• Part I: The great jute mill robbery
• Part II: How the jute swindle was masterminded

Till 1988, the EPFO didn't have recovery powers of its own, so it depended on the district collector to recover dues. In 1988, it was given the same powers as the income tax department with the same procedures prescribed for recovery.

Most of the procedures were flouted: no valuation was done for the unlisted shares, wide publicity was not given to the sale, and the sale was 'outsourced' to brokers who were arbitrarily selected. From start to finish, the entire sequence of transactions was completed in a matter of a few days, from inviting brokers to sale of shares and reconstitution of the companies' boards.

"Normally, any government recovery proceeding takes at least 2 to 3 years," says an income tax commissioner.

Three invitation letters were sent to 12 brokers for selling the shares from August 8 to 10, 2001 -- the third letter, addressed to seven brokers, had no dispatch number or date.

Sources even say the same person came to collect the letter for at least seven brokers! Then, instead of the department publicising the sale, the brokers were left to do it. The timing, placement and content of the ads were decidedly queer. Even the companies' names and quantum of shares for sale were not indicated in the ads, which were tucked away in the classifieds section of The Telegraph.

The provident fund officials' collusion with the licensee companies is apparent from the two people it chose to associate with, in the sale process. Binod Kumar Bhuwania, the share broker who pushed the deals, had existing business relationships with the licensees and was occupying prime property in Alipore that belonged to Angus Mills.

Then, Suraj Poddar, a director in the licensee company Aditya Translink, was appointed as the standing legal counsel by the RPFC.

The report by R N Kaul & Associates establishes the nexus between the front companies that purchased the shares, the financing company and the licensee companies.

The report found that the Oswals and the Poddars, through a web of companies, either directly or indirectly controlled the jute companies as licensees, the front companies that acquired the shares in the auctions and even their financier, Chariot Leasing. Kaul's team has managed to follow the money trail of more than Rs 2 crore (Rs 20 million) from Chariot Leasing to the share purchasing companies.

So, on June 29, 2001, Angus was sold off to Smart Technologies for Rs 10.39 lakh (Rs 1.039 million). Samnuggur and Victoria were sold off on August 2001 to Chick Commodities and York Holdings for Rs 86.25 lakh (Rs 8.625 million) and Rs 67.4 lakh (Rs 6.74 million), respectively.

While all three purchasers had bid for the three mills' shares, what is amusing is that each of them was declared the highest bidder for the mill they already occupied. As soon as the sale certificates were issued, Chick and York, almost in tandem, quickly called extraordinary general meetings and reconstituted the mills' boards with their own directors.

As for the workers' provident fund dues, in the ongoing litigation with the EPFO, the new owners are arguing that the department should collect the Rs 38 crore (Rs 380 million) dues (as of August 2003) from the holding company, Titagurh!

Incidentally, as per Section 108 of the Companies Act, transfer of more than 10 per cent shares in foreign companies like Samnuggur and Victoria needs the prior approval of the central government.

Apparently, the provident fund office did ask the Reserve Bank of India [Get Quote] for guidelines on the sale of foreign company shares. But the shares were sold off without waiting for its reply.

Titagurh, the holding company, later realised that their companies had been sold off, and filed a petition in the Calcutta high court in 2001 to set the transaction aside.

But on May 6, 2002, in a letter to the recovery officer, Avery states: 'We disassociate ourselves from the various false allegations of fraud, collusion and connivance made against the regional provident fund commissioner and the recovery officer. The allegations in the writ petition were made without (my) knowledge, consent or approval, and therefore, we are withdrawing the (case).'

The case was finally dismissed by the court on April 28, 2004.

Why was the case withdrawn?

Exhibit B (above): This prime property in Kolkata belonged to Angus Jute Mills. 15 years ago, half of it was sold to Sanjeev Bhuwania. He is the son of Binod Kumar Bhuwania, the broker who played a key role in the jute mill sale by the regional PF office even though he had existing business relationships with the purchasing companies. No valuation or reserve price was fixed, nor were requisite permissions taken to sell shares of foreign companies. Sale ads ran with incomplete information.

Photograph: Goutam Roy

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