A volte-face in Karnataka

Print edition : January 30, 2004

The Karnataka government makes a surprise decision to hand over to the CBI the multi-crore stamp paper scam, even as it leads to the resignation of a Cabinet Minister.

in Bangalore

HAVING claimed its first political victim in Karnataka in the form of R. Roshan Baig, the Minister for Small Scale Industries and Haj who resigned from the State Cabinet on January 4, the multi-crore fake stamp paper scam could well end up as an acute embarrassment to the Congress(I) government in the State. There are unconfirmed reports that at least two other Ministers and a host of police officers in Karnataka were hand in glove with the main accused, Abdul Karim Telgi.

Baig's resignation - he has since left on a pilgrimage to Saudi Arabia - and the fact that the S.M. Krishna government had, after months of resistance, decided on December 26 to hand over the investigations into the scam to the Central Bureau of Investigation (CBI) have already given the Opposition enough ammunition to attack the government. In both Houses of the legislature (the Legislative Assembly and the Legislative Council), the Opposition demanded that the Chief Minister make a statement on Baig's role in the scam.

Said B. Somashekar, floor leader of the All India Progressive Janata Dal in the Assembly: "The government, after months of saying there was no need for Baig's resignation or a CBI probe, has suddenly changed its stand on both issues. What were the special circumstances that forced it to do so?"

The Bharatiya Janata Party, which forced an adjournment of the Assembly on January 9, insisted that the government take action against Baig since, in its view, there was enough evidence linking the former Minister to the scam. Jagadish Shettar, Leader of the Opposition in the Assembly, told Frontline that Baig had gone abroad only to avoid being present during the legislative session.

Baig's position in the Cabinet became untenable after the arrest of his younger brother Dr. Rehan Baig by the Stamp Case Investigation Team (Stampit), the special police team investigating the case since January 2002. Rehan surrendered on December 20 after being on the run for over a month. Informed sources told Frontline that Rehan's involvement with Telgi had stretched over a period longer than the three months that Rehan had admitted. Rehan said he only had a three-month-long business relationship with Telgi seven years ago, when his company Metro Corporation was engaged in the palmolein and kerosene trade. He added he knew nothing of Telgi's involvement in the fake stamp paper racket until it became public in August 2000.

But informed sources told Frontline that Stampit had uncovered a direct link between Metro Corporation and the stamp paper racket. Rehan knew and operated with Telgi between 1995 and 2000, they said. Stampit even traced a mobile phone number that belonged to Rehan and which he used for the fake stamp paper transactions, according to the sources. The evidence has already been placed before the courts. The police have 90 days to file a charge-sheet against Rehan, who has been remanded to police custody. It is likely that he could be booked for money laundering and for being an accomplice in the stamp paper scam.

Surprisingly, Stampit have so far not sought information from former Bangalore Police Commissioner H.T. Sangliana. The now-retired Sangliana was one of the first officers and certainly the seniormost officer to interrogate Telgi after his arrest in Ajmer in November 2001. After interrogating him, Sangliana had submitted an 18-page report to the State government on Telgi's activities and who his associates and supporters were. But the government chose not to act on the report. Sources in Stampit told Frontline that audio-tape recordings of Telgi's confessions to Sangliana had been found to be doctored or edited. In all likelihood, the CBI will approach Sangliana when it starts its investigations.

State BJP leaders have also alleged that three persons made major investments in various companies (such as Pearl Global Ltd., Delhi) on behalf of Telgi in Chennai and New Delhi. One of them is a retired Karnataka Director-General of Police. The other two are J.L. Zutshi, a former Chairman of Indian Oil Corporation, and Suresh Mathur, the chairman and managing director (CMD) of Petronet LNG. While Mathur has not reacted, Zutshi and another person, Deepak Seth, CMD of Pearl Global, denied any involvement in the scam. Also denying involvement was Santhosh Gadia, a chartered accountant and director of Pearl Global. He said he knew the former DGP but did not enter into any financial transactions with him.

It is obvious that Karnataka is reluctant to let Telgi, who is currently in the Bangalore Central Prison, out of its borders. It has invoked Section 268 of the Code of Criminal Procedure, 1973, to restrain Telgi's movement out of the State. Informed sources point out that the recalcitrant Telgi could spill the beans on his Karnataka contacts if he is taken out of the State. This, according to observers, was one of the main reasons why the Karnataka government was for long reluctant to hand over the case to the CBI. Unlike in Maharashtra where the Special Investigating Team has been working on the orders of the Maharashtra High Court, Stampit has been working directly under the Karnataka Chief Minister's office.

As for the State's volte-face in handing over the case to the CBI, the official reason given is that it wanted to avoid what is known in legal parlance as `double jeopardy' (being tried twice for the same offence). But there is a feeling that there is more to the State's decision than this. Although the Centre has been making noises that Karnataka should hand over the fake stamp paper cases to the CBI - it even wrote a letter in June 2002 - it has not specifically asked the State to do so. In fact, Union Finance Minister Jaswant Singh, during a speech he made in Parliament, did not even refer to the allegations made by his own party members that the Congress(I) governments in Karnataka and Maharashtra were "avoiding" a probe by the CBI. Jaswant Singh, however, said that the Union government had no problem whatsoever with who conducted the investigations, just as long as the Centre was taken into confidence.

For Krishna and the Congress(I), containing the fall-out of the stamp paper scam and holding the flock together could be the biggest fire-fighting exercise in this election year.

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