New Delhi, June 10: This is one insurance that has failed to bring relief to Satyam as the company`s claims towards the legal costs have been rejected by Tata group`s insurance venture Tata AIG.
TATA AIG has, in its preliminary view, disputed the claim sent by Satyam under its Directors & Officers Liability Policy (D&O Policy), subject to the company providing additional documentation and information.
Satyam, once the fourth largest IT exporter, had purchased the policy to protect its executives against legal costs in defending suits brought against them for wrongful acts and any awards, including out of court settlements.
The D&O Policy also protects the company if it is exposed to a `Securities Claim`. The primary policy was issued by TATA AIG, along with The New India Assurance and ICICI Lombard, forming multiple layers of cover.
Satyam sent claim notifications regarding receipt of notices from several regulatory authorities and the Class Actions. It had also enclosed copies of letters from directors and officers on likelihood of potential claims.
However, TATA AIG has sought additional documentation and information. Satyam expressed its disagreement with positions taken by TATA AIG, but agreed to furnish additional details.
Satyam had incurred insurance cost of Rs three crore in October-December 2008 and Rs one crore each in January and February.
No relief fore ex-directors
Satyam Computer has declined to entertain requests by its former directors to insulate them from any loss or legal expenses associated with cases they might face.
The company has said it was prohibited from "indemnifying the former directors until they are adjudged not guilty in any proceedings".
Satyam, which is being revived under its new owner Tech Mahindra with help from central government, said that the Ministry of Corporate Affairs has clarified that the company is prohibited from advancing defence costs to its directors and officers until they are acquitted or proved innocent.
"Certain independent directors of the company have demanded indemnification for any loss and advancement of fees and expenses associated with cases and other proceedings and investigations that may be instituted against them on the basis of the indemnification agreements entered into by them with the company," Satyam said while disclosing its financials for the October-December 2008 quarter.
"The company has denied a request for advancement of legal costs as it is prohibited by virtue of Section 201 of the Companies Act, 1956 from indemnifying the former directors until they are adjudged not guilty in any proceedings," it said.
Bureau Report
