Two US law firms file class action against Satyam

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Two US law firms file class action against Satyam

Two class action lawsuits have been filed against Satyam. One is by law firm Izard Noble and the other is by Vianale & Vianale. Even if these class action lawsuits are successful, the question is that they may not be easily implementable in India.

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Here is a verbatim transcript of Isha Dalal's comments on CNBC-TV18. Also watch the accompanying video.

Two class action lawsuits have been filed against Satyam. One is by the law firm Izard Noble and the other is by a law firm by the name of Vianale & Vianale. Even if these class action lawsuits are successful, the question is that they may not be easily implementable in India. The reason is that there is no reciprocal treaty on enforcement of foreign judgement between the US and India. So, foreign award cannot be automatically enforced in this country. That means for the shareholders who might have a successful class action lawsuit, there are two options. One is that the shareholders can ask to treat their compensation as debt owed by the Satyam which means that the company must file a winding-up petition in India.

The problem with that is that under the Company's Act - secure creditors get paid out first and then it is very likely that the shareholders, even if they are successful in the class action lawsuit, are treated as unsecured creditors and may likely wind-up with nothing.

The second option for shareholders would be to file a fresh suit against Satyam in Hyderabad and then wait for the decree of the Indian court. Again that will most likely take a while to pan out.

So net, even if the class action lawsuits against Satyam are successful, it will be a while before ADR holders can receive any sort of compensation.