ED told not to attach MSat assets

By S A Ishaqui

Hyderabad, Dec 12: The AP High Court on Tuesday granted relief to Mahindra Satyam by staying an order passed by the adjudicating authority of the Enforcement Directorate (ED) attaching Rs 822 crore of immovable property of the company.

Justice P.V. Sanjay Kumar passed an interim order on the plea of Satyam Computer Services Ltd (Mahindra Satyam) challenging the order.

The ED had issued the provisional attachment order on October 18, 2012, after it had concluded that Rs 822 crore lying with various banks were proceeds from illegalities allegedly committed by Satyam founder B. Ramalinga Raju. The ED had issued a notice to Mahindra Satyam by attaching the assets on October 29.

On Tuesday, Justice Kumar said, “On the basis of the CBI chargesheets (filed in 2009) the authority formed an opinion with regards to conditions of Sections 5(1)(a) and (b) of the Prevention of Money Laundering Act, 2002 being fulfilled. However, fulfilment of the conditions prescribed in Section 5(1)(c) of the Act of 2002 is not manifest.”

Citing flaws in the order, the judge held that the authorities had improperly exercised their power.

ED draws flak for Satyam attachment

Finding fault with the Enforcement Directorate’s attachment order, Justice P.V. Sanjay Kumar said, “Except for badly reproducing the language of Section 5(1)(c) of the Act in the provisional attachment order, the authority has failed to detail as to what reasons he had to believe that the new management of the company, which was brought into the picture after a laborious exercise by none other than the Government of India itself, would either conceal, transfer or deal in any manner with the alleged proceeds of crime which may result in frustrating any proceeding under the Act.”

Referring to an earlier order of a Division Bench of the AP High Court, of which he was a member, Justice Kumar said that the power of provisional attachment was a very drastic one which had to be exercised sparingly and in exceptional circumstances, as provisional attachment of properties of a commercial entity could have far reaching consequences affecting the reputation and liquidity of the enterprise.

Citing various flaws in the attachment order, the judge held that the authorities in the current case had exercised power and jurisdiction under Sections 5(1) and 8(1) of the Act without proper application of mind and without having “reason to believe” as mandated by the statute.

The judge observed that the notice dated October 29, did not even reflect that the Adjudicating Authority had found “reason to believe” that an offence under Section 3 of the Act was established or that the petitioner company was in possession of the proceeds of crime.

The judge ruled that the provisional attachment order and the consequential notice of the Adjudicating Authority were found to be in flagrant disregard of the legal provisions and could not therefore be permitted to operate pending disposal of this petition.