Dec 112012

The Andhra Pradesh High Court on Tuesday issued an order stalling the attachment of fixed deposits worth Rs 822 crore belonging to software giant Mahindra Satyam by the Enforcement Directorate as part its investigation into the money laundering case involving disgraced former chairman of Satyam Computers B Ramalinga Raju and his family members.

Justice P.V Sanjay Kumar, while staying the provisional order of the ED on the attachment of fixed deposits, sought to know whether the investigating agency had any evidences to prove that the amount of Rs 822 crore constituted proceeds of the financial irregularities committed by Raju and his family members under the Prevention of Money Laundering Act.

The high court also stayed a notice issued by the adjudicating authority of the ED to Mahindra Satyam asking company officials to appear before it with regard to the case.

The ED issued a provisional order on October 18, attaching Rs 822-crore fixed deposits in the name of Satyam Computer Services Limited in Andhra Bank, Bank of Baroda, IDBI Bank and ING Vysya Bank, stating that the deposits constituted proceeds of crime derived out of the scheduled offences under the PMLA, 2002 committed by Raju and his family members.

According to the ED authorities, Raju had conspired with the others during 2001-2008 and lured investors into buying the shares of the company by continuously publishing falsified books of accounts, thereby projecting a very rosy financial picture of the company for keeping the share prices of the Satyam Computers inflated.

They said all the shares held in the name of Raju, his wife Nandini Raju, brother Rama Raju and the latter’s wife Radha Raju were transferred to SRSR Holdings Private Ltd in which they were all directors. In turn, the SRSR Holdings pledged the inflated shares with various the NBFCs and raised loans to the extent of Rs 2,171.45 crore based on the inflated value of shares of the Satyam Computers.

These loans were circuitously transferred among the 327 front companies floated by Raju, his relatives and his associates to disguise the true source of funds. The front companies used these loans to buy properties in Andhra Pradesh, Karnataka, Maharashtra and Tamil Nadu.

Further trail of these loans derived from the front companies revealed that Rs 822 crore out of Rs 2171.45 crore found their way to the Satyam Computers and were used up for day-to-day expenses like payment of salaries etc.

“Since this amount subsists with Satyam Computers and constitutes a part of the loans that were derived or obtained by pledge of inflated shares of Satyam, they fall within the mischief of proceeds of crime under PMLA and are liable for attachment,” the ED order said.

Mahindra Satyam, which subsequently took over Satyam Computers and has been showing the fixed deposits in a suspense account, challenged their attachment by the ED by moving the High Court early this month.  

The Mahindra Satyam maintained that it had revived the scam-hit IT company and brought in strategic investors like Venturbay Consultants, a subsidiary controlled by Tech Mahindra, to infuse Rs 2,900 crore into it after they took over. The attachment of the fixed deposits would affect the functioning of the company, it argued.

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