In a setback for Mahindra Satyam, the Andhra Pradesh High Court on Wednesday asked the company to pay Rs350 crore to the Central Board of Direct Taxes (CBDT) and provide a further unconditional bank guarantee worth Rs267 crore to the tax department.

The court also restrained Mahindra Satyam from approaching the Central Board of Direct Taxes (CBDT) on the matter before it heard the matter completely.

The interim order comes after Mahindra Satyam moved the high court last week seeking a stay on the proceedings related to a Rs617-crore claim made by tax authorities.

The I-T department's claim is based on Rs345 crore foreign tax credit availed of by the former management of Satyam Computer Services headed by Ramalinga Raju during 2002-08. The present management insists that the papers are forged.

The court has given three weeks to the CBDT for filing the counter. The case will now come up for hearing on 20 April.

However, a Division Bench comprising justices V V S Rao and Ramesh Ranganathan has allowed Mahindra Satyam access to its bank accounts worth Rs1,300 crore. Earlier the court had prevented both Mahindra Satyam and the I-T department from accessing the company's frozen bank accounts.

This will be a relief to the company as senior counsel for Mahindra Satyam, S Ganesh, had pleaded with the judges to release the accounts to pay salaries for the company's employees. The counsel was requesting the court to pass relief orders before banking hours get over.

Considering that the order came on 30 March, the company will now be able to access its accounts today. As per the policy followed by the company, it will have to pay salary to its employees on the last working day of every month.

The senior counsel has also assured the judges that the company would provide the required cheques and guarantees on Thursday.

According to T Hari, chief people officer and chief marketing officer of Mahindra Satyam, the attachment of accounts would not affect the company's day-to-day operations. "We have already made arrangements for the salary of employees," he said. However, he refused to explain how this money was organised.

As per Mahindra Satyam's last quarter result, salary bills account for about 70 per cent of its total revenues, so every month it has to pay about Rs298 crore towards salaries.

The company's senior counsel also admitted that the company does not have any proof to show that the foreign tax credits are fictitious.

The bench pointed out that the company cannot base its arguments on Ramalinga Raju's confession letter as he has not been found guilty.