CSC is being sued by a group of investors over the failed NHS National Programme for IT (NPfIT), the world's largest non-military IT programme.

The news comes as the company repaid the government £170 million after the parties failed to sign a memorandum of understanding by a 30 September deadline.

The supplier, which after taking over Accenture's work on the programme had amassed a £3.1 billion contract, was in the summer heavily criticised by the Public Accounts Committee, which said its work on the programme was so disappointing that it may no longer be fit for any other government work.

Last month, the government officially 'abandoned' the project, following a Cabinet Office review that delivered a dire verdict. The government remains embroiled in a dispute with another supplier, Fujitsu, which quit the programme in 2008.

The investors suing CSC, led by Canadian fund the Ontario Teachers' Pension Plan, claim the company "fraudulently concealed" the performance of the contract from them, and that it knew over three years ago that the contract was "undeliverable". The lawsuit, available to view on the Guardian website, was filed in the US District Court for the Eastern District of Virginia.

The investors claim CSC teams that visited review sites in 2008 became clearly aware that the contract would not succeed, and that test results were "abysmal". They also allege that a test official was met with an angry response from his superiors around his efforts to express his concerns.

Yesterday, CSC disclosed it repaid £170 million of the £200 million advance bond it had received in April for the work on the programme. The retention of the full bond had been subject to an MoU being reached by 30 September.

CSC said in a statement on the MoU that it will continue to have discussions with the government, but said there was "no assurance" that an agreement would be reached.

"Progress is continuing in development and deployment projects under the contract in cooperation with the NHS, although progress has been constrained due to the uncertainty created by the government approval process," it said.

CSC has not commented on the litigation, though it is expected to file a response in court in the coming weeks.