MahSatyam mulling options against insurers on disputed claims -Governance Now

MahSatyam mulling options against insurers on disputed claims

Purchased policy for approximately Rs 480 crore from Tata-AIG General Insurance, New India Assurance and ICICI Lombard General Insurance

PTI | July 27, 2011

Mahindra Satyam is considering various options for initiating proceedings against a clutch of insurers, which have disputed claims on the policy taken by the company when it was run by disgraced founder B Ramalinga Raju.

"The company has been examining various options for proceedings against the Lead Insurer and, hence, the outcome is uncertain at this stage," the company's annual report said.

A D&O Policy was taken by the company (erstwhile Satyam Computer) in October 2008 to protect directors and officers against legal costs incurred in defending allegations or suits brought against them for wrongful acts and any awards granted against them, including out of court settlements.

Such D&O Policy included protection to the company in the event of a 'Securities Claim' as defined. Satyam has purchased the policy for approximately Rs 480 crore from Tata-AIG General Insurance, New India Assurance and ICICI Lombard General Insurance.

Later in January 2009, Raju unveiled a multi-crore rupees scam in the company admitting to financial irregularities, including inflating revenues and assets. Subsequently, Mahindra group took over the company and rebranded it as Mahindra Satyam.

While the primary policy for the period from October 15, 2008, to October 14, 2009 was issued by Tata AIG, and secondary policy forming multiple layers of coverage in excess of the primary policy was issued by other insurance companies.

After Mahindras took control of Satyam Computers, the company entered into various settlements which include USD 70 million with Upaid Systems, USD 125 million with the investors under class action suit in the US, and USD 10 million with the US securities market regulator Securities Exchange Commission.

Mahindra Satyam is also contesting Rs 1,230 crore by 37 companies that claimed lending to Ramalinga Raju and USD 68 million claimed by investors under Aberdeen Complaint.

The company had notified the Lead Insurer regarding the receipt of notices from several regulatory authorities and the class action suits, auditors Deloitte Haskins and Sells said in the report.

The Lead Insurer, while expressly reserving its rights under the D&O Policy, has taken a preliminary view and disputed the claim.

The company has replied wherein it has disagreed with a number of statements and positions taken by the Lead Insurer. Earlier, Mahindra Satyam had said that it would sue Raju and former auditors PricewaterhouseCoopers (PwC) for the losses it suffered.

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