Technology partner sues Zenith Infotech in US court

DSSDR seeks damages worth Rs 41.6 lakh for sale of arm to Summit Partners

Mumbai-based Zenith Infotech Ltd, which is fighting a battle with investors in the Bombay High Court over default of its foreign currency convertible bonds (FCCB), has been sued by one of its technology partners in a US court.

DSSDR has filed a suit in a US state district court, Northern District of California, against the company; its Chief Executive Officer Akash Saraf; Summit Partners, which acquired a part of Zenith; and Michael George, CEO of Continuum for damages. Zenith’s remote monitoring and management (RMM) business has been renamed as Continuum Managed Services.

DSSDR has claimed as damages an amount exceeding $75,000 (Rs 41.6 lakh). DSSDR in its petition has alleged the sale of the RMM business to Summit Partners in September 2011 had harmed its business. The company has raised seven cause for action. And in each cause it is seeking damages exceeding $1 million.

DSSDR also claims since they were technology partners to Zenith Infotech, they are entitled to get 7.5 per cent of the actual value of the sale of the RMM business.

Zenith had sold the RMM business for $55 million.

When contacted, Saraf said: “The technology from DSSDR was for our Zenith BDR business. We have sold the RMM business which has no co-relation with the BDR business. According to our lawyers the case has no base and is frivolous. We will take action and reply in due time.”

Zenith Infotech licences technology from DSSDR for its cloud computing and back-up recovery business. The company accordingly has been paying royalty to DSSDR on a regular basis. DSSDR also alleges that Zenith did not disclose the details of the sale of its business.

Zenith Infotech is fighting a winding up petition filed by FCCB bondholders. It had issued $33 million of FCCBs in 2006 that was due in September 21, 2011.

The company, in a BSE announcement, admitted that it has defaulted on this payment. The conversion rate of these FCCBs was at Rs 310. In 2007, the company had again raised $50 million via FCCBs that mature in August 2012, and has a conversion rate of Rs 522. Zenith Infotech's stock on Friday fell 4.72 per cent to close at Rs 31.3, while the benchmark Sensex closed at 17,783.2, down 0.38 per cent.