Activist Arvind Kejriwal's allegations against Union Law Minister Salman Khurshid are based on an inspection report by the Comptroller and Auditor General, reports a correspondent from Delhi.

Salman Khurshid could be in deep trouble for the alleged financial 'fraud' committed by the Dr Zakir Hussain Memorial Trust, which is reportedly run by the Union law minister and his wife Louise Fernandes Khurshid.

The trust, named after Salman Khurshid's maternal grandfather, the late President Dr Zakir Hussain, has been accused of allegedly misappropriating Rs 7.15 million granted to it by the Union ministry of social justice and empowerment to provide aids and appliances to handicapped people in the minister's native Uttar Pradesh.

The Comptroller and Auditor General's office has asked the ministry of social justice to recover the grant of Rs 7.15 million along with an interest of Rs 1.549 million.

The CAG also pulled up the ministry for further sanctioning Rs 6.825 million to the trust during 2010-2011 for implementation of the scheme in 17 districts of Uttar Pradesh.

The trust has also been accused of lying about conducting camps to help the handicapped in various districts of UP.

READ the full audit report here.

Khurshid has threatened to sue activist Arvind Kejriwal who brought these allegations into the public domain.

Kejriwal was arrested on Friday, october 12, while leading a rally of disabled people to Prime Minister Manmohan Singh's home to demand Khurshid's resignation from the Union Cabinet.

Kejriwal's allegations are based on an inspection report by the Director General of Audit, Central Expenditure, a wing of the Comptroller and Auditor General.

The inspection report will form part of the CAG report that is yet to be tabled in Parliament.

The inspection report came into circulation even before the CAG report was finalised.

The alleged 'fraud' was detected in the course of scrutinising implementation of the scheme -- to assist disabled persons with aids and appliances --during an audit.

The auditors visited the trust's office -- which is located at Khurshid's home in Jamia Nagar, Delhi -- on March 2, March 19 and April 2, 2012. But no representative from the trust was available to respond to the auditors's queries.

The social welfare ministry was also censured for trying to cover up the alleged fraud committed by the trust -- by pleading that it was not under its aegis.

The CAG affirmed that the social welfare ministry released the grants to the trust and 'as per the provisions of the sanction order, accounts of the trust would be open for audit by CAG of India.'

The report noted that the social welfare ministry is bound to take action against the trust in the event of non-compliance of its sanction order.

The NGO had claimed that camps were held in Bareilly, Siddhartha Nagar and Shahjahanpur districts, Uttar Pradesh, on January 15, January 25 and February 15, 2010.

The auditors cited the trust's letters dated April 1, 2010 to the district magistrates of these districts -- which state that it intends to hold the camps -- proving that the camps were not held before April 2010.

'Wrong information was furnished by the trust to the ministry,' says the inspection report.

When the social welfare ministry asked the district magistrates about the camps, the Allahabad district magistrate revealed that no such camp was held by the trust till October 7, 2011, though the trust had claimed in its report to the ministry that the Allahabad camp was held on June 5, 2010.

The trust also claimed that a camp was held in Sant Ravidas Nagar on April 17, 2010. The audit report states that the camp could not have been held in April as aids and appliances for the camp were dispatched by the supplier only on July 19, 2010.

The CAG also objected to the social welfare ministry not recovering the grants despite all these indications of alleged misappropriation.