Bitter battle

Mumbai, Feb. 23: Differences have cropped up between Mahindra Satyam (formerly Satyam Computer Services) and UK-based Upaid System, two months after both of them settled a long-standing dispute.

The present standoff relates to the issue of tax liability arising from the $70-million settlement that the two sides reached last December.

Under the terms of the settlement, Mahindra Satyam was to pay $70 million to Upaid to formally end a two-year old legal dispute between them.

Mahindra Satyam contends that the tax liability rests on Upaid, while the latter believes that the amount should be inflated to cater for any tax liability, which Satyam has refused to do.

Mahindra Satyam today told the bourses that it had filed a lawsuit against Upaid in the New York court, seeking a declaration regarding the settlement agreement. It added that the parties had subsequently entered into an escrow agreement and Satyam had deposited $70 million into the escrow account.

In the lawsuit filed on February 22, Satyam said it was asking the court for a declaration that the agreement was valid and enforceable and that Upaid was responsible for any tax liability arising from the payout, including the responsibility for complying with the tax deduction requirements.

Satyam also said that to the extent there was any tax deduction required, it should be deducted from the $70 million, plus interest, in the escrow account.

The dispute dates back to those days when Ramalinga Raju was at the helm of Satyam. Upaid, which provides payment solutions in mobile phones, had signed an MoU with Satyam to develop a solution on May 29, 1997.

Upaid wanted to patent the technology for which it needed the signatures of around 20 Satyam employees. Satyam helped Upaid get the signatures. When Upaid filed a suit against Qualcomm and Verizon Wireless in 2005, alleging the use of its patented technology, a Verizon employee, who had worked on the project, said his signature was forged. This led to Upaid filing a suit against Satyam for forgery and fraud.