CBI’s black sheep

Nageswara Rao IPS : CBI’s black sheep

This is the story of a rogue cop whose luck ran out after a long successful run in India’s premier investigating agency, the CBI.

Nageswara Rao, an IPS officer of Odisha cadre ruled the roost as Joint Director, Chennai Zone of CBI. He was almost unstoppable. No one dared to question him and those dared were shown their place and doomed.
It all commenced with Savukku’s exclusive story in Tamil published on 17 November 2014. The story which was done after elaborate investigation did not evoke the required response from any of the law enforcement agencies.
Hindustan Tele Printers Limited or HTL was started as a Public Sector Unit of the Central Government, on 14th December 1960 at Guindy. It was intended to manufacture Teleprinters, but at the initial stage it assembled the parts of teleprinters imported from the Italian Company Olivetti. Another PSU, Hindustan Machine Tools Limited (HMT), manufactured many of the machines required for the Hindustan Teleprinters.

Hindustan Teleprinters Ltd. continued as an active supplier to P&T Department. But economic liberalization turned out to be a bane for this PSU, as it failed to understand the sea change in technology. The introduction of mobile services was the final nail in the coffin of HTL. It turned into a loss making unit.

When the central government wanted to commence a PSU in Chennai, TN government was liberal in allotting prime land in Chennai keeping in mind the employment it would generate. The land was allotted in 1965 and the condition for allotment was specific. The land so allotted should never be used for anything other than the purpose it has been allotted.

After HTL became a sick unit, its debts started mounting. HTL owed money to banks, employees, state government by way of sales tax, etc. Banks to which HTL owed money, formed a consortium headed by SBI.

Himachal Futuristic Communication Limited

In 2001, the Department of Disinvestment, decided to sell 74% shares of HTL and Himachal Futuristic Communication Limited (HFCL) emerged as the successful bidder. HFCL was incorporated in the year 1987 by Dr.Deepak Malhotra, Mahendra Nahata and Vinay Maloo.

HFCL commenced its operations by implementing a small 1.68 crore project for manufacture of analog subscriber carrier systems. Subsequently HFCL stunned the market by  forming partnership with Israel based Bezeq and managed to win 9 of the 20 telecom circles outbidding AT&T – Birla, Reliance-Ninex, BPL-US West and Tata-Bell Canada. When HFCL’s stocks were running high, it got itself entangled in scam with its godfather the then Telecommunications Minister Sukhram being booked by CBI. Subsequently HFCL got embroiled in 2G scam too.

HFCL Principal Promoter Mahendra Nahata was also accused of making frequent visits to the residence of Ranjit Sinha in spite of being involved in 2G scam.

Guindy land comes to auction

The consortium of banks headed by SBI decided to auction 11.021 acres of the land belonging to HTL. The Bengaluru based RMZ Millenia, a realty firm emerged as the successful bidder and bid Rs.298 crores for the 11.021 acres of land.

RMZ also deposited Rs.20 crores in an Escrow account towards the purchase of this land. An agreement to this effect was signed between State Bank of India (Escrow Agent), HTL Limited the property owner and RMZ Millenia, the purchaser on 30.03.2007.

But government of Tamil Nadu was reluctant to grant NOC and was litigating up to Supreme Court. The undue delay resulted in the successful bidder RMZ Millenia pulling out of the deal.

On 16 April 2012, the government of Tamil Nadu finally issued No Objection Certificate for the sale of land belonging to HTL in G.O. Ms No. 18, Micro, Small and Medium Enterprises Department. One of the mandatory conditions for issuance of NOC is that “out of the net sale proceeds, the company (HTL Limited) shall remit after deducting its liabilities, an amount equivalent to 10% of such surprlus to government”.

But, this G.O itself was the result of a criminal conspiracy say sources. Decision to issue NOC to HTL was taken in a cabinet meet of TN cabinet headed by Jayalalitha. In the meet, it was decided to relax the condition on the sale deed.

In a note submitted to cabinet, Finance Department of TN government insisted that portion of the premium price shall be shared with the state government, as the relaxation of this condition will fetch higher price for the said land. The note stipulated that ‘therefore, as a pre-condition to the permission to grant of NOC, government may insist that out of the sale proceeds, an appropriate premium should be paid to the Government / SIDCO for lifting the rights to enable the deployment of the funds for the development of MSME sector.”

But, the word “appropriate premium price” was mysteriously missing in the follow up order issued granting NOC. Sources say, Finance department raised a red flag about this omission, but to no avail. In the secret note sent to the CM, it has been mentioned that “ Finance Department has specifically mentioned that an appropriate percentage of share on the premium price will be decided by the MS&ME department depending on the rights foregone. Hence the MS&ME department should be determined with the benchmark price to decide premium value to share it with state government.

But the Cabinet Note was prepared without indicating benchmark price or percentage of share on the premium price shall be shared with the state government. In the Cabinet Meeting it was decided to fix this share as 10%. There was no other modification suggested in the cabinet meeting.

However in the Minutes of the Cabinet Meeting, this has been altered as 10% of the share on the surplus of the land value after meeting the loan, instead of 10% of the premium price fetched on such disposal.”

This secret finance department note wonders why a decision taken in the cabinet meeting was specifically altered.

Highly placed sources revealed that the conspiracy to confer the prime land of 11.021 acres at Guindy was hatched by former Chief Secretary R.Ram Mohana Rao and executed by his lieutenants Niranjan Mardi IAS and Hans Raj Varma IAS. Hans Raj Varma IAS was the then Chairman, SIDCO and Niranjan Mardi IAS was the then MS&ME Secretary. It was Niranjan Mardi, who specifically changed the wordings different from the one actually in the cabinet decision and the subsequent NOC issued say sources.

On 7 March 2013, the consortium of Banks headed by State Bank of India, conducts a meeting along with other stake holding banks. The meeting was presided over by Leon Therattil, Deputy General Manager and officials of SBI, Pegasus, HTL participated. N.Ramadoss, Chief Manager of SBI, reported in the meeting that four prospective buyers are readily available and the sale can be closed quickly. It was also decided in the meeting not to go for open auction and close the sale as a private treaty.

It was resolved in the meeting that all offers should be finalised by 2 pm on 15th March 2013. It was also resolved to accept offers that is more than Rs.250 crores. It is pertinent to note that the upset price of Rs.250 crores is being decided in 2013 whereas the price offered by RMZ Millenia in 2007 was Rs.298 crores.

On 15.03.2013, the offers received in sealed cover was opened in the presence of SBI officials. As per the minutes of this meeting, only one offer was received from M/s VGN Developers private limited for Rs.272 crores. There was no whisper about the 4 offers readily available as told by Ramadoss, Chief Manager. The meeting in which VGN representatives also attended, unanimously resolved to accept the offer of VGN.

Even after government issued an NOC allowing HTL Limited to convert the land proposed to be sold to residential purposes, no open auction was adopted and instead land was sold in a private treaty.

The land in question was a high value property. The land has a permissible built-up space of 2.5 times of the land area. Since the land has been reclassified from ‘industrial’ to ‘residential’, the market value of the land would be more than the guideline value fixed by the government. Further the land is situated in Guindy, which has locational advantage, nearby airport, metro connectivity, etc.

As per the advertisement placed in newspapers at that time for a realty project just near to the land of VGN in dispute, the asking price was Rs.12,000/- per square feet.

As per the government records, guideline value of the land is as follows.

01.04.2003 to 31.07.2007 Rs.2200/-
01.08.2007 to 31.03.2012 Rs.4600/-
From 01.04.2012 Rs.8500/-.

This guideline value is for a land which is classified as ‘Industrial’ under SIDCO Industrial Estate, under Industries Special Type.I. The conversion as ‘Residential’ should have shot up the guideline value too. However the sale price was finalised far below the market / guideline value.

The consortium of banks headed by SBI had fixed the reserve price for the said land at Rs.250 crores and finalised the deal on 19.06.2013 for Rs.272 crores. But as per registration department records, the guideline value of the said land comes to Rs.376.26 crores on the date the sale was finalised. VGN Developers private limited, paid stamp duty for Rs.376.26 crores and not for the actual sale price of Rs.272 crores.

On the same day the deal was finalised, VGN Developers mortgated the property to IL & FS Trust company for Rs.280 crores. While it is the normal banking standard to pay 80% of the mortgated property value as loan, VGN purchased a property for Rs.272 crores and mortgaged the same for Rs.280/- crores.

The entire transaction smelt of a huge scam and after a detailed investigation, a story was published in savukku on 17 November 2014.

The connected documents were also passed on to CBI officials for further action at their end. But after dragging its feet for more than 18 months, the CBI finally on 28 December 2016 registered an FIR against 1) Leon Therattil, DGM, SBI, (2) Ramadoss, Chief Manager, SBI, (3) D.P.Gupta, Chief Operating Officer HTL, (4) D.Prathish, Managing Director, VGN Developers.

The primary strength of the CBI, being India’s premier investigating agency is its searches. An officer who had a long stint in CBI said that “in almost all cases investigated by CBI, following FIR key locations would be identified and simultaneous searches conducted. In majority of the instances, the searches would yield price catch. Invariably, we stumble upon important documents, particularly with regard to corruption cases. No crime is a perfect crime and always there would be traces and a good police officer with keen eye for details would find out the right document”, said the officer.

But, even after a lapse of 2 years, the Anti-Corruption Branch of CBI Chennai Zone, failed to conduct any searches either in the houses of accused or in the office of VGN Developers nor HTL.

There is no clear answer as to why CBI failed to conduct searches in any of the connected places after registration of the case. This failure has resulted in loss of a very important document of huge evidentiary value.

When this author did a story on the VGN scam in November 2014, an Excel sheet containing details of payments made to various government officials in lakhs and crores was obtained. But, in an expectation that CBI may conduct searches and publication of the details may lead to loss of evidentiary value, the same was not published.

A sample page of Excel sheet containing details of payment made to Ministers

While the CBI was dragging its feet in investigating this case, VGN filed a petition to quash the FIR in this regard. Surprisingly, the CBI, in its counter to the plea took a strange stand.

“The main allegation was criminal misconduct of the officials of State Bank of India for undue waiver of interest to the extent of Rs53.50 Crores in connivance with the other accused M/s Hindustan Teleprinters Limited and M/s VGN Developers (P) Limited when the sale proceeds of the subject land was appropriated towards loan account which caused wrongful loss of Rs.53.50 Crores to State Bank of India. While preparing the FIR, it was inadvertently mentioned that the loss to Government of India was Rs. 115 Crores being the difference between the sale price (Rs 272 Crores) and guideline value (Rs.387 Crores). The loss was to State Bank of India due to undue waiver of interest to the extent of Rs. 53.50 Crores. Investigation is in progress.”

According to highly placed sources in CBI, Nageswara Rao was the one who took the decision not to conduct any searches.

Enquiries in CBI and in Odisha revealed that Nageswara Rao was a highlly corrupt officer, who was mired in allegations in his parent cadre Odisha. Without any verification / vetting Rao was inducted into CBI with active recommendation by former Union Minister Venkaiah Naidu, say sources. Rao, being a native of Warangal, was close with many Telugu speaking officers in TN, and former CS Ram Mohana Rao was a close buddy. It was Nageswara Rao and Ram Mohana Rao, who decided to give a silent burial to the case against VGN, revealed sources. As a follow up to this understanding CBI took a stand before the Madras HC, that the loss in VGN case is only a meagre Rs.53.50 crores.

However, the Madras High Court saw through this design and dismissed the petition by observiing “ The property originally belong to State Government assigned to HTL, to set up an industry. The SIDCO, through which Government has assigned the land to HTL has given NOC to sell the property subject to discharge of HTL. The property originally belongs to State Government assigned to HTL, to set up an industry. The SIDCO, through which Government has assigned the land to HTL has given NOC to sell the property subject to discharge of HTL.”

At this stage, the Enforcement Directorate registered a separate case and attached the Guindy property of VGN to the extent of Rs.115 crores. VGN came out with a public notice, trying to clear the air. In the public notice, VGN said that “CBI which is the prime investigation agency itself, has informed the court that the loss to government was only Rs.53.50 crores because SBI has given interest waiver to HTL”. This claim of VGN is far from the truth.

If at all the CBI bothered to conduct any proper investigation, the enormity of the scam and the overwhelming evidence available could have been unearthed. The documents which are in the possession of savukku were never collected by the agency and instead the agency was very keen to give a clean chit to VGN and other officials.

At this juncture, a detailed complaint was sent to the Director CBI, against Nageswara Rao. The relevant portion of the complaint, which has been exclusively accessed by savukku, runs as follows

“Though the FIR (VGN) was registered on 28.12.2016, Shri.Nageswara Rao, failed to instruct the I.O. to conduct any search operations in connection with the case. Due to this serious lapse, sources say, some serious evidence of bribery by the VGN Developers to various state and central government officials was lost and the said evidence was published in media last week. Instead of allotting this case for investigation to an I.O. of police / investigation background, Shri.Rao, assisgned the investigation of this sensitive case to one Shri.Velayutham, who is a deputee from Indian Bank for reasons best known to him.

Shri.Nageswara Rao, failed to issue any clear instructions with regard to the investigation of this case or monitor the progress of this investigation. However, he had ensured that he is always kept in the loop with regard to any developments. Though the allegation as per the FIR is that the land in dispute which was purchased by VGN developers was purchased below market price, there are widespread allegations of the involvement of two senior IAS officers of TN cadre who facilitated issuance of NOC for the sale. Sources also claim that one Ram Mohana Rao, who was a former Chief Secretary of TN government had also received sizeable money from VGN promoters.

However, no investigation whatsoever has been conducted in this regard. Further, as per sources, VGN Developers sent part of the bribe amount of Rs.2 crores intended for the SBI officials through one Ganesh Raj, retired Assistant General Manager of SBI. Rs.80 lakhs of the bribe amount was sent by VGN Developers to HTL account. From the HTL account, the above mentioned Ganesh Raj transferred the amount to his account, later encashed the same and handed over the bribe amounts in cash to A.1 Leon Therattil and A.2 Ramadoss. A simple verification of the bank accounts of Ganesh Raj and HTL would have revealed evidence of bribery. But, Shri.Nageswara Rao, chose not to touch any crucial area of investigation.

Now, according to sources, Shri.Nageswara Rao had instructed the I.O Shri.Velayutham to give a closure report in the above RC and accordingly a report stating that the Bank has not suffered any loss, the amount due is recovered and no further action is required has been given and the same has been approved and sent to Delhi by Shri.Nageswara Rao. Sources also reveal that Shri.Nageswara Rao, is strongly connected with the Telugu officers in Tamil Nadu and is in the habit of passing on several sensitive information to the officers. One such officer who is regularly in touch with Shri.Nageswara Rao, is former Chief Secretary of TN, Shri.Ram Mohana Rao.”

Nageswara Rao, a clever operator, managed to suppress this complaint, with the help of K.V.Chaudry, the present Central Vigilance Commissioner, who is the nodal authority for induction and repatriation of officers in CBI. Though the present CBI Director, after making due verification tried to repatriate Rao, KV.Chaudry, shot down his proposal, say sources.

The failure of the CBI’s top echelon to properly vet Nageswara Rao before inducting him into CBI had proved very costly.

In his annual property returns, Nageswara Rao had declared that during his tenure as IG (Operations), Central Reserve Police Force, his wife Mannem Sandhya had purchased a land at Pedapalakaluru village, in Guntur District, Andhra Pradesh to an extent of 13,668 Sq. Ft, with a built in area of 6563 sq. ft. along with her brother Ratna Babu at her cost of Rs. 20 lakhs. The source of funds for this purchase has been shown as loan from a firm named Angela Mercantiles Private Limited, Kolkatta.

The firm Angela Mercantiles Private Limited is a shell company functioning from C.A.39, Salt Lake City, Sector.I, Parganas North, Kolkatta. Apart from this Angela Mercantiles, several group of shell companies belonging to the same set of accused are reported to be functioning out of two small rooms at C.A.39, Salt Lake City, Sector.I, Parganas North, Kolkatta and another at 5 Clive Row, Room No.42P, Sarvamangala Building, Kolkata.

The records of this firm were obtained from Registrar of Companies. Documents revealed that M.Sandhya had given a loan of Rs.38,27,141/- to this company, which was outstanding as of 31.03.2013. This M.Sandhya is none other than the wife of Nageswara Rao. Mannem Sandhya, w/o Shri.Nageswara Rao, has suppressed her husband’s name from RoC records and has instead used her father’s name – Chinnam Vishnu Narayana in all the records.
In the details of share holders filed by the said Angela Mercantile Private Limited, the address of M.Sandhya, who is also a share holder in the said Angela Mercantile is shown as “C.A.39, Salt Lake City, Sector.I, Parganas North, Kolkatta” which is the address of the shell companies and not the address of the share holder. M Nageswara Rao’s wife had invested money to the extent of more than 60 lakhs in Angela Mercantiles and obtained Rs.25 lakhs as loan which is none other than money-laundering.

During his tenure in his parent cadre, Odisha, Nageswara Rao had in the year 2011, purchased a government land using forged documents at Khurda, Odisha, from a lady. Due to reasons that remain unclear, the deal fell through and litigation in this regard is pending in 14th Additional Civil Court, Khurda in Civil Suit No. 9211/2015. Sources say, Shri.M.N.Rao entered into an out of court settlement with the seller and got back the money he had paid with a pecuniary advantage of about 7 lakhs over and above his investment.”

Civil case pending in a Odisha Court wrt forest land purchased by Nageswara Rao

Nageswara Rao & his wife Mannem Sandhya

A detailed source report was sent to CBI Director, Alok Kumar Verma, following which he had ordered a discreet enquiry into allegations on Nageswara Rao. Alarmingly, the discreet enquiry had thrown up enough material not only to repatriate Nageswara Rao out of CBI, but also to launch prosecution against him, add sources. However, due to the backing of Central Vigilance Commissioner KV.Chaudary, who put his foot down and refused to permit the CBI Director, to take any sort of action against Nageswara Rao, nothing could be done.

A helpless CBI Director, decided to save the cases at least from going down the drain. Swiftly, Alok Verma, ordered transfer of the investigation of important cases from Chennai Zone of CBI to Banking and Securities Fraud Cell (BSFC) of Bengaluru. Nageswara Rao’s jurisdiction do not extend to BSFC and it works under the direct supervision of a separate Joint Director, meant exclusively for BSFC.

Highly placed sources, say the Bangalore BSFC wing has discarded the investigation so far done by the Chennai Zone of CBI and has commenced investigation afresh. Additional documents pertaining to the role played by Niranjan Mardi, IAS & Hans Raj Varma IAS were also collected. Though CVC KV.Chaudhary, refused to allow Nageswara Rao to be sent out of CBI, he could not prevent the DCBI from transferring Rao out of Chennai. In what looks like a routine administrative transfer, Nageswara Rao was transferred and posted to Chandigarh. Sadly, two weeks back, Nageswara Rao slipped in a hotel restroom and suffered a pelvic fracture. At present he is on a long leave. The Chandigarh CBI branch has also been handed over to another officer.

Though everyone believes, CBI to be an all powerful and professional agency, it too has its own black sheep which it is not able to weed out. In a democracy, the faith on agencies like judiciary and CBI keeps the hopes of common man afloat. Black sheep like Nageswara Rao will erode that confidence and lead to anarchy. Even in these worst of times, people need something to hold on to. Removal of Nageswara Rao from CBI and a thorough follow up investigation alone will rekindle that hope which has hit rock bottom.

Nageswara Rao tried his best to kill this story by using all tricks in the trade. In the past, he was successful in killing many probes against him and a few adverse stories against him.

Finally Tamil Nadu happened to be his Waterloo.