Former board of directors also sued; firm seeks damages for perpetrating fraud, breach of fiduciary responsibility.
“The company filed a suit in the civil court, Hyderabad, against the past board of directors, certain former employees and Price Waterhouse, the former statutory auditors, its affiliates and partners, seeking damages for inter-alia perpetrating fraud, breach of fiduciary responsibility, obligations and negligence in performance of duties,” Mahindra Satyam said on Monday in a filing to the Bombay Stock Exchange.
Apart from founder and promoter B Ramalinga Raju and his brother, B Rama Raju, the suit is against some big names like management guru Krishna G Palepu, Pentium chip innovator Vinod Dham, Mendu Rammohan Rao, former dean, Indian School of Business; former cabinet secretary T R Prasad, former Indian Institute of Technology, Delhi, director V S Raju and US-based academician Mangalam Srinivasan.
According to the management of Mahindra Satyam, the company had filed the suit against the previous management, including the chairman and managing director and PW, for causing considerable damage to the company. “We believe the company has suffered incredible loss. That has been established, in our view, both by the confession made by the previous chairman, as also by the forensic audit, which we got conducted. We suffered losses in customers, reputational loss and specific losses in terms of class action suit. These are all significant damages,” said Vineet Nayyar, chairman of Mahindra Satyam.
PW said in a statement: “PW India is outraged that Satyam is attempting to shift responsibility to the auditors for the consequences of a carefully and deliberately concealed fraud that was undertaken at the direction of its own senior management. The fraud perpetrated by Satyam was specifically designed to — and did — circumvent Satyam’s own internal controls and PW India’s audit process, and consequently PW India was a victim of Satyam’s fraud, and will defend itself vigorously against Satyam’s baseless contentions. PW India also confirms that it has filed its own civil suit against Satyam and certain members of its former senior management claiming compensation and damages,” said PW India.
The development came after the Institute of Chartered Accountants of India found Srinivas Vadlamani, Satyam’s former chief financial officer, and PW auditor Srinivas Talluri, who signed the company’s financial audit, guilty of professional misconduct in the Rs 8,000-crore fraud, the biggest such case in India’s corporate history.
Satyam plunged into crisis in January 2009 after founder B Ramalinga Raju confessed to inflating the company’s revenue and profit figures for several years. The Union government took charge of the company soon after, ordered restatement of accounts, and selected Tech Mahindra to invest in Satyam.