Are Indian investors the ultimate Lallu-Panju victims of corporate fraud? From the impunity with which promoters, government and even the courts are treating the interests of retail investors, it would appear so.

A case in point is Mahindra Satyam, the successor regime to Satyam Computer Services, which courted ignominy when its promoter B Ramalinga Raju (now in jail) announced on 7 January 2009 that he had overstated revenues to the tune of over Rs 5,900 crore by declaring fake bank balances, non-existent interest earnings and dues from debtors in audited accounts.

The fraud, quite obviously, ended up destroying the wealth of thousands of shareholders in India and abroad (the company had American Depository Receipts – ADRs – listed on the New York Stock Exchange) that accounted for 11-20 percent of the total shareholding base at various points of time.

But here's the iniquity: While the new Mahindra management has settled investor lawsuits in the US for $125 million (over Rs 565 crore at current exchange rates), Indian shareholders haven't got a paisa's worth of compensation. While investors in the US got another $25.5 million (about Rs 115 crore) from PricewaterhouseCoopers (PwC), the audit firm, for failing to do their duty, India shareholders got zilch.

The problem: India has no effective tort law under which shareholders can collectively sue company managements that seek to defraud them and obtain effective relief quickly. The US has a very strong one, and this is why Mahindra Satyam has quietly settled and dipped into the company's coffers to pay up.

But here's the second bit of unfairness that compounds the unhappy state of affairs for Indian shareholders. It is one thing to say that Indian shareholders won't be compensated, but quite another to say their remaining resources will be used to pay another set of investors in the US.

While reporting its fourth quarter earnings for 2010-11 on May 23, Mahindra Satyam reported a consolidated net loss of Rs 327 crore, largely because of the US payout.

The profits and revenues that belong to all shareholders are effectively being used to pay one small set of shareholders in the US (less than 20 percent of total shareholders) because their tort law is stronger than ours. Indian shareholders are doubly suckers in the process.

The point is this: when it was promoters who looted both sets of shareholders, it is the promoters who must compensate the losers ultimately. But the net result of Mahindra Satyam taking on the loss on its books is that all Indian shareholders are taking on the burden of compensating only US investors. They are being robbed twice over.

The Supreme Court dismissed an Indian public interest petition by Midas Touch Investor Association in 2009 that sought compensation of Rs 5,000 crore on behalf of retail investors. The Association first went to the consumer court, and then the Supreme Court, but a bench headed by the then Chief Justice, KG Balakrishnan, dismissed the petition as not maintainable.

Says a recent report in Mint newspaper: "The ability of Indian investors to take either Satyam or PwC to court is also limited because the current Companies Act doesn't have any clear provisions  regarding class action suits."

Virendra Jain, founder of Midas Touch, told Firstpost that Indian laws are not good enough: "We do have a tort law, but it is not effective. It can take 25 years to decide. How can you have effective investor protection without an effective compensation mechanism?"

It appears that Indian shareholders are second-class investors. Mahindra Satyam has not thought twice about robbing Pappu to pay Paul.