Exclusive: ‘Karnataka industries minister Murugesh Nirani evaded tax, encroached government land’

Nirani Sugars Ltd hasn’t paid property tax since 1996 says Bagalkot district administration’s report to Lokayukta. Minister refutes allegations.

ByMahesh M Goudar

Published Apr 05, 2023 | 12:02 PMUpdatedApr 05, 2023 | 12:02 PM

Murugesh Nirani

Karnataka’s Minister for Large and Medium Industries Murugesh Nirani has evaded property tax, encroached on government land and built a factory on non-approved land, according to a report submitted to the Lokayukta.

Documents accessed by South First under RTI show that the Bagalkot district administration submitted a detailed report recording several violations by firms owned by the minister and senior BJP leader.

Activist Hanamanth V Shinde had filed a complaint with Karnataka Lokayukta alleging that Minister Nirani was involved in tax evasion, encroachment of government land, and building a factory on a non-approved layout in Mudhol, on 21 September, 2022.

The Lokayukta directed the district administration to submit a detailed report on all the allegations made by Shinde on 25 November, 2022.

On the directions of Karnataka Lokayukta, the Bagalkot district administration led by Deputy Commissioner Sunil Kumar submitted a factual report within one month on the allegations against Murugesh Nirani’s firm on 12 December, 2022.

A copy of the report is in the possession of South First.

Nirani Sugars Ltd has not paid property tax since 1996

According to the report submitted by the Bagalkot district administration, Nirani Sugars Limited has not paid property tax to any local body since 1996. While the report has not said how much is owed, it is estimated to be in crores. The minister’s firm has also not paid property tax for its distillery unit for the past six years.

“Nirani Sugar factory is located in the following Survey Nos of Mudhol village: 126/6, 143/2, 144, 147, 148, 151, 152, 154, 155, 156, 157, 158, 159, 163, 165, 166, 170, 171. These survey Nos are not in any of the local bodies either urban or rural,” says the report.

“This factory began operating in 1996 with a sugar cane crushing capacity of 500 TCD and now its capacity is 20,000 TCD per day. Neither CMC [City Municipal Corporation] Mudhol nor Gram Panchayat [GP] Kulali have given any demand notice to the factory owner to pay property tax as the factory does not fall within their limit.”

“It seems that the ‘factory owner’ has ‘not paid property tax’ to any local body till date,” claimed the district administration’s report.

The official website of Nirani Sugars Limited identifies the firm as being part of the Murugesh R Nirani Group established in 1995, whose founder-owner is Karnataka Industries Minister Murugesh Nirani.

On condition of anonymity, an official from the district administration told South First: “It is a unique case because the factory is located in ‘no man’s land’ — it neither comes under the jurisdictions of the Mudhol CMC nor any surrounding Gram Panchayat. The factory owners are taking this as an excuse to evade the tax.”

“As per the master plan of then CMC, the Nirani Sugar factory will not be exempted from the Mudhol town. We have also conveyed the same to the factory owner. As per the findings, the factory owner has not paid property tax since 1996,” stated the official.

However, the official did not disclose the actual figures (amount) of property tax that is due from Nirani Sugars.

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Whisteblower: Loss to govt in hundreds of crores

Activist Hanamanth Shinde told South First: “Nirani Sugars Ltd was started on merely five acres in 1996 and now it has spread to over 300 acres. He has not paid property tax to any local body since the factory started operating.”

“The government is incurring anywhere between ₹100 crore to ₹200 crore loss. He has taken approval for many acres of land to develop industries, but not paid any property tax. He is evading taxes and causing a loss to the exchequer,” alleged Shinde.

No property tax by distillery unit for six years 

It isn’t just Nirani Sugars Ltd. The district administration report also exposes tax evasion by another unit owned by Nirani.

Incumbent Minister Murugesh Nirani, the report notes, hasn’t paid property tax of a distillery unit, which is located in Malapur village, since fiscal year 2017-18.

“The distillery unit of Nirani Sugars Ltd is located in Malapur village. This village was in Kulali Gram Panchayat till 2103-14. In the year 2015-16, Malapur village was shifted to Soragav GP. After shifting of Malapur village to Soragav GP, Nirani Sugars Ltd has paid property tax of ₹1,06,062 for the years 2015-16 and 2016-17,” claimed the report.

“Soragav GP has given demand notice to Nirani Sugars Ltd for payment of property tax from the year 2017-18 to 2022-23. Instead of paying the tax, the factory Managing Director has given a reply saying that their constructed factory area is only 6,725 metres. Henceforth, the tax will be only ₹26,900 per year.”

“From the year 2017-18 to 2020-21 the payable tax stands at ₹1,07,600 and for the year 2012-22, it will be ₹33,625. The Managing Director of the factory has sent two cheques for the above amount to GP by registered post. The GP has not accepted those two cheques and sent back the cheques to the MD of the factory,” the report states.

It further said: “Chief Executive Officer of Zilla Panchayat [ZP] Bagalkot has got the area of the factory measured by Executive Engineer of Panchayat Raj Engineering Department (PRED). On the basis of measurement, GP has revised the property tax and sent demand notice to the owner of the factory. But the owner refused to receive the demand notice and returned it to the GP,” the district administration’s report says.

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The report adds that the managing director of the sugar factory claimed to have made an “agreement” with then Gram Panchayat Kulali regarding payment of the tax as per Section 202 of the Panchayat Raj Act, and was paying tax accordingly.

“The agreement is between the MD and President of GP. The agreement is not signed by any official. As per Section 202 of Panchayat Raj Act, a prior approval of ZP CEO is needed to enter into such agreement. However, there are no documents to show that GP Kulali has sent a proposal to the CEO. It was confirmed by the CEO office that prior approval was not given by the CEO office,” the report stated.

Officials have claimed that the agreement is not valid.

An official from the Soragav GP told South First: “Nirani Sugars Ltd have not paid any property tax of the distillery unit for the past six years. As per the new estimations, the factory has to pay a property tax of ₹2.60 lakhs for the year 2021-22 and 2022-23.”

“We have communicated with the MD of the factory. He has agreed to pay the property tax. We are planning to send the demand notice after the 10 May Assembly polls,” said the official, who wished to be unnamed.

Development and layout approval fee not paid

The report also points to how the Karnataka’s industries minister’s firm has neither paid development charges nor layout approval fee for around 100 acres of agricultural land, which falls under Mudhol village, CMC, and Malapur village. The said land has been converted for industrial purposes between 1996 and 2020, as per the report submitted by secretary of the town planning authority in Mudhol.

“The layout plan for the converted area of the factory has been approved for the 27-29 acres from the Director of Town and Country Planning Department in 2006. There are no documents to show that the development charges were paid to any local body.”

The report pointed out that the factory owner had paid ₹45,000 as verification fee but Nirani Sugars Ltd hasn’t paid fees for layout approval.

“The firm requested to approve a layout for 5-14 acre in Survey No 168/3, 168/2A, 165/5. As per the request, the member secretary City Planning Authority of Mudhol, has given intimation to pay ₹31,93,431 as fee. That requested fee has not been paid,” the report said.

It noted that for another 76 acres of land, only ‘No Objection Certificate’ (NOC) has been issued by Town Development Authority of Mudhol for conversion of land from agriculture to industrial purpose but the layout for the same has not been approved.

“(For) the lands converted from agriculture to industrial purposes in the year 2018, 2013 and 2020 — layout has not been approved by the authorities concerned,” claimed the report.

An official from Town Planning Authority in Mudhol told South First: “Nirani Sugars Ltd has not paid any development charges and layout approval fee till date.”

“The factory owner has developed the infrastructure for his sugar industries in those areas where the layout approval has not been given. All the survey Nos (including that of Nirani Sugars Ltd) pertaining to Mudhol revenue village will be included in the extended master plan of CMC Mudhol.”

“The factory management attempted to keep these survey Nos out of CMC Mudhol limits. After these survey Nos are included in CMC Mudhol, the factory owners have to pay development charges and property tax to CMC,” an official, who wished to be unnamed, alleged, adding that Nirani Sugar Ltd not only violated norms but also made an attempt to keep the factory away from CMC limits using Nirani’s official position.

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Encroachment UKP rehabilitation centre land

The report submitted by the district administration has said that Nirani Sugars Ltd has encroached on land on the north side of the rehabilitation centre at Yadahalli.

“Nirani Sugar factory has laid a pipeline on the north side of Rehabilitation Centre Yadahalli ‘without taking permission’ of the concerned. The notice has also been served to MD of the factory on 29 November, 2022, and 2 December, 2022,” Upper Krishna Project, rehabilitation and resettlement general manager confirmed in a report that Nirani has encroached on the land.

Providing details, the general manager pointed out: “Nirani Sugar factory has laid a pipeline in Survey No 160 of Rehabilitation Centre measuring 72 meters long and 3.6 meters wide areas of steel columns, on which four pipes of 70 meter (dia) installed. This is the recent encroachment.”

“The MD of the factory has written a letter to Assistant Executive Engineer, R and R of UKP to give the encroached land for their factory by determining market value on 6 November 2022. The permission has not been given by the commissioner or general manager of R and R of UKP,” detailed the report.

There are also allegations that Nirani Sugars encroached on irrigation canals and roads. However, the report did not find any violation in this regard.

Nirani refutes allegations, cites ‘miscalculation’

Refuting the “factual report” of the district administration, Karnataka Industries Minister Nirani told South First: “I own 21 factories. I am part of the government; how can I evade tax and build a factory without proper approval?”

The industrialist-turned-industries minister insisted that the authorities were miscalculating the taxes.

“My factory site is on over 200 acres of land, but the main building is only on 50 acres. They (authorities) have to impose tax only on the main building, not an entire site. How can they charge tax for the whole site?” asked Nirani.

The minister, however, admitted that there was encroachment of government land, adding that the issue is being sorted out.