The Hyderabad High Court on Monday set aside an order of Enforcement Directorate issued six years ago provisionally attaching fixed deposits of ₹ 822 crore belonging to Tech Mahindra.
On October 10, 2012, the Joint Director of ED passed an order provisionally attaching ₹822 crore of fixed deposits belonging to the then Satyam Computers company under Prevention of Money Laundering Act. These fixed deposits were with Andhra, ING Vysya, IDBI and Baroda banks.
In the charge-sheet, the ED stated that the deposits were proceeds of crime under PMLA. Founded by V. Ramalinga Raju, Satyam Computers was among the top IT companies in the country then. In 2009, Mr. Raju wrote to the Securities and Exchange Board of India (SEBI) admitting that he had inflated the account books of Satyam Computers and also confessed to have understated liabilities of the company and made financial misstatements.
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As the fraud got unearthed, the government ordered auction of the company to protect its investors and employees. Eventually, it was taken over by Mahindra and got renamed as Mahindra Satyam. It was eventually merged with Tech Mahindra.
The counsel for Tech Mahindra presented to the HC that there was no money in Satyam Computers when Mahindra group took over it. The latter infused money to revive the fraud-hit company, they contended.
Initially, a single judge of Hyderabad HC stayed the ED’s attachment order following which the ED filed an appeal. A division bench comprising Justice V. Ramasubramanian and Justice J. Uma Devi heard the petition. The bench observed that if the ₹822 crore fixed deposits of the company were proceeds of crime, the Ministry of Corporate Affairs could not have auctioned the same through competitive price bids.
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“After one wing of the government had induced a third-party like the strategic investor to come to the rescue of the company, another government wing cannot take action that will vitiate the entire process,” the bench said in the verdict.