KPIT Technologies share price plunged as much as 8 per cent on Tuesday after the company on Monday (post market hours) informed bourses that Copart Inc, a former US client, has filed a case against KPIT’s 100 per cent subsidiary Sparta Consultancy Inc and seeking damages amounting to not less than $50 million.
Sparta was hired by Copart Inc between 2011 and 2013 to design a replacement for its legacy Enterprise Resource Planning system. However, the contract was terminated by Copart “without cause”.
At 1.32 pm, shares of KPIT Technologies were trading 5.20 per cent down at Rs 179.55. The scrip opened at Rs 175 and has touched a high and low of Rs 182.90 and Rs 174.20, respectively, in trade so far.
Later, the scrip closed 5.41 per cent down at Rs 179.15.
In a BSE filing KPIT said, “Following a dispute between the parties on the amount of fees payable to Sparta, Copart filed a suit against Sparta alleging that it is entitled to seek damages amounting to not less than $50 million for, among other things, breach of contract, fraudulent inducement and negligent misrepresentation. Copart also sought for other relief such as indirect damages, punitive damages, attorney’s fees, etc for an unquantified amount.”
Sparta also filed a suit against Copart seeking damages for, among other things, breach of contract, promissory estoppel and unjust enrichment.
In a filing KPIT Technologies further said, “Recently, Copart amended its suit to seek fresh claims for damages for, among other things, misappropriation of its trade secrets and has added the company and its subsidiary, KPIT infosystems Inc, as parties to the dispute. While the service of the process on the company is yet to happen, we are making this present announcement as a measure of abundant precaution. KPIT has made adequate provision against the amount receivable from Copart.”
“Should KPIT be served and if the Court finds there is jurisdiction over KPIT, KPIT intends to vigorously defend against Copart’s alleged claims, and pursue any available claims against Copart. The matters are pending before a California court,” KPIT added.
IndiaNivesh in a research note said, “The company has already written-off all the receivables related to Copart and adequate provision is already created for claims. As a result, we do not see any major financial impact going-ahead due to this on-going legal battle. However, the company have to bear the lawyer and other legal charges, which could be in the range of $1.0-1.5 mn (Rs.66-99 mn or Rs 0.35 to Rs.0.53 per share) per year till the time issue is not resolved.”