Another multi-crore Telgi-like scam rocks Maharashtra govt

Apr 18, 2014, 08:15 IST | Sharad Vyas

Stamp duty frauds continue to cripple state treasury, as crores are being siphoned off by fraudsters. Financial institutions, government agencies under scanner

The kingpin of the Rs 20,000 crore stamp paper scam Abdul Karim Telgi has been cooling his heels behind bars, but the scam he masterminded still rages on ten years after it first crippled the state government.

Mumbai Port Trust’s operation service centre (OSC) building, opposite GPO. Pic /Bipin Kokate
Mumbai Port Trust’s operation service centre (OSC) building, opposite GPO. Pic /Bipin Kokate

Maharashtra continues to suffer at the hands of new-age Telgi-like cheats, who are violating with ease the archaic system of franking of stamp papers and the online payment mechanisms to siphon off crores in stamp duty.

The fraudsters are trying every trick in the book, from carrying out franking with bogus machines, duplication of challans, and breaking of stamp codes, at several financial and non-financial institutions, container stations and government bodies, adding up to a huge sum of evasion in the past three months alone.

Now, investigating agencies probing the frauds believe it is possible that scores of discarded franking machines have landed in the open scrap market or have been duplicated, only to be used in making fake impressions of stamps, nearly ten years after they were first introduced as a foolproof mechanism against scams.

Bogus franking through duplicate or discarded machines is being carried out in connivance with rogue elements within the institutions, as Maharashtra looks to phase out a past that has haunted it ever since the infamous Telgi scam of 2005.

A total of 115 franking machines have been surrendered to the government by license holders in the last one year alone, but now there hangs a big question mark on their whereabouts.

The machines are mandated to be dismantled and destroyed in the presence of a four-member Inspector General of Registration and Stamp Duty (IGR) team. “But in my short tenure here in the franking department, I am yet to witness destruction of even a single machine,” admits CM Shirke, deputy superintendent of stamp duty (franking), Maharashtra.

The government is aware of the fraud but is unable to do much because of low cross checking carried out at various payment centers of financial and other private institutes. It claims helplessness, but however assures that urgent steps are being taken to curb the menace at various places.

“There has been a spurt in fraud of stamp duty by production of bogus challans, duplication of machines, especially on duty collected on non-registerable documents.

The violations have not been brought to the notice of the state IGR, even as they initially caused losses to the tune of over Rs 10 crore to the government, they remained to be addressed. We have now announced urgent steps to curb the leaks, including restrictions on franking and e-payment system,” said state revenue minister Balasahab Thorat.

The government’s new electronic secured bank treasury receipts (eSBTR) system to pay stamp duty and registration fee online, and the e-payment system, too, haven’t been able to stop the frauds. The online system was breached earlier this month at two of the 31 cargo Container Freight Station (CFS) in Navi Mumbai, Uran, Thane.

In a recent scam busted at the Mumbai Port Trust (MbPT), it is estimated that the state government has lost nearly Rs 12 crore in what has turned out to be a case of bogus franking of stamp duty by use of duplicate or discarded machines.

Not only MbPT, even leading banks have not taken action against their staff. The state appoints select post offices, banks and financial institutions to collect stamp duty on non-registerable (NR) transactions by use of franking machines.

NR transactions, like power of attorney, sale agreement, etc, were brought under the ambit of Maharashtra Stamp Act vide an amendment over a decade ago. For payment, the transaction is printed on a non-judicial stamp paper of appropriate value. The duty can be paid by visiting any authorised franking agency.

Machines misused
With the new eSBTR system being introduced to collect stamp duty and registration online, franking machines are slowly being phased out. Concerns have been raised by the IGR on stamp duty frauds through misuse of old machines and the e-payment system.

The IGR data shows that of 189 franking machines in 2013, the duty department is currently licensing only 74 (this figure was 204 in 2012). This means 115 machines have been surrendered with eSBTR taking over.

A probe by several investigating agencies, including the state home department and Mumbai police, indicates that discarded franking machines are landing into the wrong hands and are being used for bogus franking, and that there are attempts by financial institutions to protect their staff found conniving with those in possession of machines.

“It is even possible the machine themselves have been duplicated since it is not impossible to source the belt and embossing ink from private firms,” said an official of the IGR, Konkan.

The MbPT Scam
In November 2013, the Mumbai police claimed it busted a racket involving bogus franking inside MbPT’s operation service centres (OSC) at Ballard Pier.

While the MbPT, authorised by the state to collect government stamp duty on its own as well as private consignments, did not suffer losses, the Maharashtra government was cheated of Rs 1 crore of duty. A total of 28 people were arrested.

Imposters Dharmesh Rasal and Praffull Chandorkar posed as accountants of MbPT and opened six bank accounts in the name of ‘The Board of Trustees of the Port of Mumbai’ and ‘Traffic Manager, MbPT’. The banks opened accounts without any verification of forged trust deeds, identification cards and other certifications produced by the nexus.

The duo used the accounts to divert payments received at the OSC, where unscrupulous port officials assist them in obtaining POs submitted by customs agents and importers. After obtaining POs, the nexus then franked the DOs with a forged stamp.

The nexus later withdrew the amount through ATM machines. The duty, on paper, was paid to the State. But in reality, the money never reached the state treasury. It was routed to private accounts. Separate FIRs were registered at Chembur and Govandi police stations in the case.

High quality forgery
In a meeting with State Home Minister RR Patil last month, a group of importers and customs agents warned of misuse of discarded machines in carrying out bogus franking at various institutes. The delegation urged the State to let the Economic Offences Wing (EOW) look into misuse of franking machines and stamp frauds.

“Thus far, the quality of bogus franking in various cases underlines only one fact: a systematic use of scrapped machines by crooks in connivance with officials of the institutions and banks. This is a much bigger scam than what the government is making it out to be,” said Kishore Parulekar, senior member of the Bombay Custom House Agents Association (BCHAA).

Apathy of cops and officials
mid-day’s investigations reveal that the extent and scope of the scam is much bigger in size than being made out to be by the cops. Internal documents accessed by this newspaper at the MbPT and the state IGR reveal that the Maharashtra government may have lost to the extent of Rs 12 crore in stamp duty.

The port, as recently as last week, discovered fresh accounts at banks in Ichalkaranji, Kolhapur district, where imposters parked money. This amount itself runs into crores. Probe documents show that in ICICI Chembur branch alone, the fraudsters diverted pay orders worth Rs 4.5 crore, received as stamp duty from custom agents. About Rs 1.95 crore was diverted into accounts at the State Bank of India (SBI).

Papers accessed by mid-day show little or no action on part of port officials against staff found conniving with the nexus. Letter to heads of banks, such as ICICI, Oriental Bank of Commerce, Bank of Baroda, State Bank of Patiala, Axis Bank and SBI, too, did not get any response.

“Their (banks) role is highly suspicious, and a clear case of protecting employees. If they behave irresponsibly here, we can imagine what they must be doing at other collection centres,” said senior officials at the stamp duty and registration department.

“We have written to the RBI governor to take immediate action against the banks for violating norms in neglecting verification of the documents submitted by fraudsters,” said CM Shirke, deputy superintendent of stamp duty (franking).

Shailesh Ogale, branch head at ICICI, told mid-day, “I was in-charge of the set-up. We have given our version to the police and cannot comment on what happened at the MbPT. The matter is under investigation and let the police do its probe.”

Internal documents show the port’s Traffic Department found on October 3, 2012, illegal cash transactions of R16,000 to Rs 70,000 by J R Jagasia and V K Pisal, both accountants at the OSC. The two were suspended on November 12, but the action was later revoked on January 28, 2013.

The duo was later merely shifted to Labour (administration) department. An assessment of the franking scam by auditing firm Deloitte concluded that while MbPT did not suffer any loss, its officials were widely involved in the manipulation of the franking machines at the OSC.

“There is no doubt most of our staff at the OSC were paid a commission ranging from 10% to 15% for being part of this fraud. This (fraud) would not have been possible without their involvement and active assistance of bank officials at the senior level,” said a senior port official who assisted the Deloitte study.

Leave aside the bank and port officials, the masterminds, Dharmesh Prakash Rasal, who posed as the Chief Accountant (MbPT), Praffull Devanand Chandorkar, who posed as Accountant (MbPT), are both still at large.

“The cops are just rounding off scapegoats, while the real culprits remain at large,” said an importer who was called for interrogation. “We have arrested some accused, the probe is progressing well. We can give full details in some days,” said Rajvardhan Sinha, Addl CP, EOW, Mumbai Police.

Fraud at e-payment uran
>> It’s not just the franking system that is flawed. The much-hailed e-payment system put in place last year to replace electronic franking, which had in turn replaced manual vending of stamp papers ten years ago, has been exposed at two of the CFSs in Uran.

>> Central Warehousing Corporation received a complaint of bogus challan submitted by agents M/s Gemini and M/s Vijendra. The two were managing consignments on behalf of importers M/s Transpek Industries and M/s Ficvspax Pvt Ltd. The two made payment on online website GRAS, and submitted a copy of the bogus challan at the freight station of CWC with a bogus code. The CWC issued a delivery order on the basis of bogus challans, while no duty was paid by the two. There is no method to cross check if the challan is bogus or original.

>> The two firms forged challans to take delivery of consignment. This is a clear evasion of stamp duty. A detailed verification of all stamp duty e-payment challan need to be done,” reads an internal report of Konkan IGR.

>> The Uran police have registered two separate cases of fraud, and are probing how much money the state government have lost as stamp duty. Sensing a major fraud, the IGR (Konkan region), has ordered re-verification of all transactions and payment made through online payment since its start earlier this year.

>> “This was a systematic fraud carried out in connivance with officials of our service centres, and needs to be probed in depth,” added “One of the two duplicate challan copies was shown as a proof of payment to collect the delivery consignment. In reality, this duty was never paid as shown in the other copy,” said V G Vichare, joint district registrar, IGR, Konkan region. The money was again diverted into private accounts. This is not an isolated case of breach of e-payment system; the Maharashtra IGR has been receiving several complaints of manipulations in the online payment system.

>> “There are serious issues with it. While we are yet to find if the system itself can be breached, there are certainly ways to externally manipulate it by duplicating challans and codes,” said a stamp duty official.

Banks in the dock
ICICI, Oriental Bank of Commerce, Bank of Baroda, State Bank of Patiala, Axis Bank, State Bank of India (SBI)

Involved port officials and masterminds
J R Jagasia, cash supervisor (MbPT), V K Pisal, senior accountant (MbPT), Dharmesh Prakash Rasal, posed as a chief accountant (MbPT), Praffull Devanand Chandorkar, posed as an accountant at (MbPT).

Did you know?
MbPT is also an agency authorised to collect stamp duty on behalf of the state for all consignments. The department of registration and stamps looks after registration of documents and collection of stamp duty, on documents related to property, shares, consignments etc, through as many as 470 sub-registrar offices. As many as 22 lakh documents were registered in financial year 2012-13.

Anatomy of a fraud

03 Oct 2012
MBPT receives anonymous complaints about illegal exchange of cash at OSC. A probe finds accountant J R Jagasia and V K Pisal involved in cash exchange of Rs 15,000 to Rs 70,000.

12 Nov 2012
The port suspends Jagasia and Pisal and hands over investigations to the vigilance department.

12 Dec 2012
Assistant Controller of Stamps looks into the manipulations at the OSC.

15 Jan 2013
The Oriental Bank of Commerce sends request for verification of documents to open accounts. Rasal and Chandorkar forward the documents.

19 Jan 2013
The N M Joshi Marg police start a probe after two banks file complaints.

28 Jan 2013
The port suddenly revokes suspension of its officials and transfers them to a quieter Labour department.

12 Jun 2013
Another complaint is lodged at the MRA Marg police against fake franking at the port’s OSC.

01 Aug 2013
The port shoots off a letter to bank heads, including ICICI chairman Chanda Kochhar, demanding immediate action against officials.

20 Aug 2013
The port issues a public notice to warn importers about the fake franking racket.

23 Aug 2013
A fresh complaint is registered by the port against Jagasia and Pisal at the Yellow Gate Police Station.

27 Aug 2013
Fresh attempts made to open accounts in Kotak Mahindra, ICICI, State Bank of Patiala and Axis Bank.

04 Sep 2013
A final FIR (215/13) is filed at the Govandi police station.

Nov 2013
The Chembur and Govandi police claim the case is cracked. But masterminds remain at large.

How it works
Every consignment lands at one of the CFSs in the city. The importer then gives the job to one of the 1,200-odd customs housing agents in the city to get the consignment from the CFT.

These agents send liaison men to the port to collect the shipment. When the liaison agent gets the job, he prepares a pay order (PO) based on the total value of the consignment, on a non-judicial stamp paper.

This order is then taken to the operation service centre (OSC) of the MbPT, where an import duty of 0.1 per cent is levied on the total value.

Rs 9,000 crore
Approximate amount in stamp duty the Maharashtra government collects in a year

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