The Supreme Court had earlier in December 2017 rejected the ED’s appeal seeking to make Tech Mahindra liable for the alleged money-laundering of over `820 crore by erstwhile Satyam Computer Services.
In the `7,200-crore Satyam Computer Services (SCSL) fraud case, the Supreme Court on Monday refused to interfere with the Hyderabad High Court’s order that set aside an Enforcement Directorate (ED) order provisionally attaching Tech Mahindra’s fixed deposits worth `822 crore.
The ED, in 2012, had provisionally attached the fixed deposits under Section 5 (1) of the Prevention of Money Laundering Act 2002, before Tech Mahindra formally took over scam-hit Satyam Computers. This was done on the ground that it was ill-gotten proceeds of the B Ramalinga Raju-founded Satyam Computers.
A bench comprising Justices Arun Mishra and Ravindra Bhatt, while refusing any relief in the case, said that it will finally decide on November 26 the larger issue of whether PMLA can over-ride other laws like IBC, among others.
During the brief hearing, the bench told solicitor-general Tushar Mehta that it is to be decided whether PMLA is gone once you auction. “You (Govt) you takeover and invite them. They (Tech Mahindra) put in place a new board and proper auction is done… They have been transacting abroad and are subjected to stringent securities laws both in India and abroad.”
The Supreme Court had earlier in December 2017 rejected the ED’s appeal seeking to make Tech Mahindra liable for the alleged money-laundering of over `820 crore by erstwhile Satyam Computer Services. The top court had upheld the high court’s 2014 judgment that ruled that Tech Mahindra cannot be fastened with criminal liability of Satyam.
The scandal broke in 2009 when founder-chairman of Satyam Computers Ramalinga Raju on January 7 admitted and confessed to inflating the books of Satyam, besides understating liabilities and other financial mis-statements, thus disclosing a `7,000-crore accounting fraud in the balance sheets. After the fraud came to light, the government ordered auction of the company to protect investors and employees of the then fourth-largest IT firm. Later, Satyam was acquired by Tech Mahindra in 2013 and was renamed Mahindra Satyam, and was eventually merged with Tech Mahindra.
Challenging the December 31 order, the ED, in its fresh appeal on Monday, stated that the investigation under PMLA clearly established that proceeds of crime amounting to `822 crore were received by “SCSL into their bank accounts. SCSL has utilised such proceeds of crime towards the salaries and infrastructure of the SCSL…”
It added that it was a fact that SCSL had dealt with proceeds of crime, laundered the same by projecting them as normal monies as if received from commercial operations instead of showing them as loans/advances from the front companies of Raju in their books of accounts, and committed the offence of money-laundering laws.
The ED further said that Tech Mahindra took over SCSL only after conducting due diligence and after assessing the advantages and disadvantages of acquisition/takeover of the company and was aware the ongoing investigations/attachments and as such is responsible not only for the assets of the company but also for its liabilities.
Further, as per the provisions of PMLA, 2002 any person/entity which handles the proceeds of crime is also liable for action under Sections 3 and 5 of the PMLA, 2002 and since SCSL no more exists, Tech Mahindra was made to represent to defend the case of SCSL as its successor, according to the appeal.