Mahindra Satyam (the erstwhile Satyam Computer Services) has agreed to pay $70 million (Rs 325 crore) as settlement to UK-based Upaid, which had claimed damages of $1 billion for alleged forgery, fraud and breach of contract.
“The agreement provides for a first payment of $45 million (Rs 211 crore) within 10 business days and a second payment of $25 million (Rs 118 crore) within 12 months after the first payment is made,” Satyam said in a press statement. Upaid is an online and mobile payments service company.
The agreement also stated that both firms agreed not to sue, extinguished all prior agreements or understandings between both, required Upaid to grant Mahindra Satyam a perpetual worldwide, royalty-free licence on all its patents, and provided for the dismissal of all pending actions, including the litigation between the companies pending in the US Federal District Court.
However, the agreement is subject to government and regulatory approval. The senior management of both companies were not available for comment.
“Upaid has agreed to the settlement in principle. Final documents are yet to be signed and the company’s board has to give their final seal of approval,” said a source close to the development.
Analysts tracking the industry heaved a sigh of relief, as the company has been able to close this legal suit. “Certainly, a positive news for the company. If the case had been in court, the probability of it going against Mahindra Satyam is equal to the probability of its going in favour of them. Besides, the settlement is less than what was claimed and what was expected in the industry,” said Alok Shende, Principal Analyst and Founder Director, Ascentius.
“I would say it is one less headache for the company. But the core issues of the company, clients and senior management loss, is still an area of concern,” said Viju George of Edelweiss Capital. Another analyst said, “This news might take the company’s stock up a bit tomorrow but that would be short-lived.”
A veteran from the IT industry said the settlement buttresses the stand that Satyam had taken. “Upaid did not have a strong case. It is just that the company went through a bad patch, with its promoters involved in a fraud case. This worked well for the UK-based firm,” said the executive, on condition of anonymity.
Upaid had filed this case against Satyam in 2007. Satyam had done a project between 1997 and 2002 for which it got $10 million, partly in shares due to Upaid’s inability to pay cash. When Upaid wished to patent the technology, Satyam needed to provide signatures of the people who worked on the technology. Though the company gave Upaid the signatures, some of these employees had moved out.
When Upaid received the patent, it filed a suit against Verizon Wireless and Qualcomm in 2005, as they were using the company’s patented technology. However, one of the former Satyam employees had moved out of the company and joined Verizon. He said the signature was not his. After this, Upaid filed the case.
The announcement came after the markets closed. The company’s stock price closed at Rs 102.65 up 1.33 per cent from the previous close of Rs 101.30.
Nayyar heads Satyam’s expanded board
Vineet Nayyar has been elevated from vice-chairman to chairman of the Satyam board. And, management consultant M Damodaran and the World Bank’s former managing director (operations), Gautam S Kaji, have come in as additional directors. The size of the Satyam board has now risen to eight, comprising four independent (including two nominees of the Union government), two non-executive and two executive directors.
Meanwhile, the company said Deloitte Haskins & Sells, one of the two audit agencies brought in by the post-scam Satyam Board to restate accounts, would vet the accounts of the Mahindra group company for 2008-09 and 2009-10 as statutory auditor.
The company, acquired by Tech Mahindra in April, has got until June 2010 from the Company Law Board to file its re-audited results.
