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Linking Aadhaar to bank accounts is a recipe for creating benami[2] bank accounts and scaling benami bank transactions. It threatens to destroy your bank accounts and destroy the country’s banking system. It’s devastating that the integrity of banking processes is being destroyed by dividing, outsourcing and privatising processes integral to core banking so that they become the responsibility of no one.

Linking Aadhaar[1] to bank accounts is a recipe for creating benami[2] bank accounts and scaling benami bank transactions. It threatens to destroy your bank accounts and destroy the country’s banking system. It’s devastating that the integrity of banking processes is being destroyed by dividing, outsourcing and privatising processes integral to core banking so that they become the responsibility of no one.

Destroying the banking system

India’s Department of Revenue (DoR) has done it again.

On June 1, 2017 vide Notification №2/F .No. P.12011/11/2016-ES Cell-DOR it mandates the linking of every bank account with an Aadhaar number before December 31, 2017. While lawyers point out several illegalities, including the scope, of the notification of this subordinate legislation under the Prevention of Money Laundering Act (PMLA), the failure of the DoR to consistently protect national interest is unbelievable.

A few days back a co-panelist on a TV channel defended the DoR arguing that linking Aadhaar to Bank Accounts will weed out money laundering by verifying bank accounts. What my co-panelist did not say is money laundering is facilitated by creating benami accounts. It is also facilitated by benami transactions. Nor did my co-panelist explain how benami accounts happen or how benami transactions are scaled by money-launderers.

This latest notification ensures that the Trojan horse that they instilled into the banking system on January 27, 2011, will destroy the Indian economy along with the Indian banking system. As feared by the Reserve Bank of India before January 2011, Aadhaar is yet the best state sponsored enabling mechanism for money launderers to enable benami bank accounts. Aadhaar can even help the money launderer to take over your bank accounts. Aadhaar is also the enabler to scale benami transactions.

Here are just 5 ways in which linking the Aadhaar to PAN[3] or a bank account will hurt you, destroy India and, for those who care, an explanation of how Aadhaar creates benami bank accounts and scales benamitransactions.

The innocent will lose money, reputation and access to justice, dignity and livelihood

One, the innocent will lose money, reputation and access to justice, dignity and livelihood as their Aadhaar numbers can act as mules for money laundering, their subsidy and other Aadhaar enabled payments can be easily compromised, their access to their own bank accounts be denied, or they can be framed for economic offences. Helpless citizens and businesses may also find themselves at the receiving end of covert human rights violations as even their access to money and existence is disabled by deactivation or blocking of Aadhaar leaving no recourse to survival.

Linking Aadhaar to bank accounts or PAN converts India into the new tax haven for money launderers

Two, linking Aadhaar to bank accounts or PAN converts India into the new tax haven for money launderers as it becomes easy to remotely create benamiaccounts and operate benami transactions while claiming complete legitimacy. This will destroy India’s economy and governance.

Financing crime and terrorism will grow uncontrollably

Three, financing crime and terrorism will grow uncontrollably as it becomes increasingly difficult to discover, report or close down such operations. This will make it impossible to ensure national security as the rule of law is destroyed.

Corruption will increase

Four, corruption will increase as it becomes easier when proceeds will not be traceable to the corrupt. It will be increasingly difficult to restore swarajya and impossible to ensure suraiya.

Banks will not be able to contain non-performing-assets

Five, banks will not be able to contain non-performing-assets, fraud and financial misappropriation as the real users of banking services will be untraceable. The economy will be completely out of control as the black and white economies become indistinguishable.

We are in a policy vacuum as the NITI Aayog and the bureaucracy have failed to recognise the Trojan horse and protect national interest. Unless the RBI de-licenses the payments systems based on Aadhaar (AEPS) immediately and the government stays linking Aadhaar to PAN and bank accounts, our leadership will have failed to protect India from this fast colonisation of India by the private interests driving Aadhaar.

Enabling Benami Bank Accounts

Benami accounts get created when banks fail to identify the real customers who own the accounts. The Panama Papers exposed data of thousands of benami accounts created through a Panamanian law firm, Mossack Fonseca. The Panama Papers exposed one modus operandi of hiding the real owners of the assets in tax havens.

panama papers modus operandi
The use of Aadhaar as KYC for bank accounts is similar to the note from Panama Law Firm Mossack Fonseca saying “they are an honest client”

Prudent bankers recognise the importance of knowing who they bank with. It is no wonder that the RBI had warned, right from before the Trojan horse was instilled in to the RBI in 2011, that the Aadhaar enrolment process does not have due diligence. It pointed out that for Aadhaar enrolment verification is not compulsory, as confirmed by the UIDAI in the Demographic Data Standards and Verification Procedure, and does not require document based verification.

The RBI also highlighted that such use of Aadhaar as third party identification is against Prevention of Money Laundering Act, the Financial Action Task Force (FATF) and the paper issued on Customer Due Diligence (CDD) for banks by the Basel Committee on Banking Supervision and circulated to scheduled commercial banks by the RBI on November 29, 2004.

The RBI also observed that a fixed time document like the Aadhaar cannot be a Proof of Address. It further cautioned using Business Correspondents (BC), to open bank accounts or undertake banking transactions, as the vulnerability of the system has not been tested and co-mingling funds of different banks in the hands of BC’s was a major operational risk to the banks. While resisting the use of Aadhaar, the RBI also highlighted the Government’s concern about the perceived misuse of such accounts for terrorist financing.

Under pressure from the UIDAI and the Department of Revenue, Ministry of Finance, the RBI, through its circular dated January 27, 2011, allowed bank accounts to be opened exclusively on the basis of Aadhaar number. However the RBI required such accounts to be put to restrictions and be subjected to conditions and limitations prescribed for small accounts.

Not happy with the restrictions, the UIDAI pressed the RBI to lift the restrictions placed on accounts opened with Aadhaar numbers under the PMLA. On September 28, 2011, again through the Department of Revenue, the UIDAI succeeded in getting the RBI to backtrack and suspend the restrictions of the PMLA on bank accounts opened solely through Aadhaar. The UIDAI also succeeded in causing the RBI further to accept eKYC or remotely using information associated with an Aadhaar number as KYC. According to the UIDAI eKYC brings scale to the ease of onboarding customers.

To put the problem in perspective, Aadhaar enrolment was completely outsourced to private parties by the UIDAI with the sole aim of building the worlds largest biometric database. Mr. Nilekani’s UIDAI repeatedly emphasised that they merely provided a framework to issue a number and store the (unverified and unaudited) data.

RTI says Aadhaar has never been verified or audited
UIDAI admits that the Aadhaar (UID) database has never been verified or audited

No one from the UIDAI or even the government even sign the Aadhaar card that is mailed back to the enrolee. The very same organisations that were declared by the UIDAI as holding databases full of ghosts and duplicates were asked to serve as “Registrars” to the enrolment process. They were even given flexibility in the collection, retention and use of the data (including biometric) that they collected.

Without a verification and audit Aadhaar enables duplicates and ghosts
Without a verification and audit Aadhaar enables duplicates and ghosts

No one in the Aadhaar enrolment process was required to identify anyone. At best they had to merely verify documents that were submitted for enrolment. Needless to say anyone in possession of your documents could enrol with minor changes in any demographic information or with different biometrics. Field stories of enrolments are replete with descriptions of biometric jugaad including using combination of persons, use of biometric masks, biometric modifications, and other ingenious methods to maximise registrations.

According to the IT Minister Ravi Shankar Prasad, 34,000 operators who tried to make fake Aadhaar Cards have been blacklisted. Even if each operator worked for a year before being blacklisted, at about 100 cards a day amounts to over a billion cards. That is more than 95 percent of the database. The Aadhaar enrolment has been unlike that of any other identity document, easily scaling the creation of duplicate and ghost identities.

Excrept of IT Minister Ravi Shanker Prasad’s reply in Rajya Sabha on April 10, 2017
Excrept of IT Minister Ravi Shanker Prasad’s reply in Rajya Sabha on April 10, 2017

While there is widespread belief that biometric authentication at time of opening a bank account prevents benami, it ignores the field realities of mobile phone SIM cards being issued on Aadhaar photocopies and used to open bank accounts, of having remotely “downloadable” accounts, and also plain simple use of photocopies of Aadhaar or parallel Aadhaar databases to open bank accounts. With Aadhaar, banks do not have any trace of the real customer. The real customer is simply masked by a benami owner using an Aadhaar number.
Even your Aadhaar can be used, without your knowledge, by a perpetrator to open multiple accounts in order to use it to collect bribes, park black money, or siphon your subsidies. In the eyes of law enforcement, if these accounts are discovered, you will be the criminal.

benami money laundering aadhaar bank account
Is Aadhaar the new Panama?

To compound the problem, UIDAI has no liability for benami bank accounts opened with Aadhaar. After the introduction of the Aadhaar to open bank accounts, the accounts and deposits have doubled in 5 years. No one knows who really controls these accounts.

Growth of bank accounts and deposits in India
Growth of bank accounts and deposits in India

Enabling Benami transactions

Even when it had no mandate to develop banking platforms, in 2009, the UIDAI signed an MoU with the National Payments Corporation of India (NPCI), a non government company, to develop an Aadhaar Enabled Payment System (AEPS). In this MoU the UIDAI has no responsibility for your banking transactions and the NPCI has no obligation to the RBI. The payment system uses the Aadhaar linked to a bank account as a financial address to do electronic money transfers from one Aadhaar number to another.

Company data for NPCI
Company data for NPCI

Unless an Aadhaar is linked to the account, the AEPS cannot access the bank account. Linking a PAN to the Aadhaar will have the same effect as linking the Aadhaar to a bank account as the PAN is already linked to the bank account. Such accounts become Aadhaar enabled. Aadhaar enabled bank accounts are ready to be used by the AEPS for Aadhaar to Aadhaar money transfers.

Linking an Aadhaar to a bank account is done through a process called as “seeding” an Aadhaar number to a bank account. After receiving the Aadhaar number from the customer, the bank uploads such numbers’ into a “NPCI mapper” or a repository of Aadhaar numbers and Institution Identification Number (IIN) numbers used for the purpose of routing transactions to the destination banks. The IIN is a unique 6-digit number issued by NPCI to the participating bank. If you or anyone else seed your Aadhaar with another bank account, the NPCI mapper is overwritten with the new banks’ IIN. Money transferred to an Aadhaar number, using the Aadhaar Enabled Payment System, gets transferred to the bank account linked to the Aadhaar number at the branch recognised by the IIN.

A money launderer can transfer money to an account linked to an alternate IIN and then re-seed the NPCI’s mapper with the original IIN for the Aadhaar number, completely wiping out any trace of money to the alternate IIN. Like transactions of bearer shares in Panama, such money transfers becomes no different from a hawala[4] transaction between real parties who remain anonymous or benami[5].

Your Aadhaar number can be used to facilitate such benami money transfers. If these money transfers linked to your Aadhaar number are detected by investigation officers or tax authorities, you, not the real operator will be held on suspicion of economic offences.

The NPCI’s idea of Aadhaar to Aadhaar banking itself is flawed. It is surprising if the RBI has licensed this payment system under the Payment and Settlements Act.

All money is ultimately stored in bank accounts and not in the name of a person. Nowhere in the world does one transfer money to a person, you transfer it to a persons account. Money transfers to and from a bank account makes every money transfer traceable from source to destination making money laundering difficult, if not impossible.

Hawala schemes make money transfers untraceable by eliminating the bank accounts. Money transfers that, like the hawala, are based on the premise that you do not share an account number, with someone transferring money to you, are inherently flawed in auditability as they wipe out the money trail.

The idea of a mapper, as used by NPCI’s AEPS, does not allow for instructions from sender but relies on periodic update of IIN in the NPCI’s table mapping Aadhaar numbers from banks. As multiple banks have to upload the Aadhaar numbers seeded with accounts held by them, this cannot guarantee desired results.

Perhaps the worst aspect of the mapper is that it slices the business process and outsources parts. This destroys the responsibility of the payment system from any single party as was in the case of NEFT or RTGS. Neither the NPCI, the UIDAI or the banks are responsible in such money transfers. They merely provide “look-up” services. In this system, a single compromised or rogue bank branch, or the perpetuator’s ability to exploit a good one, is enough to siphon off subsidy, park black money or take bribes.

Such money transfers would be difficult, if not impossible, to trace without a whistleblower. A few cases have been reported that suggest the large scale play of this scenario already. For example more than 40,000 erroneous transfers were reported through AEPS in DBT transfers meant as part of drought relief for farmers in Karnataka. The government allegedly blamed the banks for failure to seed the correct Aadhaar numbers with the beneficiaries.

Governments across India had been using the RBI’s own payment system, the NEFT or RTGS, to undertake electronic money transfers. This is also evidenced by the fact that Aadhaar Leaks has exposed that bank details are already present in every record of the leaked data. There is absolutely no reason to switch public payments from NEFT to AEPS, run by a non-government company.

The replacement of a time tested standard of electronic money transfers under government regulation by a non-standard payment system run by a non-government company raises several serious questions of national and public interest, propriety and possible conflicts of interest.

Preventing disaster

If the government and the Supreme Court implement the wisdom of 7 orders of the Supreme Court of India on the use of Aadhaar, they can yet save the country from disaster resulting from the colonisation of India by the new East India Companies or the private interests driving Aadhaar.

In its first order of September 23, 2011 the Supreme Court had indicated that “no person should suffer for not getting the Aadhaar card inspite of the fact that some authority had issued a circular making it mandatory and when any person applies to get the Aadhaar Card voluntarily”.

On August 11, 2015, the 3 member bench restricted the use of Aadhaar and indicated that it may not be used for any other purpose.

On October 15, 2015, a 5 member bench led by the Chief Justice had emphasised that “the Aadhaar card Scheme is purely voluntary and it cannot be made mandatory till the matter is finally decided by this Court”. It had restricted the voluntary use of Aadhaar to public distribution system (PDS) Scheme, the liquefied petroleum gas (LPG) distribution scheme, the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), National Social Assistance Programme (Old Age Pensions, Widow Pensions, Disability Pensions), Prime Minister’s Jan Dhan Yojana (PMJDY) and Employees’ Provident Fund Organisation (EPFO).

In the meantime, following Mahatma Gandhi’s footsteps and refusing to link Aadhaar to anything may be the only option left for you.

On 10 January 1908 Mahatma Gandhi was arrested for the first time in South Africa for refusing to carry an obligatory identity document card commonly known as the ‘pass’.

[1] Aadhaar is a 12 digit random number assigned by India’s Unique Identification Authority of India to unaudited and unverified demographic and biometric information submitted by private enrollers.
[2] Accounts and transactions undertaken using a ghost or a duplicate identity are called benami.
[3] Permanent Account Number or PAN is a number used to track financial transactions and file income tax returns in India.
[4] Hawala is an alternative or parallel remittance system that works outside formal banking systems.
[5] This was first highlighted in September 2014 in http://www.moneylife.in/article/how-aadhaar-linkage-can-destroy-banks/38736.html

 

Originally published here.

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There is an abundance of claims by the government both about the virtues of demonetisation as well as the duration of the "inconvenience" people have to go through. Here is my attempt to debunk some of them.

To begin with, there is a slight problem. The objectives of the demonetisation have not been officially and explicitly listed anywhere, it appears, so one must draw them based on the Prime Minister's speech and whatever various people have said would be a "good" result from the demonetisation. These include fighting black money, fake currency notes, reducing corruption, bringing most of the money in the country into the banking system, generating more taxes and improving economy. Other non-stated objectives, widely pointed out of course, would be the ongoing bank bailout using private funds of citizens (recapitalizing, it is called in polite circles) and strangling the financial resources and thus limiting power while contesting elections for political opponents.

Let us look at these one by one.

Fighting black money

There seems to be no consensus on how much black money exactly is in the form of currency notes. An estimated 6% of all illegitimate income recovered has been in the form of currency, which does not appear to be a lot in comparison with the losses to the economy from the shock of the demonetisation. How much has been recovered is unclear. There are several reported instances of notes being confiscated. However how much of it is black money and how much is (or gets explained away as) legitimate income remains to be seen. There are reports of the news of the demonetisation already been leaked to the wealthy well in time and is supported by increased sales of gold before the demonetisation being announced. Additionally, as economists are repeatedly cautioning, black money is a result of the nature of the transaction rather than a quality of the money, so the same notes can be black money or white depending on the legality of the transaction and whether it is declared in taxes.

Supporters of the government, in their attempts to silence all criticism of demonetisation have increasingly taken to demonising cash transactions or the possession of cash itself as black money, which is a dangerous perspective in a country where 95% of the transactions happen in cash. They might as well call India a black money country. This view is incorrect and obfuscates facts. However, there is no shortage of reports of the old notes themselves being traded for a lesser value creating an overnight black market ranging from a single note to crores being laundered through agents. Between the advance warning and the laundering a large amount of the already small percentage of black money is likely to have safely returned to its owners without changing color.

A small percentage of people may declare their money and choose to pay tax on it, but this is not likely to be a large amount given that amounts over 2.5 lakh will be flagged for Income Tax, and those that cannot be explained as legitimate income are likely to incur a 200% fine in addition to the tax on the deposit (though there currently does not appear to be a provision under the law), essentially leaving only 10% with the owner of the money. Another percentage of the black money is likely to be confiscated from suspicious deposits in banks and through raids. Given that the Income Tax Department will have to show that this money is not legitimate income, the percentage of money likely to be confiscated will be small compared with all deposits flagged, if for no reason then for the sheer number of accounts that will be flagged requiring manpower to investigate and process. No doubt mass mailing of notices will happen and is already reported to have started.

However, there appear to be plenty of ways for people to launder money, including big and connected agents close to the government, false sales of gold, purchase of gold, backdated fixed deposits in banks, interest free loans, advance salaries for several months to employees and more. The government itself offered the victims of the Kanpur train tragedy compensation in the old and illegal notes. It is anyone's guess whether these amounts were originally withdrawn as legal notes and swapped with illegal ones before giving the victims, since the notes not being legal tender cannot be legally paid out by the government after demonetisation.

But the biggest blow to claims of black money being hindered by #demonetisation is the abundance of people named as having offshore accounts, notorious for having black money, cronies who have benefited from disproportionate favors from Modi led governments (state before center) and of course the noble denizens of the black money rich Bollywood. If all these people support demonetisation, they are clearly not worried about their black money being in trouble.

Fighting fake currency notes

The new notes introduced have no additional security features. Existing notes are already counterfeited, so it does not seem like demonetisation will prevent fake currency to any large degree. In fact, within days of the new notes being released, there were instances of photocopies of the notes being used to defraud people, including, in one instance by school children. The garish color and relatively flimsy paper of the new 2000 rupee notes make even real notes appear to be dubious in comparison with regular currency notes. How soon or late counterfeiters start producing fake notes is anyone's guess, but there is absolutely nothing to indicate that it won't happen. We certainly seem to have failed in intercepting their distribution, or fake notes would not be a reason to demonetise.

The hasty nature of the demonetisation causing the panic and overburdening the banks has not allowed banks to adequately examine deposits to catch and refuse fake notes, so existing fake notes are likely to have been knowingly or unknowingly legitimized with government approved real currency through deposits and exchanges.

Reducing corruption

This seems to be mostly fiction, as even in this short duration, a bribe of four lakhs was paid using the new 2,000 rupee notes, that at the time of being caught had not even been released for a week. Reducing corruption cannot be achieved by changing currency. It would require better law enforcement and deterrents. The government machinery being one of the biggest causes of corruption in the country on every level, the government making a claim of reducing corruption with the simple changing of notes sounds mostly like the fox claiming to provide security for the poultry. Indeed in recent days, we have seen allegations backed by documents that implicate the Prime Minister himself in receiving over 55 crores from the Sahara group when he was the Chief Minister of Gujarat.

Another set of serious allegations come from several quarters, notably a BJP MLA himself, indicating that businessmen close to the ruling party had advance notice of the demonetisation and had already cleared their black money. A third allegation is that people close to the president of BJP, Amit Shah himself are exchanging large sums of black money for a fat commission. This is by Yatin Oza, a former BJP MLA who also claims to have videos backing his accusation as well as makes some realistic challenges about the richest people not featuring among those with large deposits of money into banks. Large quantities of 2,000 rupee notes seen with various people support these accusations, as no one can legally get a bundle of 2,000 rupee notes at this point due to limitations on withdrawal. None of these allegations have so far been denied by the Prime Minster or Amit Shah.

While the country lines up for access to its own cash, a large number of loans by high profile defaulters have been written off. A green fine worth 200 crore levied on Adani has been waived. BJP MLA from Rohtak has publicly reassured black money owners that they need not worry and that Haryana Chief Minister Khattar and Modi were with them. And all this is just within the last few days without needing any extensive searches through history. It is unclear why corruption would reduce under a leadership like this.

Routing most money through the banking system

How much money remains in the banking system is a matter of debate once the cash demonetised is fully replaced. Opinions are split on this. Right now people have no choice, since they aren't allowed to withdraw much cash, and banks are often even failing to provide the allowed limits of cash given the severe cash crunch that is likely to last for 4 - 6 months by most estimates. When they do have choice, it is quite possible that a lot of the cash will be withdrawn right back out. Also, given the availability of the 2,000 rupee notes and their relatively low utility for transactions, the only purpose they could realistically be used in any quantity appears to be hoarding. Even while limited cash withdrawals are allowed, there have been several instances of bundles of 2,000 rupees being seen with people including office bearers of the BJP as well as being used to pay bribes. The instances described in the black money laundering also would remain outside the banking system. So it is entirely possible that while the country struggles for cash, a lot of the illegitimate money may still remain out of the system, merely converted to new notes.

In the meanwhile, there seems to be some evidence for the misuse of Jan Dhan accounts (and indeed it could be done with other accounts too) for parking funds. So money entering the banking system may not necessarily be in a manner desired. My suspicion is also that if there are corrupt bank employees, money could be deposited into the bank accounts of people who aren't even aware that their account is being used for laundering. Such money could probably be recovered by forging signatures on withdrawal slips or misuse of debit cards if the person whose account is misused is known to the launderer and trusts them. There seems to be evidence of this happening as well. Such money would fly right out of the banking system once scrutiny was reduced and if caught, would implicate a complete innocent.

The large number of Jan Dhan accounts lying unused and thus likely to not be monitored by owners are particularly a concern, as they have been suspected to be misused for hawala transations in the past.

Improving collection of taxes

While there will be increased collection of taxes, there are easier ways of doing this with far less loss to the economy. Namely tax reforms, reducing corruption in the tax system and robust enforcement. As of now, about 1% of India's population pays taxes. Given the widespread poverty even with an absurdly low poverty line, how much this number can be realistically expected to rise is anyone's guess. The economic stagnation will also result in fewer taxes being collected because of lost jobs, wages, business losses and devalued goods, even if more people temporarily seem to be on the radar.

Recapitalizing banks

Banks will be recapitalized, loans will be easier to get, interest rates will be lowered... are the expected outcomes from demonetisation. I am no expert on these matters, but given the kind of slowdown the economy is seeing, there will also be reduced deposits, transactions, people digging into savings and businesses collapsing, taking their loans down the drain with them. There is speculation that low interest loans will encourage rebuilding of the economy. No economist of note seems optimistic that it will outstrip the shrinking already set into motion. At best it is put as a possibility in the long run, all things going well. All things don't appear to be going well, given that it will be months before there is any liquidity worth mentioning for businesses. What advantage will evolve in the long run remains to be seen.

Preventing terror financing

This seems to be a popular reason on TV as well as supporters of the government. Modi himself referred to it in his speech. However, going by evidence so far, it does not make sense. Manohar Parrikar hurried to claimsuccess as a halt in stone pelting incidents in Kashmir after demonetisation. This echoes a popular belief within the ranks of the BJP leadership and supporters - that the stone pelting incidents in Kashmir are not spontaneous protests, but well organized and funded with black money. However, this couldn't be farther from the truth. Apart from demonetisation having triggered stone pelting on banks in other parts of the country, the stone pelting in Kashmir had actually reduced by October - as per the J&K Home department data (BJP itself is a part of the J&K government) - well before demonetisation and there have been incidents of stone pelting after the demonetisation as well, though congruent with the slower frequency. Furthermore, Kashmir actually saw the least disruption to daily life and order as a result of demonetisation in the country - this is attributed to the penetration of banking to even remote parts of Kashmir as compared with the rest of the country.

Furthermore, the most counterfeited currency in the world is the dollar and it is also the one most likely to be used by international terrorists for financing, yet demonetisation has not seemed to be a feasible deterrent to any such use if it happens. In comparison, Indian currency has far more limited use - within India and Nepal alone and is even less likely to be used. Several people have pointed out that there is no reason why terrorists wouldn't use online banking and electronic transfers, given that they could be accomplished with fake identities, and being caught for taxes is unlikely to bother those willing to brave the consequences of being caught for terrorism (there may be the potential to dispute this using some jokes on taxes here).

Attack on finances of other political parties

One would expect to see a lot more agitation among political parties if their finances were truly disrupted. And it would have been possible for the BJP to disrupt them quite thoroughly if it had chosen to implement transparency in political funding as well. However, BJP has not done that - quite likely as a result of it being the party with the largest amounts of unaccounted funding in the country at present. Consequently, the other parties are merely opposing the BJP for politics as well as the sheer disastrous nature of the demonetisation. There seem to be no indications of alarm for their own well being.

There have been no instances of black money being found with rival parties or politicans so far. In fact, so far the few instances of large amounts of cash being found as currency notes have all been from the BJP itself. The reason for this likely is that political parties being allowed to accept funds in cash as well as not provide details for donations under 20,000 rupees, it is a routine practice for parties to even show larger amounts of black money as several donations of smaller amounts. Far from being cornered, rival parties would likely be able to comfortably change old notes for new ones, including the potential of laundering black money to white for politicians belonging to the party.

It is unclear what advantage, if any the demonetisation will end up giving BJP in comparison with rivals when measured against the tremendous inconvenience, losses and worse caused to voters.

This post will be updated with links to all the claims and quotes in a couple of days when I get some time. Till then, you could probably google the references up if you need them.

Mumbai, 30 June 2016: Hundreds of savvy and well-educated flat buyers have purchased "luxurious" flats in RNA Exotica without noticing what their sale-purchase agreements clearly says: that RNA Exotica is actually a large and shabby slum rehabilitation scheme with a tiny island of rich flat-buyers. The rich people's housing project is married and tied to the rehab component in the same undivided compound -- a marriage made in hell! Not just RNA Exotica's sale-purchase agreement, but also project layouts and plans presented to MOEF, give a birds-eye-view of this nightmarish neighbourhood. With clever advertizing, a tight-lipped sales staff, and several clauses in the sale-purchase agreements that forbid investors from asking the right questions, RNA Corp has been consistently misleading its investors for many years. A prospective home-buyer never gets to read the true facts before he is inside the builder's trap!

So let us take a close look at all the ugly truths that the sale-purchase agreement reveals. As a specimen, take the sale-purchase agreement of actor Arif Zakaria (Flat no. 1903, D-Wing).

Inline image 1

NINE WAYS THE BUILDER SCREWED YOU:

  1. RNA Exotica is a Apartment and Slum Rehab Project in a single compound, so you can't object to general public and outsiders in your compound. The agreement makes sure that flat-buyers will have no right in future to object to the rehab building and car park constructed adjoining RNA Exotica, in the same compound. This clause tells flat-buyers in no uncertain terms that the public parking being constructed on the rehab building is not available for their cars. Read this on page 13 and this on page 21 of the registered agreement. So, the proud flat purchasers should know from this clause that their building compound is only semi-private, unlike most of the apartment compounds that are completely private.

  2. RNA Corp can construct anything on top of your flats, so keep quiet and mind your business. The agreement gives the builder the unlimited right to build anything on top of the "top floor" flat, and the flat-purchaser must keep mum about it. In other words, the builder can continue to commercially exploit any increase in FSI or any changes in rules, even if it causes great delay, inconvenience and losses to the flat-buyers, and the only thing that they can do is smile and feel privileged about owning a luxury flat in RNA Exotica.

  3. RNA Corp can construct servants' toilets, septic tanks, electric sub-stations, closed garages, etc. etc. anywhere in the compound or in the building, so shut your nose, mouth and ears.The ground plans or floor plans shown in the agreement can and will be extensively changed to suit the builder's requirements, and this is plainly stated in the agreement itself. All kind of noisy, smelly or intrusive structures can and will be constructed in various parts of the building and compound where you live, including the same floor where you live, but you cannot object on any grounds because you have signed on an agreement that ties your hands. Your rights as a flat-buyer are restricted to the premises that you have purchased, and not, as is the case in other building projects, the common amenities.

  4. RNA Corp can and will create third-party rights and entitlements to various parts of your building and compound, including clubhouse and various parts that you may mistakenly consider as your common amenities. Read this point carefully again, and you will see that this clause is not just a routinely-drafted formality, but is cleverly drafted to take away all your legal rights.

  5. RNA Corp can decrease the common areas and facilities in your building, and you waived your right to raise any objections.People book luxury apartments not just because of spacious flats, but because of spacious and well-designed common amenities and facilities. These amenities and common spaces are factored into the price of the flat as "super-built-up area". But, after paying lakhs of rupees up front to book a flat in RNA Exotica, buyers are informed by their registered agreement on page 37 that the common areas cannot be taken for granted, and they have no right to object!

  6. You unknowingly gave a power-of-attorney to RNA Corp to sign legal waivers on your behalf before all government authorities, without even informing you. According to this clause, the developer need not consult you or even inform before making big or small changes in the plans, because he can always sign an indemnity or undertaking on your behalf to tell the government that you are OK with anything that he does!

  7. You have surrendered your right to independently verify title and ownership of the plot of land on which RNA Exotica is built... because agreement says you have already verified it and satisfied yourself! Mr flat-buyer, when you signed on every page of the agreement in the Stamp Duty Registrar's office, you definitely were not looking for tricky clauses like this one. But here is a clause on page 17 and another on page 25 that says that you have already verified the title and satisfied yourself, and now you have agreed not to investigate any further, or raise any objections.

  8. Possession date is deliberately left blank. Therefore, you have no way of holding RNA Corp accountable for delay of several years, although there is technically a clause for delays. Read this clause on page 37 and its continuation on page 39.

  9. RNA Corp can allot you car parking according to their own sweep pleasure, and you cannot object. The builder may allot you a really shitty parking in the basement, podium or stilt, and the builder may sell favourably-positioned parkings to others. You have no right to object. Read this clause on page 41.

So, Mr and Mrs Flat Purchaser, it is only in theory that you bought a luxury apartment in RNA Exotica. Your luxury apartment exists only in pretty advertisements. The fact is, you just bought a 2BHK or 3BHK in a shitty slum rehab neighbourhood overlooking the railway tracks, and you signed up on a document that says that you have no right to keep the people of your neighbourhood and sundry public from accessing your compound... and you have no right to object to this entire scheme of things. The only thing you can say now is, "It was nice being screwed by you, Mr Anil Aggarwal."

Inline image 2

Sincere thanks to Sulaiman "Superman" Bhimani (9323642081) for his continuous detective work, which enabled and motivated me to write this article.

ISSUED IN PUBLIC INTEREST BY

Krishnaraj Rao

9821588114

krish.kkphoto@gmail.com

7 April 2015, India: OK, here’s a question: Can you and I make a profit of about Rs 90 lakh by selling a plot of government land before it is transferred to us? Can we sell it to a known crook and swindler at the height of his career? Answer: If we are common people, then no. But if we are high court judges, then yes, we can not only do it, but we can also be elevated to the position of a Chief Justice! Come, let us learn from Justice Laxmi Kanta Mohapatra, Chief Justice Of Manipur, how it is done.

Like all our High Court and Supreme Court judges, Justice Laxmi Kanta Mohapatra (http://hcmimphal.nic.in/judges.html) is immune to the laws of the land. When he was a High Court judge in Odisha, Mr. Mohapatra accepted a bribe of about Rs 90 lakh through a shady land deal with a chit-fund fraudster named Pradeep Sethy (http://tinyurl.com/pradeep-sethy), whose Artha Tatwa Chit Fund scam in Odisha was estimated by Supreme Court to be Rs 4,600 crore – roughly twice the size of the infamous Saradha scam in West Bengal. (Others put it at Rs 20,000 crore.) In this unusual sale of land, the Cuttack Development Authority actively cooperated with Justice Mohapatra. In connection with this same land transaction, Advocate General Ashok Mohanty was arrested last year (http://tinyurl.com/AG-ashok-Mohanty), but Laxmi Kanta Mohapatra -- then the Acting Chief Justice of Manipur High Court -- went on to be elevated to Chief Justice on 10th July 2014, well after the scandal became well-known in the public domain and the media! Isey kehte hain Independence Of Judiciary!

One however wonders about the dynamics of how this particular elevation happened. Did somebody bribe the members of the Supreme Court collegium on behalf of the hon’ble Mr Mohapatra? Or did one of the collegium judges highly recommend Mr Mohapatra as, relatively speaking, the cleanest judge available for the position of CJ of Manipur? Did this brother judge convincingly argue that a little bit of shady dealings, stamp duty evasion and money-laundering should be considered acceptable among the brotherhood of judges? Or was it the collegium’s considered decision that, since Justice Mohapatra was only exploiting well-known legal loopholes in Odisha's Stamp Act and other laws, it was legally acceptable?

(For the record, the government of Odisha was in the habit of making such discretionary land allocations to high court judges and others. This facility was widely known and exploited for years by VVIPs. (Read http://tinyurl.com/Odisha-land-allotments. After this scandal, in December 2014, the government seems to have decided to mend its ways (http://tinyurl.com/Odisha-cancels-allotments). RTI Activist Jayanta Kumar Das, in his Letter Petition (http://tinyurl.com/Jayanta-Das-Letter2CJI) to Chief Justice of India on 18th March 2015, presented a blow-by-blow account of Justice Laxmi Kanta Mohapatra's wrongdoings, with supporting evidence, and is awaiting some action. Tall hopes? Maybe. Wait and watch.

HIGHLIGHTS:

  1. On 11.10.2006, in his capacity of a judge of Odisha High Court, Laxmikanta Mohapatra applied for a government plot in Markata Nagar to Cuttack Development Authority (CDA). Within seven months, CDA allotted a 4000 square foot plot in Sector-11 in Bidanasi project area, Cuttack) and instructed him to pay Rs 9.8 lakhs. Having an ancestral property in Cuttack district (Stoney Road, Post- Candinichowk, P.S- Lal Bag, Dist – Cuttack), Mr Mohapatra was actually not eligible to get a government plot from CDA. So, his letter was evasively worded, stating that neither he nor his family owned land at Markata Nagar. After taking possession in July 2007, lthough the allotted plot was not yet transferred in his name, Laxmikanta Mohapatra proceeded to build a double storied building on the allotted plot. Read documents: http://tinyurl.com/Judge-gets-land
  2. within four years of the allotment of government land to him, Justice Laxmikanta Mohapatra transferred the possession of this plot for a consideration of Rs one crore. The land was "sold" by means of a simple affidavit on ten-rupees stamp paper to Pradeep Kumar Sethy, the chit-fund baron. The mode of payment was not mentioned (Cheque? Cash? Any other means? Who knows?) The affidavit said, “I have taken over the possession of the plot on 23.7.2007 and lease deed has not been executed in my fabour (sic!) till date. The plot is double storied building is existing on the plot”. As Justice Laxmi Kanta Mohapatra was not the owner of this plot, he had no right to execute and register a sale deed or to transfers this plot in favour of any party. Indeed, no law in India or in Odisha empowers anybody to transfer or sell a property to any party by means of a mere affidavit… but that is precisely what this learned judge did! Read http://tinyurl.com/Sethy-buys-from-Judge

By means of this unlawful transaction, Justice Laxmikanta Mohapatra enabled chit fund operator Pradeep Kumar Sethy to do him an undue favour of about Rs 90 lakh. Simultaneously, the honourable judge broke the law to avoid paying at least Rs 5 lakhs stamp duty and registration. And last but not least, this person who is now Chief Justice of Manipur committed offences of money-laundering by accepting and creating black money from the chit fund operator – possibly in order to provide him some undue favours.

Cuttack Development Authority aided and abetted this unlawful transaction. It transferred this plot in the name of Sri Pradeep Kumar Sethy vide its Letter No.8098/CDA/Dated 23.4.2011 based on Justice Laxmikanta Mohapatra’s affidavit and a request letter written by Pradeep Sethy.

  1. Meanwhile, lakhs of people in Odisha started raising their voice against Artha Tatwa Chit Fund Company, its Chief Managing Director Pradeep Sethy and other directors for the nonpayment of their matured fixed deposits in different branch offices of the company. Anticipating his arrest, Pradeep Sethy approached the Advocate General of Orissa High Court Sri Ashok Mohanty for an undue favour, and a deal was struck.

Barely one and a half years after the land was transferred in his name, Pradeep Sethy made another affidavit dated 03.10.2012 transferring the land plot for a consideration of Rs 1,00,01,000/- (Rupees One Crore and One Thousand) only. Again, the mode of payment was not mentioned (Cheque? Cash?). This affidavit suggests, as CBI mentions in its chargesheet, that Advocate General Ashok entered into this transaction as a consideration for giving undue favours in Orissa high Court. Read http://tinyurl.com/Sethy-sells-to-AG

  1. A case was registered against Pradeep Sethyand his staff by Balasore Town Police for cheating innocent investors (Balasore Town P.S. Case No. 352 of 2012 dated 06.10.2012, U/S 420/506/34 I.P.C etc). Pradeep Sethy applied for anticipatory bail before Odisha High Court, on 09.10.2012 (Annexure- 21). Thanks to Advocate General Ashok Mohanty, this anticipatory bail was allowed. Pradeep Sethy and all his associates were released on anticipatory bail without production of the case diary on 18.10.2012.
  2. Soon afterwards, Cuttack Development Authority took steps to ensure that the bribe paid to Ashok Mohanty reached him, i.e. the transfer of the land to Ashok Mohanty, who was possibly anxious that the land plot may be seized by the authorities, along with other assets belonging to Sethy. So, by a form-letter dated 8th February 2013, it summoned Sethy to appear in person on the same day between 2 and 4 pm with necessary documents for signature verification and verification of his identity. It is not know by what mode this letter was delivered, and so one may presume that an urgent hand-delivery was made, possibly by the Advocate General himself! Read http://tinyurl.com/CDA-writes-to-Sethy
  3. In its preliminary charge sheet in the Artha Tatwa Chit Fund Scam Case, CBI states that the consideration of Rs one crore to Justice Laxmi Kanta Mohapatra came out of misappropriated funds from the Artha Tatwa company accounts. It says, "As per records, accused P.K. Sethy had purchased said building from Justice L.K. Mohapatra for consideration of Rs. 1,00,00,000/- during April, 2011 out of the money flown from the accounts of AT Group and later, transferred the said plot to Asok Mohanty." You may read the relevant paragraphs of the CBI chargesheet here: http://tinyurl.com/CBI-chargesheet-Artha-Tatwa
  4. The CBI chargesheet says: "Investigation disclosed that accused Asok Mohanty was the Advocate General of Odisha during the period from June, 2009 to September, 2014. He had purchased a building located at plot No. 11-3B/1332, Category-B, measuring 4000 sqft in sector -11, Bidanashi, Cuttack from the accused Pradeep Kumar Sethy. As per records, accused P.K. Sethy had purchased said building from Justice L.K. Mohapatra for consideration of Rs. 1,00,00,000/- during April, 2011 out of the money flown from the accounts of AT Group and later, transferred the said plot to Asok Mohanty. Though the sale transaction was shown to be of Rs 1,01,00,000/- but in fact an amount of Rs. 70,00,000/- only has been paid by accused Asok Mohanty to accused P.K. Sethy. During the course of investigation two money receipts were seized from the official premises of accused Asok Mohanty indicating the payment of Rs. 1,01,00,000/- towards consideration. The said money receipts bear forged signatures of accused Pradeep Kumar Sethy. During the relevant period of time i.e. during October, 2012, when the above transaction took place, agitations were going on in Odisha against the accused Pradeep Kumar Sethy and against AT Group by the depositors which is evident by registration of the 1st FIR against the AT Group on 06.10.2013 following which the accused P.K.Sethy had moved an anticipatory bail petitions before the Hon'ble high Court on 09.10.2012 and during the relevant time the present accused AG entered into a criminal conspiracy with the said Pradeep Kumar Sethy and in furtherance thereof extended his hospitality towards the accused P.K.Sethy as a result of which the anticipatory bail was granted to the accused P.K.Sethy on 18.09.2012. During the course of investigation, two separate agreements for sale of the said plots were recovered/seized from the possession of accused Asok Mohanty. In the said two agreements, the consideration agreed upon was Rs One Crore and One Lakh which is contrary to the consideration mentioned in the affidavit dt. 03.10.2012 submitted to the Cuttack Development Authority for transfer of ownership of the said property. It may be mentioned here that in the said affidavit dt. 03.10.2012, the consideration amount is mentioned as Rs. One Crore and One Thousand. Thus, it is clear that the accused Asok Mohanty misappropriated the remaining amount of Rs. 31 lakhs that he was supposed to pay to the accused Pradeep Kumar Sethy."
  5. Significantly, CBI was able to investigate the role of Advocate General Asok Mohanty... but do they have the authority or the mandate to investigate the role played by Justice LK Mohapatra? No. And therefore, one is left wondering whether Justice Mohapatra's role was as innocuous as the CBI chargesheet makes it out to be!

Final outcome:

  • Lakhs of citizens of Odisha – swindled. Money not yet recovered
  • Chit fund swindler Pradeep Sethy – arrested & chargesheeted by CBI.
  • Advocate General Asok Mohanty – ditto… and he lost his job.
  • Odisha High Court Judge Laxmi Kanta Mohapatra – got to keep Rs 90 lakhs that came from the savings of chit fund investors… and he was elevated to the position of Chief Justice of Manipur after the scandal.

Will somebody please rap the Supreme Court collegium on the knuckles for this decision, and impeach this honourable Chief Justice of Manipur? If this is not done, one worries that before his scheduled retirement on 10th June 2016 upon attaining the age of 62, the SC collegium (or Judicial Appointments Commission) may elevate him to the exalted status of a Supreme Court Judge, or even, who knows? Chief Justice of India? You can never tell.

1

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And with that we come to a close of today's top ten list. Hope you enjoyed the show and good bye till we meet again.