Mr Murthy, a retail investor, who still has some Satyam stocks, was excited after reading the flash news in business channels that the company's investors in the US are going to be compensated with $125 million.

His excitement was short-lived as his investor friends told him that Indian investors are not as lucky, keeping in mind the legal and institutional weaknesses.

“I felt cheated. The company has begun to make profits and we too should get some compensation for the huge erosion of value in my share value,” he said. Mr A. K. Narayan of Tamil Nadu Investors' Association said it was not possible today for investors to get some relief.

“We have appealed to the Centre to bring in necessary amendments to the Companies Bill and give some rights to the retail investors,” he said.

Ms Sundari R Pisupati, Attorney at the law firm Tempus Law Associates, blames it on the lack of awareness and shareholder activism for the absence of class action suits in India. “There is a misconception that class actions are not possible in India and shareholder activism has been minimum because of the same. This is not true,” she said. The Indian Civil Procedure Code under Order-1, Rule-8 permits representations — actions whereby a large body of persons who are interested in a matter can bring action together as a group and one or several of them shall act as a representative on behalf of the group.

“This provision has been used in India extensively for filing under civil property matters some times in suits relating to administration of religious institutions and other associations. Therefore, it is very much possible for shareholders in India to bring suits similar to class action litigations in the US,” she pointed out.

However, keeping in mind the time it takes to adjudicate and finally obtain judgment in a civil matter in India, there may not be much of an incentive to proceed on those lines.

SEBI move

Keeping the current scenario in mind, SEBI recently took steps to create a class action mechanism in its recently-issued SEBI (Investor Protection and Educational Fund) Guidelines, 2009. It has retained the power under Rule 5(2)(d) to aid investor associations recognised by SEBI to undertake legal proceedings in the interests of the investors in securities that are listed or proposed to be listed.

Apart from the above, in India, representative suits filed by shareholders under Sec. 397 or 398 of the Companies Act for oppression and mismanagement are generally looked at as US style class actions.

However, the current Companies Act does not have a specific provision for class action, and therefore it is proposed to be introduced in the Companies Act Bill, 2008 (rule no.57) which is pending, Ms Minakshi Shukla, a senior associate at the firm, said.

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