How the OMC operated in Kar-AP

The noose has finally come around the neck of Janardhan Reddy who was arrested by the Central Bureau of Investigation today. The entire issue today is the Obulapuram Mining Company, the lease for which was granted to the Reddy brothers of Bellary by the Andhra Pradesh government under the leadership of Dr Y S Rajasekara Reddy.

The allegation is that despite the lease being granted in Andhra Pradesh Janardhan Reddy had used this licence to carry out illegal mining in Bellary which is in Karnataka.

The Obulapuram Mining Company story:

Obulapuram Mining Company Private Limited (OMC), Ennoble House, Raghavachari Road, Bellary. Directors- G. Janardhana Reddy, G. Lakshmi Aruna, G. Karunakara Reddy, D. Parameshwara Reddy,B. Sree Ramulu.

The allegation as per reports is that the OMC a very big exporter of irone ore with a mining lease from Andhra Pradesh have exported iron ore of Karnataka origin. However when records are verified there is no record to show that permits were issued to OMC from the Director of Mines & Geology, Karnataka.

Further the allegation is that the total exports of iron ore of Karnataka origin by OMC during 2006-07 to 2010-11 is 71,61,455 MT, which includes 21,44,789 MT from Chennai Port. The total exports of iron ore of AP origin by OMC from Chennai between 2006-07 and 2010 (till Dec) 2,17,660 MT only.

Further the allegation is that fake permits were used to transport ore illegally out of Karnataka in the name of a lease which had emerged from Andhra Pradesh. The Lokayukta who submitted his report on this issue recently also goes into the issue while stating the following. Investigations conducted have revealed that forged and fake permits purportedly issued by the Mines and Geology department of Andhra Pradesh were used for illegal transport of theft iron ore from Hospet, Sandur Bellary and other taluks. Use of such permits was the main reasons for illegal iron ore transport in the BHS region and also from the surrounding districts. There is indication of an unholy nexus of fake and forged permits obtained and used for illegal transport of iron ore mainly illegally extracted from the various places like forest land, Revenue land and also from regular leases i.e., excess quantity than permitted in Karnataka. Rs. 1,11,13,394/- have been paid for procuring such permits. A person by name Sajjan of Hospet was used as agent for this purpose. The other persons involved are Yeriswamy, Mahesh, Ramu, Waheed and others. The forged permits were used for transporting iron ore to various destinations like Belekeri, Karwar, Goa, Krishnapatnam, Chennai, Mangalore and steel units inside and outside the State.

Further the CBI is also dealing with the under invoicing during the export of ore. The total under invoicing in US $ and INR comes to $52,341,292.00 corresponding to Rs.215,12,50,387.00.

The foreign exchange involved in this case, has not come to Union of India and indicates that this amount might have been parked in some Banks in Tax Heaven countries and the amount is estimated to be Rs.215,12,50,357.00 which should have been profit of the Government from OMC.

The modus operandi to carry out such an operation is also interestng

There is a well established forest check post at interstate border near Bellary (Hagari check post). This check post was withdrawn by the then Deputy Conservator of Forests, S.Muthaiya in 2008. From the records seized from Belekeri port, large numbers of forged permits were found purportedly issued from Andhra Pradesh. With this act of withdrawal of established check post, it is quite clear that Andhra Pradesh origin Xerox copy of bulk permits and forged trip sheets were in use at a large extent to illegal transport of iron ore from the illegal stockyards, permitted stockyards, Forest and Revenue areas and also from regular leases.

One of the main reasons for explosive illegal iron ore mining during 2009-2010 was posting of favored officials at strategic posts of Police, Mines, Forest, Revenue and other departments. Because of this, a fearless atmosphere prevailed in the Bellary district. Law of the land was seemed to have been suspended and oral whip was used to keep silent. Consequently administration has allowed to loot the natural resources, in this case the iron ore, which continued without any opposition. Huge bribes were paid. Mafia type operations were the routine practices of the day.

It is to be noted that during late 2009, State Government tried to post some upright and officers with known integrity in Revenue, Forest and other departments. Unfortunately, for reasons known to the Government, they were transferred in a fortnight and the same old officers were reposted. This act of withdrawal has further fuelled the corruption to raise its head and it has became a monster, uncontrolled as reflected in the seized documents.

A well equipped intelligence networking was deployed by the “Bosses” involved in illegal operations where their people were placed at strategic places all along the major routes to Krishnapatnam, Belekeri, Karwar and others ports. The trusted personnel’s were deployed/posted with motorbikes, mobile phones and money. Rooms were taken on rent on routes to stay and watch. A parallel administration was in position and operation. Regular payments were made to such deployed personnel’s as seen in the seized records. The Government machinery/ administration was totally paralyzed.

Records of Income Tax Department, show that several entries of payment of penalties against the illegal transport of theft iron ore (in Karnataka, Andhra Pradesh and others) have been recorded during the period on various dates. The payment of penalty is a proof of illegal transportation and theft of iron ore. It also proves that concerned people are taking the responsibility for transportation illegal iron ore by collecting “risk amount” by Sri K Mahesh and his associates. With the records and field observations it is found for the last 5 months, that the risk amount had been collected at the rate of Rs. 75 to Rs. 200 per MT based on the risk involved, distance, State and the relationship with the party. In the five months period Rs. 40,92,88,860/- of risk amount was collected and by dividing this amount to an average of Rs.125 per Metric Tonnes it comes out 3274310.88 MT illegally transported in this period.

The Reddys story of Rs 215,12,50,357

When you read the report on illegal mining prepared by the Karnataka Lokayukta and his team you get the larger picture. While the entire state focuses on the political ramifications of this report, the report per se speaks in great deal about how the Reddy brothers have under invoiced their iron ore exports to Singapore and have also parked money in tax havens abroad.

A chapter in the mining report stating “ Under Invoicing, Evasion of Taxes and Duties by Obulapuram Mining Company has this interesting story to tell about how 215,12,50,357 has been parked outside the country by the Reddy brothers. Further it also negates the claim made by the Reddy brothers themselves that they have no mining interest in Karnataka.
M/s. Obulapuram Mining Company Private Limited (OMC), Ennoble House, Raghavachari Road, Bellary had the following Directors at the relevant time- G. Janardhana Reddy, G. Lakshmi Aruna, G. Karunakara Reddy, D. Parameshwara Reddy, B. Sree Ramulu.

The report further states that a private company by the name Man-Go Pub Pte Ltd was registered in the year 2004 at Singapore and the purpose of this company was to provide entertainment, food and

Beverage. In the year 2007 there was a special resolution passed in which the principal activities of this company were also proposed to be changed from restaurant Bars and Canteen to general whole sale trade including general imports and exports. Janardhan Reddy was appointed as Director of this Company. One share of this company i.e. GLA was transferred in favour of GJR Holdings International Limited with its address at Isle of Man on December 21 2007 and same transaction was lodged with ACRA on January 4 2008. Again it should be noted that the letter GJR in this company refers to Gali Janardhana Reddy and the company is registered in Isle of Man, which is our internationally known “Tax Heaven”. The said share was further transferred in favour of Interlink Services Group Limited, British Virgin Islands in June 2009. The British Virgin is also known to be a “Tax Heaven”. The role of GJR Holdings International

Limited and Interlink Services Group Limited under the above circumstances, requires further probe by the competent authorities.

It is to be noted that after the enquiry into the illegal exportation was initiated by Lokayukta, Janardhana Reddy ceased to be the Director of the above Company with effect from 30/12/2009 by resignation.

During the period when Sri G. Janardhana Reddy was the Director of the Company, the GLA Pet Limited had imported iron ore to the tune of 8,52,033 MTs from OMC, Bellary the origin of the ore is shown at Ports from Karnataka. There was no export of iron ore, before or after the period when Gali Janardhana Reddy was the Director of GLA, from OMC. This is seen from the export data obtained from Customs Department.

An assessment order shows under invoicing of cost of iron ore, export sales to GLA Trading International Limited, Dubai by OMC.  It may be seen for the purpose of understanding the modus operandi of OMC in exporting the iron ores. The said assessment order clearly makes out a case of relationship between the OMC and GLA Trading International Limited, Dubai.

The Lokayukta report provide details of under invoice made by OMC for the year 2007-08 as assessed by the Income Tax Department, which is huge. Having noticed the details of export of iron ore made by this company (OMC), all details of export of iron ore was sought from the Customs Department 0f Kakinada, Krishnapatnam, Vishakapatnam, Chennai, Mangalore, Belekeri, Karwar, Murmagao and Panaji. The details are further verified by the investigation team with regard to GLA as consignee. The details of Mangalore Port has not been taken into consideration, since there is not much difference found during the month of October 2008. The details received also shows that there is no export from Belikeri, Karwar, Murmagao and Panaji ports by OMC to GLA. However, the Customs House, Kakinada has given information/particulars of export made by OMC to GLA, Dubai. It is interesting to note that most of the exports were shown as originating from Karnataka.

Similarly, the report pertaining to Krishnapatnam, Vishakapatnam Ports also indicates such exports.  OMC has exported 8,09,299 MTs (excluding exports from Mangalore) to GLA in the year 2007-08 and 2008- 09.

The total under invoicing in US $ and INR comes to $52,341,292.00 corresponding to Rs.215,12,50,387.00. The face value of the US$ was taken at the prevailing rate during that time. At this stage, it should be noted that this Under Invoicing has caused loss to the Government from export made to GLA by OMC for two years i.e. 2007-08 and 2008-09 only.

It is also to be noted that the foreign exchange involved in this case, has not come to Union of India and indicates that this amount might have been parked in some Banks in Tax Heaven countries. Therefore, it is necessary that the competent department should be asked to investigate as to where this money is parked and approximately a sum of Rs.215,12,50,357.00 which should have been profit of the Government from OMC and consequent to evasion of Customs duty, Income Tax and other Taxes should be investigated and collected by the respective department, the Lokayukta has recommended.