In the dock

There is a saying at Satyam Computer Services that when it comes to dealing with customers, it is not alchemy but chemistry that works. But what if the equations turn sour and outcomes get toxic? The youngest billion-dollar NYSElisted IT services major from Hyderabad is perhaps now coming to terms with this as it faces charges of alleged forgery and fraud by a former customer.

This follows a recent report that Satyam Computer has lost an appeal at the Court of Appeal in London, which upheld a court ruling barring the IT major’s move to block its one-time client, Upaid, an online and mobile payment services company, from proceeding with its fraud and forgery claims against Satyam in Texas, US. The decision, Upaid claimed in a press statement, “confirms an earlier High Court judgment in favour of Upaid on all points. This ruling allows Upaid’s lawsuit against Satyam alleging forgery, fraud, misrepresentation, and breach of contract, and what Satyam admits are “extremely large sums of money”, to proceed to a US trial by jury in a Texas federal court.

So, what really happened? According to Satyam, sometime in 1997-1998, one of its subsidiaries in the US was engaged by Intouch Technologies (now called Upaid Systems) for product development work. Upaid Systems apparently wanted to patent a product and Satyam provided support, as contractually required, to Upaid for obtaining the patent. Some of the then Satyam employees were named as co-inventors to the patent. In 2002, Satyam and Upaid concluded the business relationship and, based on the settlement agreement signed then, any future disputes were to be tried under the UK laws. In 2006, Upaid filed certain claims of infringement against some companies (apparently Qualcomm and Verizon) in the US and, in the proceedings, two former Satyam employees denied signing the patent assignment documents.

Aggrieved, Upaid filed a case against Satyam in Texas, US in 2007 to declare their patent valid and sought damages from Satyam for any possible losses arising out of impairment of their patent. Satyam, in turn, filed a petition in London contending that the jurisdiction lay the UK in line with the terms of the agreement signed between the two parties earlier.

The ruling by the courts in London, Satyam CFO Srinivas Vadlamani says, is a decision on the jurisdiction and not on the actual case. In a statement, he says: “The courts in London have decided that the case in Texas can continue and be heard based on an earlier assignment agreement signed by Satyam’s then subsidiary and Upaid. Thus, the latest court decision has determined that the jurisdiction lies in the US and the underlying case is expected to be tried in the US in 2009. The US case is in a very preliminary stage and has to undergo the due process of law and Satyam is confident that it has merits in this case and will contest the case.” He also says that Satyam is considering its legal options as regards the dismissed appeal in the London courts.

Asked to clarify the legal filings by Upaid, Satyam officials feel the filings are yet to be validated by a court of law and that the process is expected to commence sometime in June 2009. However, they say: “Our point of view remains that we are in the software services business and, as was expected of us, supported Upaid to achieve its business goals. In our understanding, the allegation of inappropriate documentation does not arise as it was directly enabled by their representative— who was based at Satyam’s premises—with our associates.” It remains to be seen now whether Satyam is able to demonstrate that its relationships do not come at the cost of its reputation!

—E. Kumar Sharma