TaxTMI 
TaxTMI 
2025 (11) TMI 955
X X X X Extracts X X X X
X X X X Extracts X X X X
....ndering. 3. It is a case where Shri B. Ramalinga Raju, the then Chairman of M/s Satyam Computers addressed a letter to the Board of Directors of the Company confessing certain facts which have been narrated in the impugned order and can be summarized as under: (i) Inflated (non-existent) cash and bank balances of Rs. 5040 crores as against Rs. 5361 crores reflected in the books; (ii) Accrued interest of Rs. 376 crores was shown, which is non-existent; (iii) Understated liability of Rs. 1230 crores on account of funds arranged by him; (iv) Overstated debtors' position of Rs. 490 crores as against Rs. 2651 crores reflected in the books; (v) For the quarter ending September, 2008, reported a revenue of Rs. 2700 crores and an operating margin of Rs. 649 crores (24%of revenues) as against the actual revenue of Rs. 2112 crores and an actual operating margin of Rs. 61 crores (3% of revenues). This has resulted in artificial cash and bank balances going up by Rs. 588 crores in the 2nd quarter alone. 4. The obvious discrepancy in the balance sheets had arisen because the profits disclosed in accounts were inflated and did not reflect the re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r advisory service namely M/s SRSR Advisory Pvt. Ltd. with family members as Directors, apart from 5 investment companies, namely M/s Elem Investments Pvt. Ltd., M/s High Grace Investments Pvt. Ltd., M/s Fincity Investments Pvt. Ltd., M/s High Sound Investment Pvt. Ltd. and lastly M/s Veeyes Investments Pvt. Ltd. 8. Shri B. Ramalinga Raju and his family members sold their shares through 5 investment companies over the years deriving undue higher value for their shares. In the process, percentage of shares held by them as promoters in these group companies decreased, which is reflected from the fact that as against holding 18.78% shares as promoters in June 1992, their holdings as on 31.12.2008 came down to 1.87% and later on it came to Zero as on 31.03.2009. 9. Shri B. Ramalinga Raju and his family members thereupon floated as many as 327 companies with the family members and trusted employees at the helm of affairs as Directors. All those companies were registered at 12 common residential addresses of employees of M/s SRS Advisory Service Ltd. and other group companies. The proceeds of crime flowed into these companies through loan Companies. Out of them, eighty-four (84) co....
X X X X Extracts X X X X
X X X X Extracts X X X X
..../s Satyam Computers pledged with them by M/s SRSR to recover the loan amount only to some extent on default in repayment. 14. In the complaint, it was alleged that out of 'proceeds of crime' amounting to Rs. 1866.45 Crores Rs. 1425 crores were transferred to M/s Satyam Computers as temporary advance during 17.11.2006 to 30.10.2008 routing the same through 37 group companies out of 327 companies floated. Out of the aforesaid amount, a sum of Rs. 194.60 crores was repaid by M/s Satyam Computers and balance amount of Rs. 1230.40 crores remained outstanding with M/s Satyam Computers. The factual position aforesaid was confirmed by Sh. B. Ramalinga Raju in his letter dated 07.01.2009 addressed to the Board of Directors of the Company. 15. It was also found that the Companies floated by the accused were dummy companies of Raju family. The individuals were benami owners of the properties acquired with ultimate gain of Shri B. Ramalinga Raju and his family. Therefore, out of the loan amount of Rs. 1866.45 Crores, amount invested in the properties was treated to be 'proceeds of crime'. 16. Besides the landed properties, the respondents attached 34,08,095 shares of M/s Satyam Comput....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ned counsel for the appellants submitted that in view of the two legal issues raised by the appellants, the impugned order should be set aside. The appellants are not required to raise any other issue at this stage and accordingly the counsel concluded his arguments. Arguments of counsel for the respondents: 20. The appeal was contested by the counsel for the respondents. It was submitted that the issues raised by the appellants were the issues in batch matters led by M. Suryanarayana Raju & Ors. Vs. The Deputy Director, Directorate of Enforcement, Hyderabad (Appeal No. 209/2011 & connected appeals) and have already been decided by this Tribunal vide its order dated 24.09.2025. The grounds raised by the appellants have not been accepted in the order referred to above and, therefore, prayer was made to dismiss the appeals. Finding of the Tribunal: 21. We have considered the rival submissions of the parties and perused the record. 22. The counsel for the appellants has raised only two issues for our consideration though had opportunity to raise other issues, rather called upon for it but the counsel restricted his arguments limited to the two issues referred to above. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt has been filed by a person, authorised to investigate the offence mentioned in that Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be: Provided further that, notwithstanding anything contained in clause (b),any property of any person may be attached under this section if the Director or any other officer not below the rank of Deputy Director authorized by him for the purposes of this section has reason to believe (the reasons for such belief to be recorded in writing), on the basis of material in his possession, that if such property involved in money-laundering is not attached immediately under this Chapter, the non-attachment of the property is likely to frustrate any proceeding under this Act.". 404. The counsel for the appellant had made emphasis on Section 5(1) ignoring the second proviso added w.e.f. 01.06.2009. Prior to the amendment, the attachment could have been of the property of such person who has been charged for scheduled offence. However, the second proviso was added with non-obstante clause to override clause (b) of Section 5(1) in a given case. The second proviso has permitted the Directo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s action for possession is taken. The filing of appeal shows the intention of the appellants to conceal the property. The material on record shows that properties are involved in money laundering. The attachment in this case is not in violation of Section 5(1) of the Act of 2002. ISSUE No.13: 427. The counsel for the appellant then submitted that mandate of Section 8(1) and 8(3) of the Act of 2002 has not been followed by the Adjudicating Authority. The reasons to believe that person has committed an offence under Section 3 or in possession of proceeds of crime to be formed before service of the notice. It was submitted that the matter was containing voluminous documents/records against 132 defendants yet notice was issued on 15.09.2009. It was impossible for the Adjudicating Authority to study the complaint and apply its mind to form reasons to believe in a day. 428. The issue was contested by the respondents. It was submitted that on receipt of the complaint, notice has to be issued by the Adjudicating Authority and if facts of this case are taken into consideration, notice was issued after application of mind to form reasons to believe, as was required....