Hyderabad: The official liquidator of the Andhra Pradesh high court on Friday conveyed its objections to the scheme of amalgamation of information technology firms Mahindra Satyam and Tech Mahindra Ltd as investigations by various agencies are under way in the Satyam fraud case. The lawyer representing the official liquidator, Anil Kumar, told the court that the Union government had asked the liquidator to oppose the scheme, two persons who attended the court hearing said.
An official liquidator is attached to a high court and has to inform it if the affairs of two merging entities are in order before they are amalgamated. It has the power to examine a company’s records and negotiate with creditors when a winding-up petition is filed against a company.
The official liquidator’s lawyer told the court that since investigations are pending against Satyam Computer Services Ltd (now Mahindra Satyam) in a financial fraud perpetrated by its former chairman B. Ramalinga Raju, no court should approve the scheme. The official liquidator and its counsel could not be reached for more information.
Satyam’s spokesperson said the company cannot comment on the matter as it is in court.
Infrastructure Leasing and Financial Services Ltd (IL&FS), which is opposing the merger of the two firms on behalf of its entity Ekadanta Greenfields Pvt. Ltd, said it was dissatisfied with the report submitted by independent auditor Brahmayya and Co. and wanted the Andhra Pradesh high court to conduct a thorough examination of Satyam’s accounts.
Brahmayya was appointed by the court to study Mahindra Satyam’s books to determine whether money from purported creditors totalling Rs.1,230.4 crore had found its way into the company when it was known as Satyam Computer. Brahmayya submitted a report on 25 February stating that Mahindra Satyam’s management was justified in not crediting the amounts received from 37 companies in their names and not showing them as creditors in the company’s books.
IL&FS also requested the high court to order Mahindra Satyam to deposit the disputed amount in an escrow account overseen by the court so creditors’ interests would be protected if the court decided to sanction the scheme of amalgamation.
The matter has been posted for further hearing on 17 April.
Appearing for IL&FS, senior counsel Venkatesh Dhond said Brahmayya arrived at its conclusion based on five documents submitted by Satyam when the mandate of the high court was to scrutinize the books and records of the company.
The IL&FS lawyer further argued that Mahindra Satyam did not comply with a statutory requirement under the Companies Act by not convening a meeting of its unsecured creditors and obtaining consent for the merger from 75% of them.
IL&FS also found fault with Mahindra Satyam’s submission that it had no unsecured creditors when the company had classified a sum of Rs.1,230.4 crore under “amounts pending investigation suspense account” in its balance sheet.
The scheme of amalgamation has been cleared by various bodies including the Competition Commission of India, BSE, the National Stock Exchange and the Bombay high court, and is pending only in the Andhra Pradesh high court. The Bombay high court sanctioned the merger application subject to approval by the Andhra Pradesh high court.
The merger swap ratio of two shares of Tech Mahindra for 17 shares of Satyam Computer too has been challenged by some minority investors in the Andhra Pradesh high court. Both the petitions—of the minority investors and alleged creditors—have been clubbed with the merger petition.