Sunday, March 27, 2011

HC freezes accounts of Mahindra Satyam

HYDERABAD: In a move that could potentially trigger off a financial crisis at scam-hit Mahindra Satyam at the fag end of the financial year, the Andhra Pradesh High Court on Friday restrained both the IT firm and the Income Tax (I-T) department from accessing the company's attached bank accounts containing Rs 1,300 crore till March 31.

Twenty-six bank accounts of the company in various banks were attached by the I-T department on Tuesday after the Central Board of Direct Taxes (CBDT) on Monday turned down the company's plea seeking a stay on the tax demand. The HC order immediately led to apprehensions among employees about the ability of the company to pay salaries at month-end but Mahindra Satyam chairman Vineet Nayyar told TOI that the company had enough liquid cash. Later, an internal mail was also circulated by the HR department to allay these apprehensions.

The restraint order was issued by a high court bench comprising justices VVS Rao and Ramesh Ranganathan while hearing a petition filed by Mahindra Satyam challenging the I-T department's tax demand of Rs 616.54 crore and the attachment of its bank accounts. The matter was posted for further hearing to March 30.

MSAT has been refusing to cough up the tax demand in question arguing that these claims pertain to the 2002-03 to 2007-08 period when Ramalinga Raju was cooking the company's books and were based on "fictitious and non-existent income".

The HC order came despite pleas by Mahindra Satyam's counsel that the attachment of bank accounts by the I-T department freezing an amount of Rs 1,300 crore was unfair as the tax demand was only for Rs 616.54 crore.

"This is unfair. What is more disturbing is that the taxmen had attached our bank accounts by issuing as many as 26 garnishee orders," a senior MSAT counsel S Ganesh told the court.

A garnishee order makes it mandatory for the banker to pay the demanded money lying in the company's accounts to the I-T sleuths.

"When the I-T sleuths were trying to take away our money from the bank even during the pendency of the case, we had to struggle to restrain them. It was only when we insisted that they give a written statement that they would withdraw money despite the pending court matter that they backed out," the MSAT counsel said.

The MSAT counsel also pleaded with the court to allow the company to segregate the Rs 616.54 crore demanded by taxmen into a separate account that could remain frozen till the matter was settled.

In response to the MSAT counsel's pleas, Justice VVS Rao said: "You can do anything but you cannot give up your genes and birthmarks", in reference to Satyam's dubious past.

Meanwhile, Nayyar told TOI that "salaries are not and will not be an issue. We have more than enough money to pay salaries". According to Nayyar, the company has access to more than an equivalent amount of the Rs 1,300 crore that is now out of bounds for the company till March 31 due to HC order.

The scam-hit IT company, which had over 50,000 employees when the scam broke in January 2009, had a total head count 28,832 as of December 31, 2010, and incurred an employee cost of Rs 831.3 crore during the October-December 2010 period. Since then, the company has added around 2,000 employees to its rolls.  

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