CASE STUDY:
National Fertilisers Limited (NFL)
VEN as Justice V.B. Gupta of the Special Court administered a rap on the knuckles of the Central Bureau of Investigation (CBI) on November 17 by asking it to examine whether the agency did not have sufficient grounds to file charges against P.V. Prabhakar Rao, son of former Prime Minister P.V. Narasimha Rao, in the urea deal case, the Enforcement Directorate (E.D.), which is independently pursuing the foreign exchange violation angle in the matter, went ahead and arrested Prabhakar Rao and got him remanded to judicial custody for 15 days from November 30. The E.D., which claims to have tracked down the trail of the complex transactions leading to the ultimate beneficiaries of the alleged Rs.10.8-crore payoffs involved in the deal, will soon issue show-cause notices to all the accused, including Prabhakar Rao.
The charge-sheet filed by the CBI in May 1996 named nine accused including M. Sambasiva Rao and B. Sanjeeva Rao (associates and relatives of Narasimha Rao), who put through the deal; the then top executives of National Fertilisers Limited (NFL), the public sector company involved in the matter; officials of the Turkish firm, Karsan Limited, which defaulted on the supply of urea but allegedly paid kickbacks to certain individuals in India; and Prakash Chandra Yadav, son of Ram Lakhan Singh Yadav, the then Union Minister for Fertilizers. The charge-sheet did not mention Prabhakar Rao, one of the alleged recipients of kickbacks.
A few months ago the CBI told the Special Court that it did not have any charges to level against Prabhakar Rao. However, in the first half of June 1996 the CBI had produced records that apparently led the trail to the doorsteps of Prabhakar Rao. If the court calls for the CBI case diaries and notes of the investigating team, it will find that the officials had gathered enough evidence to charge-sheet Prabhakar Rao. For some reason this situation was not reflected in the charge-sheet filed by the agency.
The CBI team had traced a cheque for Rs.10 lakhs, dated March 16, 1996 and drawn in favour of B.V. Rama Rao, an executive of Sinclair Electronics Industries Limited, a company owned by Prabhakar Rao. The amount had been deposited in the current account of Rama Rao. The individuals concerned, when questioned by the CBI about the transaction, said that it was a personal loan given to Rama Rao and produced records in support of this claim. However, further investigation, including the questioning of an auditor of the company, apparently revealed that the loan documents had been fabricated hastily to conceal the identity of the real beneficiary. The CBI obtained statements from the auditor to the effect that the document was fake and that the payment was intended for Prabhakar Rao. Thereupon, the investigating team sought to arrest the persons concerned in Hyderabad, but the then CBI Director reportedly turned it down.
The CBI team had found that the cheque originated from S.R.R. Investment & Finance Limited, a company owned by B. Sanjeeva Rao. The CBI had also established that another firm owned by Sanjeeva Rao, Medicon Marketing Private Limited, an intermediary in the urea deal, had received an identical sum from Mallesham Goud a couple of days earlier, and that it was this sum that was transferred to the account of Rama Rao. Mallesham Goud, alongwith Sambasiva Rao, was a director of Sai Impex Private Limited, the Indian agents of Karsan Ltd. NFL had remitted the entire sum of $38 million (Rs.133 crores, at the exchange rate prevailing at that time) as 100 per cent cash prepayment for the supply of urea into the accounts of Karsan Ltd. While 1 per cent of the amount had been remitted into Karsan's account in Ankara, 99 per cent had been remitted into the company's account in Pictet Bank, Geneva, in November 1995. Two other Swiss banks had refused to accept the funds, citing stringent disclosure requirements for such transactions.
The CBI team found more evidence. It established that Sai Krishna Impex had purchased air tickets from Hyderabad to Delhi for Sanjeeva Rao and Prabhakar Rao on March 11, 1995 and the journey was undertaken on March 12, 1995, around which time the deal was planned and executed. It also established that Prabhakar Rao was in Delhi when the deal was struck. It also traced certain leads that showed that the money from Karsan's account found its way to Hyderabad to finance the purchase of land at Nampally in the city by the recipients of the funds. Yet, it told the Special Court that it did not have any charge against Prabhakar Rao.
THE E.D.'s remand report on Prabhakar Rao has made comprehensive disclosures about various transactions in the deal. The charges are that $4 million out of the total of $38 million remitted by NFL to Karsan Limited found its way as commissions to Edible Foodstuff Trading in Dubai, from where it came to India through hawala channels. The remand report alleges that in the process Rs.10.8 crores came into the country, of which Rs.40 lakhs was handed over to Sambasiva Rao by Mallesham Goud who, in turn, issued three cheques, for a total amount of Rs.32 lakhs, all of which found their way to Prabhakar Rao.
The report alleges that Sanjeeva Rao used his kinship with Prabhakar Rao to procure the order for the supply of two million tonnes of urea by Karsan Ltd. It alleges that Sambasiva Rao had negotiated/deliberated with Karsan Ltd for the payment of a commission of $4 million out of the total payment of $38 million. It further alleges that Prabhakar Rao was one of the beneficiaries.
In support of its claim, the E.D. has said that it has obtained statements from Mallesham Goud saying that a secret commission of 8 to 10 per cent was to be paid to 'bigwigs' including Prabhakar Rao, who helped clinch the deal. According to the E.D., a secret commission of between Rs.5 crores and Rs.6 crores was received by Prabhakar Rao and others through hawala channels arranged by one Rajinder Babani. The E.D. also claims that according to another statement, made by D.S. Kanwar, Executive Director of NFL, on July 15, 1996, Sambasiva Rao had claimed to be working for Prabhakar Rao, and this was corroborated by a statement made by one Deepak Lal, an associate. Rajinder Babani had claimed in a statement made on October 17, 1995 that a secret commission of Rs.10.8 crores reached Hyderabad through hawala channels and was paid to Sambasiva Rao; the E.D. claimed that this had been confirmed also by the CBI, in its charge-sheet.
The E.D. claimed that it was the hawala money that was used to purchase the land at Nampally. According to the E.D., that Prabhakar Rao was the beneficiary of the commission was confirmed also by a statement made by one S. Nuthi, another associate. Yet another statement made to the E.D., by Anand Mohan, an intermediary, says that he delivered Rs.2 crores to an emissary sent by Prabhakar Rao.
The E.D. claims to have in its possession confidential papers seized by the CBI from Sai Krishna Impex showing a detailed plan for securing contracts and parking outside India secret funds received as commissions. It has also obtained a statement from Rama Rao, who was issued a cheque for Rs.10 lakhs by Sanjeeva Rao, that the amount was paid to Prabhakar Rao. The CBI, on the other hand, had tended to go with the version that the amount was a personal loan to Rama Rao, although the recipient himself has now admitted to the E.D. that he was merely a conduit passing on the amount to Prabhakar Rao, the ultimate beneficiary.
Now that the E.D., whose probe into the urea scam was conducted independent of the CBI, would soon issue show-cause notices to the accused, including Prabhakar Rao, for alleged foreign exchange violations in the deal, the CBI may have little option but to re-examine the issue of framing charges against Prabhakar Rao, especially since the court has ordered it to do so. With the E.D. having identified the ultimate beneficiaries, if the CBI demurs at this stage its credibility will take another beating.
This is also a test case for the scope for coordination among various agencies investigating different angles of a such a case. The Supreme Court had, while hearing the Jain hawala case, directed the establishment of a nodal agency to pool intelligence and evidence in cases involving a nexus among politicians, bureaucrats and criminals.
The Special Court's direction to the CBI to re-examine the non-inclusion of Prabhakar Rao's name in the charge-sheet came in the wake of arguments advanced by Ashok Kumar Arora, counsel for Prakash Chandra Yadav, one of the accused named in the CBI charge-sheet. Arora argued that the CBI had named Prabhakar Rao even during the remand proceedings.
He pointed out that if the Minister in charge of NFL, namely, the Minister for Fertilizers and Chemicals, himself was not taken into confidence when the deal was struck, it only pointed to the possibility of the involvement of someone even more powerful than the Minister, which could only be the Prime Minister or persons close to the Prime Minister.
Arora also argued that the fact that the Supreme Court had denied anticipatory bail to Prabhakar Rao in August 1997 showed that even the apex court was not convinced of his innocence. The court accepted his arguments and ordered the CBI to file a status report in two months' time.
National Fertilisers Limited (NFL)
VEN as Justice V.B. Gupta of the Special Court administered a rap on the knuckles of the Central Bureau of Investigation (CBI) on November 17 by asking it to examine whether the agency did not have sufficient grounds to file charges against P.V. Prabhakar Rao, son of former Prime Minister P.V. Narasimha Rao, in the urea deal case, the Enforcement Directorate (E.D.), which is independently pursuing the foreign exchange violation angle in the matter, went ahead and arrested Prabhakar Rao and got him remanded to judicial custody for 15 days from November 30. The E.D., which claims to have tracked down the trail of the complex transactions leading to the ultimate beneficiaries of the alleged Rs.10.8-crore payoffs involved in the deal, will soon issue show-cause notices to all the accused, including Prabhakar Rao.
The charge-sheet filed by the CBI in May 1996 named nine accused including M. Sambasiva Rao and B. Sanjeeva Rao (associates and relatives of Narasimha Rao), who put through the deal; the then top executives of National Fertilisers Limited (NFL), the public sector company involved in the matter; officials of the Turkish firm, Karsan Limited, which defaulted on the supply of urea but allegedly paid kickbacks to certain individuals in India; and Prakash Chandra Yadav, son of Ram Lakhan Singh Yadav, the then Union Minister for Fertilizers. The charge-sheet did not mention Prabhakar Rao, one of the alleged recipients of kickbacks.
A few months ago the CBI told the Special Court that it did not have any charges to level against Prabhakar Rao. However, in the first half of June 1996 the CBI had produced records that apparently led the trail to the doorsteps of Prabhakar Rao. If the court calls for the CBI case diaries and notes of the investigating team, it will find that the officials had gathered enough evidence to charge-sheet Prabhakar Rao. For some reason this situation was not reflected in the charge-sheet filed by the agency.
The CBI team had traced a cheque for Rs.10 lakhs, dated March 16, 1996 and drawn in favour of B.V. Rama Rao, an executive of Sinclair Electronics Industries Limited, a company owned by Prabhakar Rao. The amount had been deposited in the current account of Rama Rao. The individuals concerned, when questioned by the CBI about the transaction, said that it was a personal loan given to Rama Rao and produced records in support of this claim. However, further investigation, including the questioning of an auditor of the company, apparently revealed that the loan documents had been fabricated hastily to conceal the identity of the real beneficiary. The CBI obtained statements from the auditor to the effect that the document was fake and that the payment was intended for Prabhakar Rao. Thereupon, the investigating team sought to arrest the persons concerned in Hyderabad, but the then CBI Director reportedly turned it down.
The CBI team had found that the cheque originated from S.R.R. Investment & Finance Limited, a company owned by B. Sanjeeva Rao. The CBI had also established that another firm owned by Sanjeeva Rao, Medicon Marketing Private Limited, an intermediary in the urea deal, had received an identical sum from Mallesham Goud a couple of days earlier, and that it was this sum that was transferred to the account of Rama Rao. Mallesham Goud, alongwith Sambasiva Rao, was a director of Sai Impex Private Limited, the Indian agents of Karsan Ltd. NFL had remitted the entire sum of $38 million (Rs.133 crores, at the exchange rate prevailing at that time) as 100 per cent cash prepayment for the supply of urea into the accounts of Karsan Ltd. While 1 per cent of the amount had been remitted into Karsan's account in Ankara, 99 per cent had been remitted into the company's account in Pictet Bank, Geneva, in November 1995. Two other Swiss banks had refused to accept the funds, citing stringent disclosure requirements for such transactions.
The CBI team found more evidence. It established that Sai Krishna Impex had purchased air tickets from Hyderabad to Delhi for Sanjeeva Rao and Prabhakar Rao on March 11, 1995 and the journey was undertaken on March 12, 1995, around which time the deal was planned and executed. It also established that Prabhakar Rao was in Delhi when the deal was struck. It also traced certain leads that showed that the money from Karsan's account found its way to Hyderabad to finance the purchase of land at Nampally in the city by the recipients of the funds. Yet, it told the Special Court that it did not have any charge against Prabhakar Rao.
THE E.D.'s remand report on Prabhakar Rao has made comprehensive disclosures about various transactions in the deal. The charges are that $4 million out of the total of $38 million remitted by NFL to Karsan Limited found its way as commissions to Edible Foodstuff Trading in Dubai, from where it came to India through hawala channels. The remand report alleges that in the process Rs.10.8 crores came into the country, of which Rs.40 lakhs was handed over to Sambasiva Rao by Mallesham Goud who, in turn, issued three cheques, for a total amount of Rs.32 lakhs, all of which found their way to Prabhakar Rao.
The report alleges that Sanjeeva Rao used his kinship with Prabhakar Rao to procure the order for the supply of two million tonnes of urea by Karsan Ltd. It alleges that Sambasiva Rao had negotiated/deliberated with Karsan Ltd for the payment of a commission of $4 million out of the total payment of $38 million. It further alleges that Prabhakar Rao was one of the beneficiaries.
In support of its claim, the E.D. has said that it has obtained statements from Mallesham Goud saying that a secret commission of 8 to 10 per cent was to be paid to 'bigwigs' including Prabhakar Rao, who helped clinch the deal. According to the E.D., a secret commission of between Rs.5 crores and Rs.6 crores was received by Prabhakar Rao and others through hawala channels arranged by one Rajinder Babani. The E.D. also claims that according to another statement, made by D.S. Kanwar, Executive Director of NFL, on July 15, 1996, Sambasiva Rao had claimed to be working for Prabhakar Rao, and this was corroborated by a statement made by one Deepak Lal, an associate. Rajinder Babani had claimed in a statement made on October 17, 1995 that a secret commission of Rs.10.8 crores reached Hyderabad through hawala channels and was paid to Sambasiva Rao; the E.D. claimed that this had been confirmed also by the CBI, in its charge-sheet.
The E.D. claimed that it was the hawala money that was used to purchase the land at Nampally. According to the E.D., that Prabhakar Rao was the beneficiary of the commission was confirmed also by a statement made by one S. Nuthi, another associate. Yet another statement made to the E.D., by Anand Mohan, an intermediary, says that he delivered Rs.2 crores to an emissary sent by Prabhakar Rao.
The E.D. claims to have in its possession confidential papers seized by the CBI from Sai Krishna Impex showing a detailed plan for securing contracts and parking outside India secret funds received as commissions. It has also obtained a statement from Rama Rao, who was issued a cheque for Rs.10 lakhs by Sanjeeva Rao, that the amount was paid to Prabhakar Rao. The CBI, on the other hand, had tended to go with the version that the amount was a personal loan to Rama Rao, although the recipient himself has now admitted to the E.D. that he was merely a conduit passing on the amount to Prabhakar Rao, the ultimate beneficiary.
Now that the E.D., whose probe into the urea scam was conducted independent of the CBI, would soon issue show-cause notices to the accused, including Prabhakar Rao, for alleged foreign exchange violations in the deal, the CBI may have little option but to re-examine the issue of framing charges against Prabhakar Rao, especially since the court has ordered it to do so. With the E.D. having identified the ultimate beneficiaries, if the CBI demurs at this stage its credibility will take another beating.
This is also a test case for the scope for coordination among various agencies investigating different angles of a such a case. The Supreme Court had, while hearing the Jain hawala case, directed the establishment of a nodal agency to pool intelligence and evidence in cases involving a nexus among politicians, bureaucrats and criminals.
The Special Court's direction to the CBI to re-examine the non-inclusion of Prabhakar Rao's name in the charge-sheet came in the wake of arguments advanced by Ashok Kumar Arora, counsel for Prakash Chandra Yadav, one of the accused named in the CBI charge-sheet. Arora argued that the CBI had named Prabhakar Rao even during the remand proceedings.
He pointed out that if the Minister in charge of NFL, namely, the Minister for Fertilizers and Chemicals, himself was not taken into confidence when the deal was struck, it only pointed to the possibility of the involvement of someone even more powerful than the Minister, which could only be the Prime Minister or persons close to the Prime Minister.
Arora also argued that the fact that the Supreme Court had denied anticipatory bail to Prabhakar Rao in August 1997 showed that even the apex court was not convinced of his innocence. The court accepted his arguments and ordered the CBI to file a status report in two months' time.