EXCLUSIVE EXTRACTS: The Karnataka mining report

The report on illegal mining in Karnataka, compiled by Lokayukta Santosh Hegde and his team, may spell the end of the first Bharatiya Janata Party government in south India.

Export of illicit iron ores from Belekeri port 

In the report of Dr U V Singh committee found large scale irregularities and illegalities that have taken place in a small port situated at Belekeri, south of Karwar in Uttara Kannada district.

"While this eport of mine is in continuation of my first report submitted by me in the month of December 2008, the happenings at Belekeri port has a special significance for this report. Hence, I attach a lot of importance to this part of the report.

"On 20th February 2010, the Lokayukta police raided the Belekeri port and seized documents and computers, etc while the Forest Department seized certain quantities of iron ore, which was illegally extracted and transported during 2009-10. It is because of this, a separate chapter is included in this report.

"The facts discovered here speak for themselves. On 20th February 2010, on a complaint by one Sri Desai and also on the reliable information, the Lokayukta police conducted a raid at Belekeri port and seized certain documents and computers, etc. A forest offence case was registered in FIR 17/2009-10 dated 15/3/2010 by forest department against the Port Conservator of Belekeri port. On 20/3/2010, iron stored in the port area was seized and the Forest Department handed over the iron ore seized to the Port Conservator, Belekeri for safe custody.

"In June 2010, it was found that large portion of the seized iron ore was stolen from the port. Subsequently, cases of theft and other offences have been registered against the Port Conservator and companies/firms and others by the jurisdictional police. Various agencies including CID, Forest Department are conducting investigation of the said case. The total export from Belekeri port in the year 2006-07 to 2010-11 is about 2,03,68,977 MTs.

...

Benami accounts of Sri Bhaktha Markandeshwara Minerals, Hospet 

"M/s Sri Bhaktha Markandeshwara Minerals Hospet (SBMM) was established in the year 2008. It is an unregistered firm purportedly owned by a sole proprietor Sri K. Kashivishwanath (aged 35 years, the date of birth being 18/12/1975) son of K. Hanumanthappa, Weavers Cooperative Colony, Hospet, Bellary District. The records of registration i.e. TIN number have been collected from the Office of the Assistant Commissioner of Commercial Taxes, LVO 500, Hospet. The identity of the firm was noticed while examining the electronic records of Sri K. Mahesh of Hospet obtained from the Income Tax Department, Bangalore.

"The bank accounts of this firm have been obtained from the Axis Bank, Hospet and Bellary, Lakshmivilas Bank, Hospet and Pragathi Grameena Bank, Hospet. On going through the bank accounts, it has been observed that crores of rupees have been deposited in banks and also withdrawn in cash from these accounts. Such illegal money transactions have been further trailed/proceed to accounts in bank of various persons/companies/firms and others.

"It is stated here that Sri K. Kashi Vishwanath when applied for getting TIN number from the Commercial Taxes Department in Karnataka, he had given a bank account No. SB 13670 of Pragathi Grameena Bank, Hospet  This account number has never been used for VAT payments. Entries reflected in the chart above have not been reflected in the records of the Commercial Taxes Department, which has totally failed to trace these accounts. Financial transaction of Pragathi Grameena Bank is given as hereunder. Total debits Rs. 3,70,202.00 and Total credits 3,70,750.00, K. Kashi Vishwanath has deposed on oath on 6/4/2011 at the office of my investigating team. The deposition statement dated 6/4/2011 of Sri K. Kashi Vishwanath is enclosed.

"As per his statement, he is an ordinary private employee working in Lakshmi Venkateshwara Steel Hardware Shop at Hospet since last one and a half years. Before this, he was running his own "Kirana shop", a petty shop. He has stated that he is not sure whether his firm i.e. M/s Sri Bhaktha Markandeshwara Minerals Hospet (SBMM) is a registered firm or not, but he has taken the VAT Number. He states that he was a sole partner but since last three months, his cousin brother Sri K. Govindaraj son of Sri K. Nagaraju has also become the partner. This has not been informed to the Commercial Taxes Department and other connected departments. In reply to a question (Question No. 7) which is reproduced herein; he has stated that M/s SBMM owned by Sri K. Kashi Vishwanath has never entered into any iron ore trade.

"The office of the Lokayukta has approached the Income Tax Department, Government of India at Bangalore to exchange the information/documents mainly the documents/electronic devices seized by them during the various raids conducted in 2010. After having a thorough discussion and correspondence, a pen drive was provided to this office having the contents seized from the premises of Sri Karapudi Mahesh (K. Mahesh).

...

Seeking removal of Janardhana Reddy

"The money from the above said accounts proceeds to "G.J. Reddy Sir" (Bellary Risk Amount and others as per the electronic data record of IT department) and also to Associated Mining Company (as per bank accounts details) should be forfeited to State Government with other legal actions.

"K Kashi Vishwanath is an ordinary employee and does not operate iron ore trade instead he issues broachers on behalf of his firm which are illegal and unlawful.

"Action should also be taken against all those whose names are stated in this Chapter, who are involved in the illegal mining and iron ore trade under the relevant provisions of Law, with recovery of losses to the State Government, as well as, penal actions should also be resorted to, wherever necessary. The State Government may request the Competent Authority in Govt. of India/ Reserve Bank of India to take action under the relevant Law for cash flow in various accounts.

"In view of the misconduct of Sri G.Janardhana Reddy, Minister, noted in this Chapter, I recommend to the Competent Authority for his removal from the Cabinet.'

...

M/s South West Mining Company Limited -- the Jindal connection

"Dr U V Singh in his report submitted to me in the above chapter, has discussed some sensitive matters in regard to certain payments made by South West Mining Company Limited to a trust of which the sons of Chief Minister are trustees and so also certain sales effected by the son and son in law of the Chief Minister, of an acre of land in the suburb of Bangalore to M/s South West Mining Company Limited which according to the report is abnormal.

"Dr. U.V. Singh has in his report traced the possible relationship between Jindal Group of Companies with M/s South West Mining Company Limited.

"It is found from his report that the Jindal Group has set up its first steel plant in 1982 at Vasind near Mumbai. Soon after, it acquired Piramal Steel Ltd, which operated a mini steel mill at Tarapur in Maharashtra. The Jindals, who had experience in the steel industry, renamed it as Jindal Iron and Steel Co. Ltd. (JISCO). In 1994, the Jindal Vijayanagar Steel Limited (JVSL) with its plant located at Toranagallu in the Bellary-Hospet area of Karnataka has been set up in the heart of the high-grade iron ore belt and spread over 3,700 acres of land.

"In 2005, JISCO and JVSL merged to form JSW Steel Ltd (JSW).

"The Jindal Group is one of the largest Groups in the State having a steel plant at Toranagallu. The main supply of iron ore to this Steel plant is from mines in Bellary district. The JSW is also having mines managed jointly with Mysore Minerals Ltd (MML) through Vijayanagar Minerals Pvt. Ltd (VMPL). The mine is known as Timmappanagudi Iron Ore Mine (TIOM). The VMPL is a joint venture Company of JSW and MML. The iron ore is supplied through an agreement and conditions therein. There is another Company by name M/s. South West Mining Ltd (SWML) having office at Main Road Old JVSL, Administrative Building, Vidyanagar, Toranagallu. In their letter pad the address is shown as JSW Mining Office, Near Talur Cross, P.O. Vidyanagar-583275, Toranagallu.

"I have already noticed that on or about that time of both purchase of the land and donation, three applications were pending before the Government of Karnataka and suitable reply favouring the companies concerned would have been of great advantage to these companies. Therefore, I am of the opinion that these are sham transactions and the donation and the excess payment made to the family members of the Chief Minister, is to get a favourable reply from the State Government to the Central Government. In this background, receipt of money either as donation or as sale consideration amounts to receiving illegal gratification to show an official favour, which is an offence under the Prevention of Corruption Act, 1988.

"Therefore, I consider it necessary to recommend to the Competent Authority to take appropriate steps to initiate criminal proceedings against the Chief Minister and such other persons who are involved in the said transaction."