors to the board and appointed Deloitte Haskins & Sells as statutory auditors for the financial year ending March 2010.
The new directors inducted are M. Damodaran, former chairman of market regulator Securities and Exchange Board of India, or Sebi, and Gautam S. Kaji, a former managing director at World Bank.
Nayyar takes over from Kiran Karnik, the former president of industry body Nasscom who was appointed by the Union government as chairman of a new board it put together after the fraud. Karnik stepped down following the stake purchase by Tech Mahindra.