The Towering Corruptions in NAFED

The Pioneer – August 9, 2010

NAFED’s crores used on Husains, beauty pageants
Centre silent even 20 months after receiving inquiry report

The Centre is sitting over a shocking inquiry report, submitted 20 months ago, on the blatant corruption in the National Agricultural Cooperative Marketing Federation of India Ltd (NAFED). The inquiry committee headed by Justice RR Misra has exposed allotment of more than Rs.5,000 crore to private firms by NAFED’s Board of Directors for the “unauthorised” business ranging from iron ore export, diamond, mobiles, and petro products import, international trade, sponsoring of beauty contests.

To top it all, according to the report available with The Pioneer, a huge sum of Rs.37 crore has been ‘illegally’ used by the NAFED’s business partner Swarup Group of Industries (SGI) for purchasing 25 paintings of MF Husain. This dubious deal, which has nothing to do with agriculture, took place in early 2006, when thousands of farmers committed suicide across the country.

The NAFED’s board granted Rs.236 crore to the Mumbai-based SGI for iron ore export, basically from the Bellary mines to China. According to the inquiry report of Justice Misra and Dr VK Agarwal, only around Rs.52 crore was used for iron ore export and the rest was diverted for purchasing space in Mumbai’s Mega Mall and paintings.

“Thus, it is apparent from the aforesaid report and other papers on the files that NAFED had by September 13, 2006 the knowledge that SGI had diverted the funds received for exporting iron ore to the purchases of space in Mega Mall and paintings of MF Husain,” said the inquiry report.

Currently these paintings worth Rs.37 crore are kept in the locker of Indusind Bank’s Lokhandwala branch in Mumbai, under the joint custody of NAFED and SGI.

The report details how the NAFED lost over Rs.1,600 cr through default on the allotment of `5,000 cr during the past six years on unauthorised business deals. Of the 29 firms, major defaulters are Delhi-based Earth Tek Enterprise (Rs.550 cr), SGI (Rs.150 cr) Cuttack-based Zenith Mining (Rs.180 cr) and AP-based Handum Industries (Rs.95 cr).

The NAFED, country’s biggest cooperative, is ruled mainly by a clutch of powerful politicians of all hues.

The NAFED started “illegal business” in early 2004 by allotting funds for non-farm activities. Later, the Central Registrar of Co-operative Societies approved these dubious deals in December 2004 by allowing change in bylaws to facilitate its engagement in non-agriculture activities.

The report pinpoints the role of the directors for approving such questionable deals. The report also holds responsible then MD Alok Ranjan (IAS) and AMD Homi Rajvansh (IRS) for the heavy loss to the organisation.

The only action taken by the Government was changing the officials and instituting CBI investigations, which have reached nowhere. Alok Ranjan is currently the Principal Secretary in the Urban Development department in Uttar Pradesh Government and Homi Rajvansh is posted as I-T Commissioner in Kolkata.

No action has been taken against the Board of Directors comprising the powerful political leaders who authorised such illegal deals. On November 2009, the Government appointed CV Ananda Bose, IAS, as Managing Director to cleanse the NAFED. But in July 2010, the Board of Directors passed an “illegal” resolution to expel the Managing Director, selected by the Appointments Committee of the Cabinet.

Though Agriculture Minister Sharad Pawar backed Bose and sought the Board to cancel their “illegal” resolution, nothing happened. According to sources, the Government faced severe pressure from the powerful co-operative lobby, cutting across all political lines, not to take any action against the Board. In the first week of August, the Government appointed another IAS officer Sanjeev Chopra as new Managing Director.

“The corrupt Board of Directors feared Ananda Bose when he started acting on the Justice Misra probe report. Some officials have already gone to jail and the Board members feel they will also have to face the music. Bose had objected the one-time settlement plan of Rs.1,650 crore of debt at a heavy discount by some Board of Directors and selling and leasing prime properties in Mumbai and Delhi to cover up the huge loss,” say employees of NAFED.

The Pioneer August 10, 2010

NAFED funds fictitious iron ore exports in hurry

The rot in NAFED runs deep. The nation’s premier agriculture cooperative body seems to be doing everything other than following its basic charter of helping farmers. An explosive inquiry report submitted by Justice RR Misra shows how NAFED opened its coffers to all and sundry, including sham iron ore exporters and petroleum importers, who had nothing to do with farmers.

The report reveals that NAFED’s board of directors released huge funds to private companies for iron ore export, which never took place. The report, which runs to over 550 pages, pegs such illegal diversions at Rs.600 crore. The amount was disbursed within hours after production of fabricated shipping bills by several companies with the knowledge of NAFED top officials.

According to the report, these companies produced fake shipping bills for iron ore consignments to China from Bellay mines and NAFED “immediately” disbursed huge money without any proper verification.

Examining the fake bills and consignment details and verifying the actual shipping records, Justice Misra said it was “humanely impossible” to undertake “such huge quantity of export of iron ore in the short span of time”.

Delhi-based Earth Tek Enterprises, Mumbai-based Swarup Group of Industries and Cuttak-based Zenith Mining were the main players involved in the fraud.

The Pioneer had on Monday reported that the Swarup Group of Industries had diverted funds for purchasing 80,000 sq ft space in Mega Mall, Mumbai, and 25 paintings of MF Husain at Rs.37 crore. The funds were also used for sponsoring beauty contests.

Similar fund diversion also took place in the import of petroleum products. The inquiry report blames NAFED for funding international trade involving “third” country business, which was financed by the Indian firms funded by NAFED. The report “wonders” how NAFED allocated huge funds for such Merchanting Trade Transactions (MTT) to “friendly” private firms. The report also exposes the violation of RBI rules to provide funds for products which never touched Indian shores. The biggest defaulter is Earth Tek Enterprises, which owes NAFED Rs.550 crore. This firm is a major player in financing third-party international trade.

Sources said NAFED’s board of directors started sanctioning such “illegal business” in early 2004, while its bylaws permitted release of fund for agricultural purpose alone. “Those were the days of Lok Sabha elections and several directors of NAFED were contesting. They needed money,” they said.

In early 2004, NAFED allotted funds to Earth Tek Enterprise for import of superior kerosene oil and showed a profit of Rs.12.5 lakh. Citing this profit, the board of directors decided to go for public-private partnership and joined non-agricultural activities. This was objected to by then managing director PK Agarwal, but the board of directors — comprising powerful politicians – overruled him.

After allotting more than Rs.2,000 crore for such non-agricultural activities, NAFED approached the Central Registrar of Co-Operative Societies in December 2004 to change its bylaws to legalise such ventures.

“Since the Co-Operative Act prevents approval on retrospective business, it is still a mystery how the Registrar approved the change of bylaws. It seems that the Registrar, a Joint Secretary-level IAS officer, faced political pressure,” the sources said.

Meanwhile, in mid-2007, then chairman Ajit Singh (who was also an MP from Bihar) died in a car accident. Bijendar Singh, a Congress MLA from Delhi, became the chairman. He is also a director with several big co-operative organisations, including the National Consumer Co-Operative Federation (NCCF).

Justice Misra submitted the report to the Registrar on December 2009. Interestingly, the Registrar sends the inquiry report to the same board of directors who were primarily responsible for the “illegal business”.

But the board of directors curiously replied to the Registrar that they were “not responsible” as they were “not involved in the day-to-day business”.

The Central Government obviously accepted this explanation and took no action against the board of directors, which authorised the “illegal business” of Rs.5,000 crore and led to a bad debt of Rs.1,650 crore.

NAFED’s board of directors comprises powerful politicians cutting across political lines. NAFED’s vice-chairman Chander Pal Singh Yadav is a former MP and also vice-chairman of the world’s biggest fertiliser co-operative KRIBHCO. NAFED’s chairman Bijendar Singh is also a director of this behemoth. Virendra Singh, director of NAFED, is also the chairman of NCCF. Most of the directors of NAFED have also been on the boards of big co-operative organisations for decades. The dynastic politics is seen in all these organisations.

According to sources, the Central Government is shying away from taking action against the board of directors, mainly due to the pressure from the co-operative lobby. At one point, the Government had reportedly made up its mind to dismiss the board and appoint an administrator to cleanse the mess, but the idea was shelved due to political pressure, said the sources.

The Pioneer – August 11,2010

Registrar tells NAFED to explain bad debt

The Central Registrar of Co-operative Societies has issued showcause notices to 29 persons, including National Agricultural Co-operative Marketing Federation of India Ltd (NAFED) chairman Bijender Singh, other directors and officials, directing them to appear before him on September 16 in connection with the blatant violations and diversion of funds, leading to bad debt of Rs 1,625 crore.

Reacting to The Pioneer reports, newly-appointed managing director of NAFED Sanjeev Chopra said the one-time settlement (OTS) scheme to clear the bad debt would be formulated only according to the Reserve Bank of India’s guidelines.

Claiming that the Centre was not sitting over the inquiry report submitted by Justice RR Misra, the MD said the Central Registrar has already initiated necessary action in the matter.

He has served showcause notices on July 15 to as many as 29 persons — including some members of the board of directors, former managing directors, former additional managing director, consultants and officers of NAFED — and directed them to submit their reply within eight weeks. They have also been told to appear before him on September 16 to show cause as to why they should not be proceeded against further.

The inquiry report was submitted by Justice Misra to the Central Registrar on November 2008. The 550-page report in three volumes exposes the allotment of around `4,000 crore by NAFED to private companies for non-agricultural deals, including iron ore export, import of petroleum products, diamonds, timber wood, metal scrap and mobile phones.

Refuting The Pioneer report that NAFED had funded Rs.5,000 crore to private firms for unauthorised business deals, the MD pegged the amount at Rs 3,945 crore.

The NAFED managing director said they had filed criminal cases against all the defaulting firms. Investigation by CBI and Economic Offence Wing of Delhi Police is also ongoing.

“NAFED has filed a claim for recovery of outstanding dues from all the 29 parties by initiating arbitration proceedings. NAFED succeeded in obtaining final award/interim awards in seven cases. In addition, NAFED has also filed 167 cases under Section 138 of the Negotiable Instrument Act for recovery of an amount of RS 712 crore,” Chopra added.

Reacting to the controversies concerning the board of directors’ attempt settle the huge defaults at heavy discounts through the OTS scheme, the NAFED managing director said the scheme would be implemented only according to the RBI guidelines.

“Since the recovery through legal channels is a long-drawn process and there are some defaulters who have shown keenness to resolve the issue outside the court, NAFED — at the behest of the Department of Agriculture and Co-operation — has put in place a comprehensive OTS policy based on RBI guidelines,” Chopra noted.

[The writer is Special Correspondent of The Pioneer daily. The above articles appeared in The Pioneer's series on blatant corruptions in NAFED, published on August 2010]