Pharma giants favoured in SEZs

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Two pharmaceutical giants Aurobindo and Hetero have been chargesheeted by the Central Bureau of Investigation.

The chargesheet shows how they were favoured in allotments in Special Economic Zones by the government of late Dr Y.S. Rajasekhar Reddy with the help of IAS official B.P. Acharya.

The CBI has alleged that as part of a criminal conspiracy, Mr K. Prasada Reddy and Ms K. Rajeswari, brother and wife respectively of Mr K. Nityanandan Reddy, managing director of Aurobindo, invested `3 crore in Jagati Publications owned by the chief minister’s son, Mr Jagan Mohan Reddy.

Trident Life Sciences, owned by Mr Nityanandan’s family, invested an amount of Rs 7 crore in Jagati at a high premium of Rs 350 per share. Investigations found that Mr Nitaynanda Reddy transferred an amount of Rs 2 crore to the accounts of his wife Ms K. Rajeswari and Rs 1 crore to his brother Mr K. Prasad Reddy for investing in Jagati.

Moreover, Mr Nityananda Reddy in collusion with APIIC officials fraudulently transferred 30.33 acres of land at the Export Promotion Industrial Park at Pashamylaram in Medak district to Trident Life Sciences.

Trident is owned by Mr Nityananda Reddy’s family and he misrepresented it as a 100 per cent subsidiary of the Aurobindo Pharma.

In 2005, APIIC allotted 27.46 acres in Pashamylaram at the rate of Rs 150 square meter to Aurobindo. Later, another 2.878 acres of land were allotted.

The then APIIC zonal manager Mr Y.V.L. Prasad asked Aurobindo to give `61 lakh towards processing fee for the transfer of the land to Trident. However, based on the request of Mr Nityananda Reddy Mr B.P. Acharya said that “Since Trident is a wholly owned subsidiary of Aurobindo, we may charge a nominal process fee of one per cent.” Later it was changed to two per cent. Land was transferred at two per cent instead of 10 per cent on the prevailing land cost.

Mr Y.V.L. Prasad did not verify the relationship between Trident and Aurobindo as part of the conspiracy.

The other accused, Mr P.S. Chandramouli, the company secretary of Aurobindo, furnished a certificate on the letterhead of Aurobindo stating that Trident is promoted by the promoters of Aurobindo which is a 100 per cent subsidiary.

Trident is owned by Mr P. Sarath Chandra Reddy, son-in-law of Mr Nityananda Reddy. The CBI has alleged that Mr Nityananda Reddy, knowing fully well that the majority of the shareholding of Trident was held by his family, and it was not a wholly-owned subsidiary of Aurobindo, fraudulently submitted a request to Mr B.P. Acharya for transfer of the land. Trident has gained `4.3 crore wrongfully and a corresponding loss was caused to APIIC.

The CBI investigation revealed that the then APIIC MD, Mr B.P. Acharya, with undue haste and by abusing his official position allotted land in the Jadcherla SEZ to Aurobindo and Hetero at the instance of Dr Y. S. Rajasekhar Reddy, in violation of laid down procedures.

The YSR Congress Party on Saturday said the chargesheet filed by the CBI against party president Y.S. Jagan Mohan Reddy was a “fraudulent affair”, and that the party would consider legal options to challenge the charge-sheet.The party’s political advisor, Mr D.A. Somayajulu said the whole thing was done in a hurry to prevent the courts from granting bail to Vijay Sai Reddy.

Without proper assessment of requirement on the pretext of CM's directions Acharya allotted 49 acres to Auorbindo and 26 acres to its subsidiary APL Healthcare, 68 acres to Hetero Drugs and Hetero Lab was allotted nine acres. The work didn't commence on land allotted to APL. The AG audit found that due to allotment of land at arbitrary rates APIIC suffered a total loss of Rs 12 crore. The proposal of Jadcherla SEZ was not published in newspapers, keeping other entrepreneurs in the dark," alleged CBI in the chargesheet.

B.P. Acharya endorsed their requests for land allotments on the same day, November 17, 2006 and it was processed and endorsed at three different levels on the same day and came back to Acharya for a decision.

Mr B.P. Acharya took the letters on the same day to YSR and he handed them over immediately to the parties.

The application of Lee Pharma which approached APIIC on November 13 and 14, prior to Hetero and Aurobindo, was not processed. However, Lee Pharma was allotted 10 acres of land but it was not intimated to them. In March 2007, Aurobindo paid lease premium of Rs 5.25 crore for 75 acres of land and Hetero paid Rs 3.88 crore for the land.

Other allotments in Jadcherla SEZ were made by the plot allotment committee as per the rates fixed by the price fixation committee. Due to the special allotments Aurobindo and Hetero made a wrongful gain of Rs 8.6 crore.

Janani Infrastructure Ltd was incorporated in 2006 with capital of Rs 2 crore with Mr Jaganmohan Reddy holding the major stake.

Controversial GOs ignored in chargesheet

What is interesting is that the CBI did not make any mention of the controversial GOs issued by the YSR government for projects and land allotments, in the chargesheet. Ministers and several IAS officials are likely to face the heat over the GOs.

However, CBI sources said that there will be more chargesheets. “All the accused are facing all charges named in the chargesheet. Another chargesheet will be filed pertaining to the GOs. Other accused named in the FIR will also be included in the subsequent chargesheet.”

Jagan Mohan Reddy’s counsel Ashok Reddy said, “As the chargesheet has been filed, there can be no arrest of Jagan Mohan Reddy. However, it is the option of the CBI. I can’t comment.”

Meanwhile, one of the offences Mr Jagan Mohan Reddy has been charged with is criminal breach of trust (409 of the IPC) which is punishable with life or 10 years imprisonment. Legal experts say the applicability of 409 IPC to Jagan Mohan Reddy’s case is debatable as he did not hold any official position when the offence took place.