Mahindra Satyam mulls action over new IL&FS claims

The new management of Mahindra Satyam (formerly Satyam Computer Services) will soon finalise its legal course of action on the Rs 1,230-crore claims by IL&FS Engineering and Construction Company.

A group company of IL&FS Financial Services (IFIN), IL&FS Engineering and Construction Company was formerly known as Maytas Infra that was run by Satyam founder B Ramalinga Raju’s elder son, Teja Raju.

“We will take action (legal) at an appropriate time after consulting our legal counsel. We don’t want to get involved now, as the matter is sub judice. We will wait till the court gives us some instructions. It (legal action) will take some time, probably sometime next week,” said a Mahindra Satyam official requesting anonymity.

In a letter to the court observers at the recently convened annual general meeting of Mahindra Satyam, IFIN, as a shareholder, had raised several issues on the financials of the city-based information technology consulting and services company, including details of Rs 1,230 crore shown under the ‘Suspense Account’ head on the liability side of balance sheet. Business Standard has a copy of the letter.

Satyam was taken over by Tech Mahindra after Ramalinga Raju admitted to fudging the account books for many years. Raju had claimed in his confession letter on January 7, 2009, that he had to infuse about Rs 1,230 crore in Satyam by borrowing funds from the market.

The Mahindras-led new management of Satyam has kept the alleged advances of Rs 1,230 crore relating to prior years separately, under the ‘Amounts Pending Investigation Suspense Account’ in the balance sheet.

IFIN said in its letter, “It is our understanding that this amount reflects monies received by the company from various parties/entities and as such should be classified as a liability due to third parties and showing this amount under the head of Suspense Account and the failure to acknowledge the amount as a liability has the clear impact of distorting the financials of the company. The mere presence of such a significant amount in the suspense account does not provide a true and fair view of the financials of the company.”

It said Mahindra Satyam and its board of directors owed a collective responsibility to all the shareholders to clarify the exact nature of the amount shown under the suspense account.

IFIN has 206,000 shares in Mahindra Satyam, and is expected to get 24,235 shares of Tech Mahindra under the recently decided swap ratio.

“The substance clearly brings out that Mahindra Satyam has received funds from 37 companies (belonging to Raju and his family members) should be appearing as a creditor in the books of Mahindra Satyam,” IFIN said in the letter, while objecting to the erstwhile Maytas Infra not being recorded as a related party.

IFIN requested the court observers to record its objections — “glaring misconduct on the part of Mahindra Satyam in not complying with applicable accounting rules/regulations/standards and not bringing out the true and correct classification of accounts” — and forward the same while submitting its report of the shareholders’ meeting to the court.