With Satyam (SATYAM.BO : 34.25 10.4) founder and former chairman B Ramalinga Raju along with his brother and former chief financial officer (CFO) behind bars, the insurers are in state of quandary over the claim settlement of the country's largest directors' and officers' liability insurance policy (DandO) in the name of the top management of Satyam Computer Services.
ICICI (ICICIBANK.NS : 434.5 -22.1) Lombard General Insurance, Tata General Insurnace and New India Assurance have designed the Rs 400-crore DandO cover for the Satyam top management, who are being dragged to courts after Raju confessed about a Rs 7,000-crore fraud.
A DandO policy covers the cost of legal expenses of a policy holder in both domestic and overseas operations. Some leading corporates and private sector banks have bought these policies to protect their top management and members of their boards from any act of commission and omission committed in the discharge of their duties.
Two US law firms-Izard Nobel LLP and Vianale and Vianale LLP have also filed class action lawsuits against Satyam on behalf of shareholders of the software services firm's American depository receipts.
"A lawsuit seeking class action status has been filed in the United States district court for the Southern District of New York on behalf of those who purchased the ADRs of Satyam Computer between January 6, 2004 and January 6, 2009," Izard Nobel LLP said in a statement.
Another law firm Vianale and Vianale LLP has also announced that it has filed a class action lawsuit on behalf of purchasers of the American depository shares of Satyam Computer during the class period January 6, 2004 through January 6, 2009.
However, the insurers are now trying to find out the legal sanctity of Raju's confession, as any fraud committed intentionally by the holder of a DandO policy would not be entitled to any claim settlement.
Particularly the insurers are citing the official statement of the capital market regulator, Sebi, which has said that Raju's confession may not have a legal standing to convince a magistrate. Sebi said it needed to have its own investigation before filing complaint against the top management to implicate it.
Speaking to FE, insurers who have provided the DandO policy to Satyam said it would be now a long-drawn process to have any claim settlement under the policy.
In the US, DandO policy is one of the most bought policy by corporates against class action.
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