Satyam Computer Services Limited Vs Directorate of Enforcement (Andhra Pradesh High Court)
Summary: The Andhra Pradesh High Court considered a writ petition by Satyam Computer Services Limited challenging the Enforcement Directorate’s provisional attachment order dated 18-10-2012 relating to fixed deposits totalling Rs.822 crores and the consequential PMLA proceedings. After the January 2009 disclosure of accounting fraud, the Government intervened through the Company Law Board to preserve the business, protect approximately three lakh shareholders and 53,000 employees, and facilitate a transparent bidding process. A strategic investor ultimately infused Rs.2908 crores. The Enforcement Directorate nevertheless sought to attach deposits on the premise that alleged proceeds of crime from the promoters’ transactions had been layered through associated companies and mingled with Satyam’s finances. The Court rejected the objection that Satyam should be confined to the statutory adjudication and appeal process. It referred to the earlier admission of the writ petition, the jurisdictional challenge to the attachment and substantial legal issues regarding the 2013 amendment to Section 8(5) of the PMLA and competing regulatory regimes. Examining the CBI and Serious Fraud Investigation Office material, the Court found that Satyam had been described as a victim of fraud, whose funds had been drained through illegal payments, notwithstanding the fabrication of apparent profits. It also considered the contradiction in an attachment order that acknowledged the alleged Rs.822 crores had already been spent on ordinary operating expenses but still attached separate fixed deposits as an equivalent sum. The Court held that the Government, having secured the rescue of the company through an officially supervised and publicly competitive investment process, could not fairly permit one of its agencies to undermine that rescue by belated attachment of company assets. It further treated the PMLA as affecting substantive rights and rejected retrospective operation of the 2013 amendment in the circumstances considered. Accordingly, the writ petition was allowed, the provisional attachment order set aside, and the concerned banks directed to disburse the amounts to the petitioner. The source judgment also discusses the statutory definition of proceeds of crime, alternative remedies, jurisdictional facts, amalgamation and the need for consistency in government action.
