JUST OVER a month into office, and the DN Sadananda Gowda-led BJP government in Karnataka finds itself under a cloud of corruption and charges of fraud. Newly inducted forest minister CP Yogeshwar has been charged with corporate fraud, criminal conspiracy for siphoning off funds, forgery and cheating by the Serious Fraud Investigation Office (SFIO) of the Union Ministry of Corporate Affairs, following a probe into the dealings of his company, Megacity Developers and Builders Limited (MDBL). The SFIO took over the case after the state Criminal Investigation Department (CID) in 2010 had charged Yogeshwar with criminal forgery.
The SFIO, which began its investigation in April 2010 into the Rs 71 crore scam involving the forest minister and his brother CP Gangadeshwar, has indicted them on 16 counts for siphoning off funds and cheating thousands of people who had paid money for plots in his Vajragiri Township project. The SFIO submitted its report on 30 July to the corporate affairs ministry and has sought the prosecution of the minister. If found guilty, Yogeshwar can be sentenced to life imprisonment.
Megacity was promoted by Yogeshwar in 1995. Capitalising on the IT boom in Bengaluru, Yogeshwar promoted the Vajra Township as a property along the proposed Bangalore- Mysore Infrastructure Corridor (BMIC) Highway. In 1995, land in this planned township was available at a throwaway price of Rs 40 per square feet.
According to the business model of the company, investors were encouraged to own a plot by paying monthly instalments over five years. The promoters spared no effort to ensure timely payments. Amitabh Bachchan was flown in to inaugurate their corporate office in Bengaluru. The firm ‘honoured’ veteran actor Pandari Bai and Kannada singer C Ashwath by gifting them plots.
Yogeshwar’s political fortunes soared after the 1999 election. He was elected to the Karnataka Assembly on a Congress ticket from the Bangalore Rural constituency. However, in March 2010, based on a PIL filed in 2002 by people who had applied for plots in his project, the state CID chargesheeted Yogeshwar with criminal forgery. In its chargesheet, the CID had stated that permission was granted by the state government for 1,094 plots on 117 acres of land. The rate was fixed at Rs 40 per square feet. Yogeshwar had facilitated that money be paid in monthly instalments of Rs 800 to Rs 6,400. During 1995-2001, the company collected more than Rs 71 crore from over 9,000 people. The investors included the middle class and some NRIs. Of the 9,000-odd investors, over 3,000 paid the amount in full, whereas the remaining 6,000 paid anywhere between two to 40 instalments. But, along with his brother Gangadeshwar and his brothers-in-law P Mahadevaiah and HR Ramesh, he misused the funds.
“A sum of Rs 67 crore was collected from the members and Rs 37.22 crore was withdrawn from a bank for buying the land and constructing a temple and a house in Chakkere in Channapatna,” says a CID official who probed the case. “MDBL officials also did not provide account details from 2006-07 to the Registrar of Companies.’’
Upholding the CID probe, the SFIO after further investigation, filed its report to the Union corporate affairs ministry and charged them for criminal breach of trust, forgery for the purpose of cheating, criminal conspiracy for willfully misleading representation in brochures/pamphlets to deceive investor public — punishable under Sections 415, 420, 120A, 405, 463, 468 of the Indian Penal Code.
During the investigation, the SFIO additionally found that Yogeshwar had forged about 450 sale agreements to show that Rs 37 crore was paid to farmers to purchase their land and illegally used the company’s money. It found that in some cases, survey numbers mentioned in the agreement did not exist. In some, agreements were made in the name of people who were not even alive. In others, the agreement had neither been signed by the particular landowner nor did he receive payment from Yogeshwar. Also, only part payments were made.
According to the report, Yogeshwar had illegally obtained three different Director Identification Numbers (DINs) using his name, his father’s name and address in three different ways in violation of the Companies Act as he was ‘ineligible’ to become a director of a company because he had not submitted the company’s annual returns during 2006-09. He was given one of these DINs when he was chairman and director of the state-owned Karnataka Silk Industries Corporation last year.
Other charges include swindling Rs 3.6 crore from his company, constructing a building for another firm (Fashion Forum Pvt Ltd) and a house for himself near Channapatna by misappropriating Rs 1.59 crore from the company’s funds, not filing annual returns, balance sheet and profit and loss account, not holding general body meetings, not accounting for parcels of land belonging to the company, and not furnishing information during the investigation despite summons.
WHEN CONTACTED, JK Teotia, additional director, SFIO and Dhan Raj, director, investigations, Ministry of Corporate Affairs, refused to comment. However, Yogeshwar defends his actions. “The case has been going on for the past five-six years, and is nothing but a political vendetta on the part of JD(S) leader HD Kumaraswamy. The charges levelled against me are false propaganda on the part of the JD(S),” he says.
Responding to Yogeshwar’s allegations, Kumaraswamy’s press secretary Sadanand says, “There is no relation between Kumaraswamy and the SFIO. It is a case that is being probed by a reputed investigating agency, which also probed the Satyam scam. I don’t think we can influence it.”
Yogeshwar’s indictment has come at a time when several ministers, including former chief minister BS Yeddyurappa, are facing corruption charges. A trial against Yeddyurappa is on in the antigraft court in the state’s capital. The CBI is grilling mining baron Janardhana Reddy, his brother Karunakara Reddy and aide Sriramulu in the multi-crore mining scam.
In another case, former minister of information technology and biotechnology Katta Subramanya Naidu has been arrested and remanded in judicial custody along with his son Katta Jagadish Naidu for the past two months.
“We have the information. Everything is all right. It is a smear campaign on the part of the opposition,” says state BJP leader KS Eshwarappa. Interestingly, the BJP had elevated Yogeshwar, who crossed over from the Congress in 2009, to a ministerial post hoping to use him to make inroads into the JD(S) bastion of Ramanagaram district. He trounced the JD(S) candidate by a huge margin in the Channapatna Assembly byelection. Asked if the party was mulling removal of the minister till the charges against him are cleared, Eshwarappa said, “We are not taking any action against him.”
The indictment of the forest minister comes at a time when the party is geared up for the byelections in the Koppal constituency.Imran Khan is a Senior Correspondent with Tehelka.com.