Scam In The Hills

INCOME tax investigations in the Northeast can be even more complicated than those in other parts of the country. Given the large-scale exemptions granted to tribes under the law, the region’s politicians and business houses make sure they take full advantage of any loopholes. So when Income Tax (IT) sleuths raided the business and residential premises of three prominent business groups in connection with vast supplies of steel last September, it came as no surprise that documents seized from them revealed huge payoffs (for favours granted) to former steel minister and Congress chief whip in Parliament Santosh Mohan Deb and Mizoram Chief Minister Lalthanhawla.

The IT raids carried on methodically by the department’s northeastern wing revealed some startling discrepancies. The raids conducted at the premises of the Baids, a Guwahati-based Gulgulia group of companies, and the Calcutta-based Subhash Jain group, showed that payoffs running into several crores had been made to Deb and Lalthanhawla, besides many other Congress leaders. The money was drawn from government departments in Assam and Mizoram through a series of phoney bills and vouchers.

According to a detailed report prepared by the IT’s investigation wing, Jodh Raj Baid, who owns a Silchar-based transport company, paid Rs 30 lakh and Rs 70 lakh to Santosh Mohan Deb in two instances. "These two charges seem to be established," says an Income Tax additional collector in Delhi connected to the case.

The IT raids were reported widely in northeastern newspapers, particularly the Mizo weekly Senahri which detailed the payoffs, and kicked up a storm. The investigating official in the IT department was taken off the case and sent to Shillong. And local Congress leaders began the usual damage control exercises. According to sources close to the chief minister, the entire operation had been masterminded by Lalthanhawla’s archrival and former chief minister Brig. T. Sailo, whose son Lalhmangaiha Sailo was an additional director with the IT department in Assam.

For several months nothing happened until a group of lawyers from Delhi led by Abani Sahu moved the Supreme Court, asking it to direct the CBI to launch proceedings. In September, the court asked the CBI to proceed with investigations and on October 12 the agency filed a detailed case against Deb and Lalthanhawla on charges of criminal conspiracy and under the Prevention of Corruption Act. According to sources, the IT department has already handed over its case diaries to the CBI.

Apart from the siphoning off of funds meant for government departments, the IT microscope hovered on Lalthanhawla’s building account. "The day-to-day expenditure incurred by Jodhraj Baid on account of the chief minister’s construction are clearly recorded for the year 1994-95. The various heads of expenditure are labour, cement, steel, hardware etc. The total amount spent by Jodhraj Baid during the period mentioned above towards construction of the chief minister’s building is Rs 43,94,296," the IT appraisal report says.

It points out to "other payments made to the chief minister and such entries made in his name and also bearing his designation" and there were entries which "show that expenses have been paid for certain foreign tours of the chief minister". According to the IT report, entries of payment made to family members and relatives of the chief minister—his wife, son, daughter-in-law and brothers—were found in the seized book of accounts. That’s not all. "(A) substantial amount of money was paid by Shri Jodhraj Baid for purchasing/ booking flats with Ms Veera Builders of Delhi in the names of wife and daughters of the chief minister amounting to Rs 27 lakh," the appraisal report points out. Detailed investments in real estate in Calcutta and other cities are also given.

It, therefore, came as no surprise that these business houses had prosperous steel rolling mills—coinciding with Santosh Mohan Deb’s tenure as Union steel minister—and officials found that close to Rs 1 crore had been paid to him. According to an official in the Enforcement Directorate, the usage of the hawala conduit is also being looked into.

Investigators are now focusing on the modus operandi used by the racketeers. According to them, since the tribals are exempted from paying income tax, "these three firms carry out their business using some Mizo individuals, and their bank transaction—deposit and withdrawal—is done by signing on a blank cheque. This is what they call a benami transaction". They have identified at least eight benami concerns owing allegiance to Lalthanhawla, Deb and K.L. Lalhulna, a close aide of the Mizoram chief minister.

So overpowering is these politicians’ influence in the region, that the IT report concludes: "All these benami firms are used by business houses in close collaboration with S.M. Deb and Lalthanhawla. All these put together pocket a very high percentage of the budget of Mizoram and all of them are the richest in terms of crores." What now remains to be seen is whether the investigating agencies concerned will be able to prove these dealings.