Five months into her third term as chief minister of Uttar Pradesh, Mayawati did something she had never done before. At the death anniversary of her mentor, Kanshi Ram, in October 2007, she put her younger brother Anand Kumar in the limelight. “When I was ill and my haemoglobin fell, it was Anand who gave me his blood,” India Today had quoted her as saying. Kumar never looked back. By the time she began her campaign for re-election more than four years later, the bespectacled Kumar had transformed from a small-time government clerk in Noida to a suave real estate and hospitality baron with properties in Mussoorie, Siliguri, Mumbai and Kolkata.
However, he continued to stay away from the public glare. An officer who held a senior position in the Uttar Pradesh government during Mayawati’s tenure says Kumar had no interactions with bureaucrats like him. “Neither do I know of any such instance, nor did anyone ever bring it to my knowledge. As far as my knowledge goes, his [Kumar’s] public presence in Lucknow was limited to only social functions such as Behenji’s birthday and Lucknow Mahotsava,” he says. That may be true. Mayawati, unlike arch rival Mulayam Singh Yadav, has never pushed her family. Still, Kumar’s rise caught the attention of Mayawati’s political rivals.
Kirit Somaiya is a Mumbai-based chartered accountant and national secretary of Bharatiya Janata Party. He specialises in investment activism. Somaiya and his team dug out a list of nine companies in which Kumar was director. These nine companies, they realised, were at the centre of a larger web of over 125 companies which Kumar and his friends had set up in a short span of time.
It was December 2011 and elections to the Uttar Pradesh assembly were around the corner. There was no way Somaiya could have let the opportunity slip. So he, along with Hansraj Ahir, BJP Member of Parliament from Chandrapur who famously exposed irregularities in the allocation of coal blocks, and Ramashankar, BJP MP from Agra, began to dig deeper. A detailed complaint demanding investigation and action was drafted and sent to the Ministry of Corporate Affairs, Enforcement Directorate and Central Board of Direct Taxes. “The unusual abnormal (sic.) financial growth of Kumar since 2007 demands attention,” the trio wrote.
According to them, Kumar led a group of people who owned and controlled several companies. This group consisted of Kumar, his wife, Vichitralata, a senior bureaucrat and some friends. Kumar was not reachable. Satish Chandra Mishra, Mayawati’s trusted advisor and a senior leader of Bahujan Samaj Party, says: “We have seen in the past how our responses have been used. We don’t want to give any commentary on this. You can write whatever you want. We will respond at the right forum.”
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The complainants alleged that companies owned by Kumar and others had several transactions running into lakhs and sometimes crores with companies that did not exist or were defunct. One such company was Upper India Sugar Mills which was incorporated in 1993. It had a paid up capital of Rs 200. The Ghaziabad-based company, listed with the Registrar of Companies in Kanpur, was later struck off the register as it ceased to exist. Similarly, Chambal Valley Sugar Mills, based in Moradabad which had a paid up capital of Rs 700, too was struck off. According to Section 560 of the Companies Act, 1956, the Registrar has the power to strike off a company from its register if it “has reasonable cause to believe that a company is not carrying on business or (is not) in operation” after following the due process which involves sending enquiry letters and a three months’ notice.
But investigators have found that companies such as Upper India and Chambal Valley were allegedly used by Mayawati’s kin to conduct various transactions.
Books of DKB Infrastructure reveal that shares of face value of Rs 10 were allotted to these two companies at a premium of Rs 90. This company was incorporated in 2006. The share allotment could have happened only after that. However, records with the Registrar of Companies show that Chambal filed its last balance sheet in the year 2000 and has been inactive since. “Upper India had also been struck off long before DKB came into existence, somewhere in 2004-05,” Somaiya says. “When I visited its address in Ghaziabad, all I could find was a thatched hutment; no company was there.”
All told, some 23 companies, including Upper India and Chambal, bought 420,000 shares, infusing Rs 4.2 crore into DKB. These shares were later sold to two companies owned by the Kumar couple at throwaway prices, the BJP trio alleged. As of September 30, 2010, Aashish Construction and Adept Realcon, both registered in Delhi, held over 97 per cent of DKB. Aashish and Adept were owned by Kumar (75 per cent) and his wife (25 per cent). DKB’s income statement for 2010-11 shows other income of Rs 30.16 crore, of which Rs 30.04 crore is income from commodity derivatives.
In June 2012, the Central Bureau of Investigation had filed a charge sheet against Babu Singh Kushwaha, a minister in Mayawati’s government, and BSP MLA Ram Prasad Jaiswal in the multi-crore National Rural Health Mission scam. The charge sheet was filed regarding Rs 13.4 crore allotted to Construction Design Services — a subsidiary construction agency of Uttar Pradesh Jal Nigam — for the upgrade of 134 district hospitals. CBI alleged this company, in turn, gave the task to Ghaziabad- and Lucknow-based private companies on the basis of forged documents. Kushwaha’s family members were directors in a company called Agroha Savings. This company, which had capital of Rs 700, also grew rapidly after 2007. It became big enough to hold significant shareholding in other companies of Kumar. Agroha was one of the 23 companies that first bought shares of DKB before selling them to the Kumar couple.
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Somaiya submitted a detailed dossier of these companies to the Ministry of Corporate Affairs along with the complaint. According to informed sources, the ministry’s inspection wing swung into action following the complaint and ordered a detailed study by the Registrar of Companies, Kanpur, where many of Kumar’s companies were registered. A detailed report by the registrar has recently been submitted, the contents of which have been published in newspaper reports.
Recent revelations show real estate developers such as DLF, Unitech and Jaypee had investments and business relations with companies owned by Kumar and his associates. The companies have denied any wrongdoing and say these transactions were legal and were in the normal course of business. While Somaiya had alleged that Kumar’s companies had cash balances of over Rs 1,200 crore, recent reports have put forward different numbers. According to Indian Express, Kumar floated 49 companies after Mayawati came to power in 2007 through which he made cash transactions of nearly Rs 760 crore with Jaypee, Unitech and DLF, among others. The report pointed out how most of the companies remained inactive and had no tangible business. With little equity, income or profit, they had raised money by issuing shares on a huge premium, selling undisclosed investments and seizing advance payment made by third parties.
Only Hotel Library Club Private Limited, which was incorporated in 1987, has a tangible business of running a budget hotel, the Shilton, in Mussoorie.
The Economic Times had earlier said that this company, with a share capital of Rs 24 lakh, had received cash amounting to Rs 346 crore over the last five years despite posting losses of Rs 80 lakh in 2011-2012. While documents filed with the Registrar of Companies reveal that the cash is from the sale of undisclosed investments, they provide no details on these investments were sold to.
“The ministry has found prima facie violations. It has asked the Registrar for certain additional information. Since showing transactions with defunct and untraceable companies amounts to fraud, the ministry is likely to refer the matter to the Serious Fraud Investigation Office which will, in turn, initiate prosecution proceedings after collecting enough evidence,” says the source.
