Property involved in money laundering may be provisionally attached to prevent the frustration of proceedings, even if the owner is not charged with a predicate offence, provided the authority has recorded reasons for such belief. Administrative notices are valid if they demonstrate appropriate consideration of relevant material.

By these two appeals, a challenge has been made to the order dated 14.01.2010 passed by the Adjudicating Authority confirming the Provisional Attachment Order dated 18.08.2009.

Brief facts of the case:

2. It is a case where pursuant to the FIR lodged by the police and later on its transfer to CBI, the respondents recorded ECIR followed by the attachment of movable and immovable properties under Section 5 (1) of the Prevention of Money Laundering Act, 2002 (in short `the Act of 2002’). It has been confirmed by the Adjudicating Authority finding properties to be involved in money laundering.

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 real profits. The gap between the real profits and inflated profits reflected in the books of accounts had snow-balled over the years. This led to creation of fictitious assets. An unsuccessful attempt was made to substitute the fictitious assets with real ones by an acquisition deal with M/s MAYTAS which failed and the deal was aborted within few hours due to pressure from investors and the market. Consequently, the share value of M/s Satyam Computers dipped to lowest level after the confessional letter issued by Shri B. Ramalinga Raju which caused huge losses to the investors. A complaint was made by one of the investors Smt. Leena Mangat. The FIR was registered on 09.01.2009 against Shri B. Ramalinga Raju and others for the offence under Section 120-B read with Sections 406, 420,467,471,477A of Indian Penal Code (IPC). Section 409 IPC was subsequently added. The case was transferred to CBI under a Notification and accordingly the investigation thereupon was conducted by the CBI. The CBI filed the charge sheet after completion of the investigation.

5. The ECIR was recorded followed by investigation under the Act of 2002. It revealed that the defendants accused before the Adjudicating Authority had committed offence of money laundering within the meaning of Section 3 of the Act of 2002. To protect movable and immovable properties, they were attached till completion of the trial.

6. The summary of the allegations in nutshell shows that Shri B. Ramalinga Raju with his brothers Shri B. Rama Raju and Shri B. Suryanarayana Raju and others cheated the ordinary public and investors by falsification in the books of accounts and forging of documents in the proc