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What about Satyam?
To get some answers, I turned to Sumant Batra, a managing partner of the New Delhi-based law firm Kesar Dass B & Associates and perhaps the country's top legal authority on bankruptcy and restructuring. Over a crystal-clear telephone line, Batra outlined legal options for Satyam, its creditors, its employees, its competitors and, perhaps most importantly, the government. First, Batra emphasized, the country's current laws make bankruptcy an extremely poor option for every conceivable party. India has liquidation and rehabilitation regimes, but they don't work, Batra said. There are no dedicated courts or judge, no professional cadre of trustees or administrators, no mechanism for an expedited hearing on a bankrupt company. The list goes on and on. Under a 1985 law, it's possible to revive and rehabilitate what in India is termed a "sick company." But the criteria are precise and revolve around a poor balance sheet. Fraud isn't a factor. A new law is in the works (Batra helped in its drafting) and was introduced in Parliament last October. That law has elements of both Chapter 11 and the British administration and includes a special bankruptcy tribunal and the possibility of debtor in possession. It should bring India into line with a United Nations effort to standardize commercial law. But while Batra expects passage, he doesn't believe implementation before early 2010. So, that won't help Satyam. Perhaps more germane, Batra suggested, India also has something called a Corporate Debt Restructuring System. It's under the aegis of the country's central bank, the Reserve Bank of India. This allows a creditor to propose an out-of-court restructuring, which would prevent other secured creditor financial institutions from putting a company into liquidation. However, the system isn't binding on unsecured creditors and foreign banks, Batra said, adding it's theoretically possible for an unsecured creditor to petition the court for liquidation. But a judge could easily discourage such a move "or keep the matter pending," Batra said. And the government could also lean on any recalcitrant creditor to not pull the plug. Besides, he said, out-sourcing houses by their very nature don't have a lot of hard assets to recover. So what's the point? Batra believes the most likely outcome is some sort of an out-of-court workout that eventually results in a sale, possibly to one of the country's other major out-sourcing firms. The key now is to allow Satyam time to get its house in order and try to stop customers and employees from fleeing. "The government in the next few days will do everything possible to insure there's no panic," he believes. Shortly after our telephone conversation, India's minister for Corporate Affairs told reporters that the quasi-judicial Company Law Board has axed Satyam's remaining board of directors and will allow the central government to install a board to run the company. But rumors flew on Friday as well that the company would withhold salaries for two months and cut 15,000 of almost 50,000 employees. - Matt Miller Matt Miller is a senior writer for The Deal news magazine. Categories Deal Video
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Fraud-felled Satyam Computer Services Ltd. is being called "India's Enron," after the head of the Indian out-sourcing giant admitted this week he had cooked the books to the tune of about $1 billion, leaving the company with almost no cash. Enron went bust and filed for Chapter 11. Its trustee eventually recovered billions of dollars from banks for creditors. 
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