Satyam Computer Services? disgraced founder B Ramalinga Raju may be fighting out a plethora of charges at the local court in Hyderabad, but he has completely ignored the proceedings initiated against him by the enforcement directorate (ED) in the Capital. But ignoring the ED court?s summons or failing to appoint a lawyer to represent him won?t weaken Raju?s case?as almost every one of the 100-odd other respondents in the matter, including his wife Nandini Raju and his sister-in-law Jhansi Rani, are defending him rather than themselves.
?Even a rat sitting on the tail of this attachment order will have to defend him (Raju) in order to defend himself,? RK Handu, the counsel appearing for 51 co-defendants, claimed before the Adjudicating Authority set up under Prevention of Money Laundering Act (PMLA). But despite repeated notices sent by the authority in October 2009, Raju and his brother B Rama Raju failed to reply or send a lawyer to represent them while rest 130 defendants have filed their replies in the case. Now, after three months of arguments, the authority is expected to pronounce its order by early February.
As reported by FE earlier, the Adjudicating Authority is hearing the ED?s provisional attachment order against 280 properties owned by Raju and his kins. The ED in its 11,000 page complaint filed with the authority in September last year against Raju and his 131 associates including his brothers Rama Raju, Suryanarayan Raju, their wives, sons, other family members and employees, had alleged that these properties were obtained through the ill-gotten gains from India?s largest corporate fraud which included forgery of valuable security such as fixed deposits receipts (FDR), bank statements etc.
Enforcement directorate?s counsel Rajiv Awasthi said the Central Bureau of Investigation has charge-sheeted Raju for forging bank statements and FDRs worth Rs 3,000 crore against actual FDR interest of Rs 7.5 lakh. Raju also forged invoices running than Rs 5,000 crore of different commercial business houses which were examined by the CBI, while fabricating tax deducted at source (TDS) trails.
Pointing out that Raju could not purchase over 54 acre of property in his name under the Andhra Pradesh Land Acquisition Act, Awasthi alleged that the 280 properties were bought in names of his relatives and trusted employees. He submitted that Raju?s younger brother, B Suryanarayan Raju has admitted in his statement that the properties belong to him and his family members who have provided the money for acquisition of these properties. All the other accused persons have also admitted in their statements to ED that they had lent their names to SN Raju to purchase these properties.
According to the ED?s findings, the falsification and inflation of Satyams? accounts caused overvaluation of its share capital. Raju and his kins released these shares ?at opportune time? to release their liabilities and used the proceeds of crime in real estate and other allied businesses. They also floated 327 companies which mobilised around Rs 2,000 crore through various non-banking financial companies (NBFCs). The funds laundered by Raju and his associates were routed to these firms for purchasing real estate.
Interestingly, all the directors of the companies were Raju?s kith and kin who purchased the properties from time to time by pledging Satyam?s inflated shares.
Meanwhile, the defendants in their submissions rebutted all the allegations by ED and argued that ?falsification of accounts? and ?cleverly creating a structure? are not scheduled offences under PMLA and so the Adjudicating Authority has no jurisdiction to hear the case. They also argued that Satyam fraud is being investigated by various agencies including CBI and Securities and Exchange Board of India (Sebi) and until Raju is prosecuted for any crime, the money involved for purchasing these properties cannot be assumed to be the proceeds-of-crime.
Contesting ED?s allegation that Raju and his kin mobilised Rs 2,000 crore from the market through NBFCs, defendants claimed that Raju procured this money through loans from Merryl Lynch. Handu argued that Raju actually procured the loans to pump money into Satyam. ?ED has not demonstrated how the time was opportune when the defendants sold the shares nor has it placed any evidence to establish the actual value and overvalue of the shares of Satyam,? he added.
Under the provisions of PMLA, Handu pointed out that in case of any offence by the company, the company along with its directors is liable. But, in this case, the ED has not proceeded against the company, and has only held the director liable for the falsification of accounts. ?The thief is enjoying and the persons who have received the money are suffering because they received theft property,? he said.
?Even if we go by their (ED) argument that falsification of accounts was a offence covered under PMLA, then what about PwC and other auditors who were partner in the falsification of accounts? Why their properties are not attached, why is the attachment order confined to Raju and his family,? questioned Handu.
He argued that his clients had no knowledge of any misconduct happening in the affairs of the company. ?Surayanarayan Raju had the power of attorney and was operating the accounts of Satyam. Rest of the defendants had no knowledge of the acts and omissions committed by the company. Section 3 of PMLA (which defines the offence of money laundering) only applies to a person who knowingly and willingly performs an act or omission. The ingredient of knowledge is pre-requisite to bring a person under the provisions of PMLA,? Handu argued.
Gopal Chaudhary, the counsel appearing for 30 more defendants, commenced his arguments on the same footing as Handu and then delved into the details of money trails laid out in ED?s complaint. Refuting the allegation that the source of income of the Raju family?s 327 companies unknown, Chaudhary claimed that the money trails traced back to either loans from NBFCs, Maytas Properties, Maytas Infra, sale of Satyam?s shares, dividends accounts of Satyam or individual funds of the directors of the companies who had their independent sources of incomes.
Chaudhary also revealed that the 327 companies in question are the wholly owned subsidiaries of the parent company SRSR Holding, a company owned by Raju?s sibling SN Raju. ?The properties in questions are not any new assets procured by the companies, these properties were already existing asset which were transferred by the parent company to its subsidiaries,? he said. He also pointing out factual discrepancies in the ED?s complaint and said it is structured with complexities, flaws and material suppression of facts.
While referring to the excerpts from ED?s complaint which read ??in the transactions showing the money trail, the tainted money is intermingled with money derived from legitimate sources,? Chaudhary argued that ED should establish which part of the money is tainted. He said that money derived from sale of shares or loans from banks or NBFC?s cannot be considered a crime.
?In absence of any such evidence ED has just based its complaint on assumptions. Where the criminal charges are filed and consequences are bigger, assumptions cannot be the base of such a complaint seeking such serious punishment. ED should come out with stronger evidence rather than just assuming that the money is proceed-of-crime,? he said.