Supreme Court orders CBI probe against Yeddyurappa in mining scam

Jindal Steel Works and South West Mining will also be investigated for allegedly paying bribes to kin of former chief minister

By Anupam Chakravartty
Published: Friday 11 May 2012

Yeddyurappa in mining

The Supreme Court of India has ordered a CBI probe against former Karnataka chief minister B S Yeddyurappa in connection with alleged kickbacks taken from mining companies in lieu of granting mining leases. The court, on May 11, also directed CBI to probe all the industries involved in alleged payment of kickbacks to the kin of the former chief minister. The order follows a recommendation by the apex court-appointed Central Empowered Committee (CEC) on mining. 

A special bench headed by chief justice S H Kapadia asked CBI to conduct  the probe without getting influenced by the political clout of the persons in question and file a report by August 3, 2012. The major corporations that will come under CBI scanner include Jindal Steel Works, Mysore Minerals Limited and South West Mining Limited.

Meanwhile, a CBI court on Thursday extended the judicial custody of former Karnataka minister and mining baron G Janardhana Reddy and his personal assistant Mehfuz Ali Khan till May 23. They were arrested along with two government officials in connection with an illegal mining case. Reddy obtained conditional bail on Friday (May 11) in yet another case of illegal mining from a CBI court in Hyderabad. He has been in jail since September 2011.  

Although the CEC recommendation for CBI probe has been opposed by many, including the Karnataka state government, the Supreme Court bench on Friday set a precedent for the future investigation by making an observation: “How are you being prejudiced with somebody investigating the matter?” The bench further wanted to know if was possible to shut its eyes if a complaint has been filed supported with evidence.

The complaint in the form of a petition was filed by the Samaj Parivartana Samudaya (SPS), a non-profit based in Dharwad district of Karnataka, in the Supreme Court following an exhaustive report by the former Karnataka Lokayukta, N Santosh Hegde. Hegde's second report was filed on July 27, 2011 (See How Bellary was laid waste) . The report forms basis of the petition by SPS. 

Yeddyurappa, on the other hand, has already obtained a judgement from the Karnataka High Court in his favour. The court quashed the FIR filed against him on the basis of Lokayukta's indictment on technical grounds. The high court had held that the Lokayukta has committed a serious error in not following principle of natural justice while holding the former chief minister guilty of misconduct. But the Lokayukta had conducted the enquiry under section 7.2(A) of the Lokayukta Act, which is a preliminary enquiry and not a conclusive one, paving the way for further investigation by CBI or any competent authority of the government.  

Jindals paid Rs 10 crore to Yeddyurappa family: Hegde report

Chapter 22 of Hedge's report, which is now a part of the CBI investigation, shows that Rs 10 crore was paid by South West Mining Company (SWMC), a front company of Jindal Steel Works, to Shimoga-based Prerana Educational and Social Trust (PEST), owned by the sons of Yeddyruppa. Hegde along with the Lokayukta Police, as stated in the chapter, found that the money was transferred from Jindal Steel Works to SWMC, saying the latter was running losses and, therefore, borrowing from the parent company. However, Hegde and the Lokayukta Police  who dug into the bank details, found that the said amount was transferred through a long process of indirect payments to keep the identity of the trust secret.

The petition moved by SPS talks of this transaction in detail. “The fact that Yeddyurappa received Rs 10 crore for an education trust run by his family cannot be denied as it is paid by cheque and there is evidence for that,” the petition says. It adds: “The payment made by SWMC by borrowing Rs 10 crore, which the trust has received in a clandestine manner, when the company did not have its own funds itself, is an indicator of the fact that that money is not a donation as such, because it is paid by borrowing the funds.” 

“Similarly, market value of a property in Rachenehalli village (owned by Yeddyurappa's son) was fixed at Rs 1 crore, but was sold to the company in question (South West Mining) for a sale consideration of Rs 20 crore, which is a sham sale transaction. Such huge donations in the normal circumstances would not be given to an educational institution, which is not providing education in Toranagal or Bellary district where the company is operating. The trust is supposedly operating in Shimoga district. Payment of money in anticipation of grant of a mining lease, (which the company is) otherwise not entitled to, is an irregularity in granting mining leases,” the petitioner contends. The petition has been submitted and incorporated in the report to CEC.

Incidentally, before the mining lease was granted, there was a stay order on it as the Lokayukta had tabled his report in the Karnataka state Legislative Assembly, which was soon followed by a petition filed by SPS. Later Hegde said that it was difficult for the petitioner, SPS, to prove that Yeddyurappa favoured these mining companies. His report, however, said the former chief minister sought illegal gratification by raising Rs 28 crore for his family-owned trust.

It has been further alleged that Yeddyurappa and his family members have acquired properties and investments to the tune of Rs 339 crore from illegal mining and related activities.

JSW would face investigation for causing a loss of Rs 324 crore to the state exchequer by violating conditions of the Memorandum of Understanding (MoU) it signed with the state-owned Mysore Mineral Limited (MML) for supplying iron ore.

CEC is also in possession of reports on three labour contractors associated with JSW, which also contributed to pay offs, making the total amount raised by Prerana Trust to Rs 27.18 crore in 2010.



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