Karnati Venkateswara Rao alleged that he was forced to undersell the stake at the instance of former Andhra Pradesh chief minister YS Jagan Mohan Reddy.
Published Dec 04, 2024 | 4:27 PM ⚊ Updated Dec 04, 2024 | 4:27 PM
YS Jagan Mohan Reddy. (Supplied)
The contents of the complaint filed by Kakinada Seaport promoter Karnati Venkateswara Rao, alleging that a 41.12 percent stake in the seaport was transferred to Aurobindo Realty and Infrastructure Ltd under force, are sending shockwaves across Andhra Pradesh.
The complainant alleged that he was forced to undersell the stake at the instance of former Andhra Pradesh chief minister YS Jagan Mohan Reddy.
Subsequently, the FIR issued by the Crime Investigation Department (CID) of the Andhra Pradesh police named Jagan Mohan Reddy, MP Vijaysai Reddy, and MP YV Subba Reddy’s son Vikrant Reddy.
The complaint alleged that a 41.12 percent share of the port, valued at ₹2,500 crore, was forcibly acquired for ₹494 crore.
Apart from that, 49 percent of the Kakinada Special Economic Zone (SEZ), valued at ₹400 crores, was forcibly taken away for just ₹12 crore. Rao also claimed the GMR group had already offered ₹400 crore for the stake.
The CID officials, after registering a case, swung into action. A CID official said they were getting ready to examine the phone call details of all those Rao had mentioned in his complaint and also use Google Takeout (Download Your Data) in the investigation.
“We are inquiring about the role played by Vikrant Reddy’s PA, friends, car driver and others,” the CID official said.
In a nutshell, the sequence of events is mentioned in the complaint:
In May 2020, YSRCP Rajya Sabha member V Vijaysai Reddy called KV Rao (complainant) and informed him that Vikrant Reddy, son of YV Subba Reddy MP, would contact him for the acquisition of shares in Kakinada port.
Vikrant Reddy in turn informed Rao that it was not him but the then Andhra chief minister Jagan Mohan Reddy who was acquiring the shares. However, Rao could not meet Jagan Mohan Reddy then.
Shares of the Kakinada Sea Port were transferred to Aurobindo Realty and Infrastructure Pvt Ltd (presently named Auro Infra Private Limited).
The deal was supervised by Aurobindo Pharma Director Sharath Chandra Reddy and Vikrant Reddy.
In his complaint, Rao said that in September 2020, after the forcible acquisition of the shares, Vikrant Reddy took him to Jagan Mohan Reddy, who clearly told him to follow Vikrant Reddy’s instructions.
Kakinada Infrastructure Holdings Pvt Ltd (KIHPL) is a group investment company, which holds 41.12 percent of shares in Kakinada Seaports Limited (KSPL) and 48.74 percent (along with KVR Group) in KSEZ. Rao said that KIHPL was owned by him and his family members.
He said that since Jagan Mohan Reddy took over as the Andhra Pradesh chief minister after the 2019 Assembly elections, the directors of the port and State Maritime Board did not cooperate with KSPL in its operations. Rumours were afloat in the market that KSPL would be taken over by third parties.
Rao said the company was truthfully maintaining the accounts relating to gross revenue receipts and payment of revenue share to the government of Andhra Pradesh (GoAP). He gave a blow-by-blow account of how he was made to forgo his share in KSPL and KSEZ.
He said that the KSPL received a letter dated 13 November 2019 from the GoAP appointing PKP Sridhar & Santhanam (PKF) to conduct special audits for ports and the KSPL. He was called upon to furnish the entire data for the financial years from 2015-2016 to 2018-2019.
The audit company requisitioned many records of the company, visited the port office and started conducting the special audit.
Later on, the GoAP wrote to the port (letter dated 04. 12.2019) informing that it had appointed M/s Kroll India, a Bombay-based consulting firm, to conduct a forensic audit of KSPL and the company was directed to furnish all the required documents to enable its smooth conduct.
A team from Kroll India came to Kakinada and obtained the requisite documents and also gained remote access to all the financial operations of the company. Kroll India completed the forensic audit as directed and submitted their report to the GoAP. Subsequently, the GoAP terminated the engagement of Kroll India.
During the audit, the company duly answered the questions raised by PKF regarding gross revenue. At the time of the closure of the audit operations, the members of the audit party orally informed that they found huge accounting irregularities by suppression of gross revenue.
It claimed the government was deprived of a revenue share of about ₹1,000 crore between 2014-2015 and 2018-2019.
Rao said the Chief Executive Officer (CEO) of Andhra Pradesh Maritime Board informed KSPL that the government had accepted the request of the auditors to conduct a special audit of KSPL for the years 2008-2009 to 2013-2014 and also for the 2019-2020 and the company was asked to cooperate with the above audit party. He claimed the CEO was intending to further threaten him and the company,
In May 2020, Vijayasai Reddy called him and informed him that Vikrant Reddy would contact him in respect of the KSPL. Rao said he was also informed that Vijayasai Reddy’s son-in-law’s brother Sharath Chandra Reddy would also be present.
Towards the end of May 2020, Vikrant Reddy called and asked him to come to his home at Jubilee Hills in Hyderabad. Accordingly, he went there and met Vikraath Reddy. During the conversation, he was informed that the GoAP would demand about ₹1,000 crore of the revenue share according to the special audit report. Rao said there were no irregularities and all the alleged issues were fabricated by the auditors.
Rao said he was also informed that if a demand is raised by the GoAP, the KSPL would be in deep trouble and hence, he was asked to part with his 50 percent stake in KSPL and 48.74 percent in KSEZ.
He then told him that he held only a 41.12 percent share in KSPL through KIHPL and had only 20 shares in his personal capacity.
“It was also informed that KSEZ holds a large land bank, which is valuable and there is no need for me to part with my shareholding,” he said.
Then Vikrant Redy informed him that it was not he who was trying to acquire the shares but Jagan Mohan Reddy himself. Vikrant Reddy had told him that if he did not agree to transfer the shares, then there would be a spate of criminal cases and vigilance enquiries leading to his and his family members’ arrest.
He said he was also informed that they would pay him a nominal amount of money for the transfer of the shareholdings.
When he tried to contact the office of the chief minister seeking a meeting, his efforts proved futile. After three days, Vikrant Reddy informed him that he was making arrangements for executing share transfer agreements and he was asked to cooperate.
Rao said he was also informed that M/S Varuna Law Associates LLP were appointed to prepare the requisite documentation.
The said law firm corresponded with the offices of the KSPL and KSEZ.
“At that time, I was made to understand that they were also preparing a corporate deposit agreement, where they would pay ₹100 crore as a deposit at the time of agreement,” Rao said.
Rao said he was not aware whose favour agreements were being executed or who would pay the deposit amount. During the preparation of the agreements, he came to know that the shares in KSPL and KSEZ were being sold to M/s Aurobindo Realty and Infrastructure Private Limited (presently renamed as Auro Infra Private Limited).
On 24 June 2020, he went to the residence of Vikrant Reddy, where Saratchandra Reddy of Aurobindo and some other persons were present along with three lawyers from Varuna Law Firm.
They provided him with two agreements — A Share Purchase Agreement and a Deposit Agreement.
As per the share purchase agreement, KIHPL would transfer 41.12 percent of shares held by the company in KSPL in favour of Aurobindo. The agreement did not mention the sale consideration amount and the said sale price would be determined by the merchant banker, to be appointed by the purchaser.
Rao said he was simply asked to sign the share purchase agreement and deposit agreement, on behalf of KIHPL, agreeing to sell the shares for an unspecified sum.
He said he had no other option but to sign on the dotted lines. This itself demonstrated that the said share purchase agreement is nothing but a product of fraud, cheating and extortion with the use of fabricated documents.
Later, the deposit amount of ₹100 crore was remitted via an RTGS transfer on 10 July 2020 in favour of KIHPL.
Since the agreement contemplated the determination of the sale price of shares by a merchant banker, the purchaser Aurobindo appointed M/s Manohar Chowdhry & Associates Chartered Accountants Chennai to value the equity shares as of 31 March 2020.
The company determined a share value of ₹229.42 per fully paid-up share of ₹10, based on the Rule IIUA valuation approach under the IT Rules. This valuation resulted in a total of ₹494 crore, representing 47.12 percent of the shares.
Rao said when the same was informed to him, he protested against the valuation since it did not represent the true value of the shares. The valuation procedure adopted is only to comply with the Income Tax Rules, rather than arriving at the true value based on the net assets value, the profits earned by the company in the preceding years and the future earning capacity of the company.
He said that on a conservative estimate, the value would be not less than ₹2,500 crore for 41.12 percent of shares and asking him to part the shareholding for a pittance of price was totally unreasonable.
“On my protest, Vikrant Reddy informed me that even the payment of ₹494 crore was only to enable legitimate transfer of shares and said that the amount was reasonable. They reminded me of the consequences of refusal — my and my family members’ arrest besides stalling other businesses,” Rao said.
“I had no other option except to sign the agreement in the manner they suggested,” he said.
On 3 September 2020, an addendum to the share purchase agreement was executed, duly signed by him under which, he agreed to transfer 41.12 percent of shares in KSPL for consideration of ₹494 crore at the rate of ₹229.42 per fully paid-up share of ₹10.
After signing the agreements, Vikrant Reddy and Sharath Chandra Reddy asked him to go to Vijayawada to meet Jagan Mohan Reddy. In the meeting with Jagan Mohan Reddy, Vikrant Reddy explained the happenings.
He said when he tried to protest, Jagan Mohan Reddy did not allow him to say anything and asked him to follow what was said by Vikrant Reddy.
“Thus it is clear that all this was done at the instance of Jagan Mohan Reddy,” Rao surmised.
The balance amount of ₹394 crore was paid to KIHPL on 9 February 2021. Thereupon, necessary share transfer documents were executed which were submitted to the company for the transfer and accordingly, the shares were transferred in favour of Aurobindo that became a shareholder in the company in the place of KIHPL.
According to the advice of Vikrant Reddy, the company on 17 November 2020 sought the approval of GoAP for a change in shareholding. By a Government Order (GO. No: 17 Infrastructure and Investment) dated 24 December 2020, the GoAP conveyed its approval for transfer in favour of Aurobindo. The whole process of approval was pursued by Vikrant Reddy.
The bargain in May 2020, when he was called to the house of Vikrant Reddy, was not limited to KSPL but also the shareholding of KSEZ.
On that day, they had insisted on the transfer of 49.74 percent shareholdings in KSEZ to their nominees.
“Having no other choice, I accepted the same. I was called again to sign the agreement in respect of KSEZ on 12 October 2020 and the consideration was fixed at ₹12 crore. On that day I signed the agreement, and the amount was paid by way of a cheque dated 31 March 2021. The said cheque was presented for collection in June 2021,” Rao said.
By 3 September 2021, the transfer of shares was completed and Aurobindo became a 48.74 percent shareholder in KSEZ for just ₹12 crore.
Later, Aurobindo acquired the balance stake from the GMR group and thereby became the 100 percent shareholder in KSEZ. By virtue of the transfer of KSEZ, the Kakinada Gateway Ports Ltd, a subsidiary of KSEZ also stood transferred to Aurobindo by virtue of its acquisition of KSEZ.
According to him, the investment he made in terms of equity contribution ₹45.55 crore.
“Considering the debts of the company, our 48.74 percent shareholding was offered to GMR for a sum of ₹400 crore. As against this, we were paid a sum of ₹12 crore and the entire shareholdings have been knocked away along with the Kakinada Gateway Ports Ltd,” he said.
“The share sale and purchase agreement between my group and Aurobindo was part of a fraud and coercion based on fabricated document and employed by Vikrant Reddy, in collusion with Aurobindo,” he said.
Rao added that KSPL was used as a cash cow to fund their projects, which would not have been possible without the transfer of shares in favour of Aurobindo.
Rao said that even though these events occurred between May 2020 and February 2021, he could not file a complaint earlier because Jagan Mohan Reddy was the chief minister of Andhra Pradesh till April 2024.
He said he gained the courage to seek an investigation after noticing several complaints about the atrocities of Jagan Mohan Reddy.
(Edited by Muhammed Fazil.)
