REVEALED: The case that did Yeddy in

B S Yeddyurappa, who stepped down as chief minister of Karnataka, was done in by the Lokayukta's report on illegal mining. Vicky Nanjappa explains the exact case against the chief minister, which forced the top leadership of the Bharatiya Janata Party to seek his resignation.

In the Lokayukta's report, the name of the chief minister figures under the chapter titled The South West Mining Company Limited.

The chapter details transactions between the mining company and a trust run by B S Yeddyurappa's sons and son-in-law. Although the report does not directly mention Yeddyurappa's name, the Lokayukta has been able to prove that his sons and son-in-law were beneficiaries of two transactions worth Rs 10 crore.

The Lokayukta concludes this chapter by saying that there was no mining connection between the trust and the company in question.

These payments were made under the garb of donations to the trust, when the company in question itself was in not in a financial condition to make such a huge donation.

"It appears that these payments and also the sale of prime land were done to get a favourable reply from the state and the central governments," it says.

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The chapter starts off with, "There are some sensitive matters with regard to certain payments made by the South West Mining Company Limited to a trust of which the sons of the 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 Bangalore to M/s South West Mining Company Limited which is abnormal."

This chapter also traces the relationship between the Jindal Group of Companies with SWML.

In 1994, Jindal Vijayanagar Steel Limited set up its plant at Toranagallu in the Bellary-Hospet area of Karnataka, spread over 3,700 acres. In 2005, Jindal Iron and Steel Company Limited and Jindal Vijayanagar Steel Limited merged to form JSW Steel Ltd.

The company submitted a proposal for grant of iron ore mining lease in Donimali range in July 18, 2007, to supply iron ore to JSW Steel Ltd. On the same date, two more proposals for different locations by SWML and VMPL were also submitted.

The details of proposals submitted by them and recommended by the state government in past are pending.

The three proposals of granting of mining leases in favour of JSW Steel Ltd, SWML and VMPL Ltd (pending since 2007), were in active consideration of the state government for replying a query raised by ministry of mines, regarding whether there is any complaint case pending against the proposals (Govt of India letter dated 26/2/2010).

The centre requested the state government to furnish the comments in the matter, in the light of the above report.

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This information was called in March 2010. The Centre also wanted to know whether the proposals can be processed by the ministry.

JSW, SWML and VMPL had submitted the letters to the director, mines and secretary, mines requesting to submit suitable clarification to ministry of mines so as to process the recommendation of the Karnataka government in their favour.

"The copy of the representation is submitted herein as it is to be noted that though the above mentioned companies made their application for grant of mining lease on 18/7/2007, the same was not pursued until March-July 2010," the report says.

By the said time, the Centre had sought a feedback on certain issues with the Karnataka government.

"The correspondence made between the companies mentioned herein above and the government clearly shows that the companies were keen on persuading the government to send replies to the Centre in their favour," the report adds.

Going by these developments, the Lokayukta decided to investigate the transactions of these companies, and noticed that there were some irregularities.

In order to ascertain the particulars of SWML's transactions in respect of its purchase and sales, its bank accounts details was requested as per a letter onFebruary 18, 2011.

SWML submitted the details as under:

Bank Name: State Bank of Mysore 

Account No: 64010486365

Branch JVSL Branch, Toranagallu, Bellary district.

The report states that on perusal of the said account, certain abnormal transactions were noticed. It was found that Rs 10 crore was paid to Prerana Education Trust on March 17-18, 2010.

Further, it states that Rs11.91 crore was credited vide cheque number 80912, dated February 26, 2010 in same account. The said amount came from the account of JSW Steel Ltd.

"With this trail of transaction, it is clear that the amount finally came from JSW Steel Ltd which is paid to the Prerna Trust," the report says.

There was no trade of iron ore between the two during the period.

The report further says that that the balance in the SWML's bank account was running under overdraft during that and other periods in the range of Rs 3-5 crore.

"If we go by the trail of money transaction it can be construed that Rs 10 crore was paid by JSW to Prerana Education Trust. In the subsequent months, there were also abnormal payments of heavy amounts in favour of certain individuals," the report says.

An inquiry from the management of the company revealed that Rs 20 crore was paid for the purchase of land in Bangalore.

On going through the details for agreement to sell signed between Sri Vijayendra S/o Sri B S Yeddyurappa and Sri R N Sohan Kumar (Yeddyurappa's son in law) and SWML, it states that full consideration amount of a sum of Rs 10 crore was paid to the vendors by the purchasers (in July 2010).

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"The details of the cheques etc was kept blank. It is to be noted here that all the cheques in this regard were paid in August 2010, and validity dates fall in August and September 2010. The date of the agreement was kept blank, but was signed in July 2010. Hence, there is a mismatch recorded in the agreement signed, and amount actually credited in the accounts of the vendors," the report says.

"The report comes to the conclusion that it is inferred that the amount which is credit from the account of SWML to Prerana Education Trust and to vendors Sri BY Vijayandra, BY Raghavendra and R N Sohan Kumar actually has come from the account of JSW Steels Ltd," it adds.

"The payment of such huge amounts creates strong suspicion as to whether such payment is made for getting favours, i.e. for submitting a favourable reply to the central government by the state government, for processing the proposals to grant of iron ore mining leases in favour of JSW, SWML and VMPL. Such possibility cannot be ruled out," the report says.

The report also notices the SWML was not sound financially. It had made certain applications for grant of lease simultaneously with JISCO and JVSL for the grant of certain lands for the purpose of mining of iron ore.

These proposals/applications are pending with the Centre. It also requires to be noted that the matter was pending at the stage of replying to querries raised by the ministry of mines.

There were certain writ petitions and special leave petitions pending against the above proposals in March 2010 and July 2010. Simultaneously, the Centre also wanted to know whether the proposals could be processed by the ministry.

From the above facts, it is seen, the source of donation given by SWML to Prerana Trust has come from JSW in a circuitous manner, which then donated the money on March 17-18, 2010.

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The report raises a question as to why JSW had to transfer money to SWML to give donation to the trust, when it could have directly given it to the trust itself.

From the nature of transaction, it looks that it is the JWSL which is making the donation through SWML. The circumstances and the manner in which the donation was made, gives rise to the suspicion that this money was not donation, as it is understood in the common parlance, but money paid for some other consideration.

Similarly, the sale of one acre of land by Yeddyurappa's sons and son-in-law in Rachenahalli village to SWML is shrouded with suspicion.

The Lokayukta observes that he is of the opinion that these are sham transactions and the donation and the excess payment made to Yeddyurappa's kin, 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," the report says.

"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," the report adds.

"With this conclusion, since the report under the Karnataka Lokayukta Act to take action has to be made to competent authority, who is His Excellency, the Governor of Karnataka, under Section 2(4) of the Karnataka Lokayukta Act, 1984, in the case of the chief minister, I will have to send a copy of this report to His Excellency the Governor of Karnataka," the report says.

"This procedure was followed by me, when in an almost similar situation in regard to a former chief minister of Karnataka (Dharam Singh) in 2008, while submitting a report to the government, a separate report was sent to the Governor of Karnataka," it concludes.