Illegal payments of Rs 1.72 cr made to Kerala CM’s daughter, claims report, triggers political firestorm

The report, which refers to findings of the Income Tax Department, also mentions payments allegedly made to Vijayan, former CM and Congress leader late Oommen Chandy, senior Congress legislator Ramesh Chennithala, and Indian Union Muslim League leaders P K Kunhalikutty and V K Ibrahim Kunju, among others.

The CPI(M) state secretariat denied any illegality in the CMRL’s dealings with Veena’s firm. Congress and IUML leaders also denied any wrongdoing on their part.

The case against CMRL, a mineral processing and exporting firm, emerged from Income Tax searches held on the premises of the company, its managing director Kartha and other senior company officials in 2019. The searches allegedly revealed unaccounted money and payments made to various people.

In 2020, CMRL and Kartha had filed a settlement application before the Interim Board for Settlement in New Delhi for assessment years 2013-14 to 2019-20. CMRL and Kartha had sought immunity from prosecution and penalties under various provisions of the Income Tax Act.

In its report in June this year, the Interim Settlement Board granted immunity for CMRL and Kartha with a rider that the immunity would be withdrawn if they were found having concealed any facts or evidence with regard to the proceedings.

The Income Tax Department (I-T) said Kartha allegedly generated large amounts of unaccounted cash, and that there was no evidence on record showing a direct link between payments made to various persons and the business of the CMRL. The report mentioned undisclosed income of Rs 135 crore allegedly accrued by the firm during the period between 2013-14 and 2019-20. Of this, Rs 95 crore was allegedly found to have been illegally paid to various persons and parties.

Quoting Kartha, the report alleged payments were made “to enable the smooth running of the company on a day-to-day basis”.

Vijayan’s daughter, Veena, was allegedly paid Rs 1.72 crore from 2017-18 to 2019-20 under the pretext of providing software solutions, according to the report. It said this payment was illegal as Veena’s company, Exalogic Solutions Private Limited, had allegedly not provided any software service to CMRL as per evidence gathered during the search. Senior employees of CMRL had told I-T that Veena’s firm had not given any software service to the company, the report alleges.

However, in 2017, CMRL had entered into a service-level agreement with Exalogic for development and management of software with a monthly remuneration of Rs 3 lakh. I-T had found another document that showed CMRL had engaged Veena as a consultant on a retaining basis from 2017 for a monthly remuneration of Rs 5 lakh.

Referring to the payments, CMRL was quoted in the I-T report as saying that “business required various payments to be made outside of banking channels to ensure smooth running of the business with uninterrupted flow of raw materials and services”.

Regarding the payments to Veena, I-T said CMRL had been making payments allegedly to compensate for a service that had not been received. “The payment to Veena T had been quantified towards bogus claims under software services and management consultancy, and was included in the total undisclosed income of the CMRL. Exalogic has not provided any service to the CMRL as per the contemporaneous evidence gathered during the search. The payments to Veena do not qualify as business expenditure,” alleges the report.

The names of other recipients of the alleged illegal payment were given in abbreviations as PV, OC, KK, IK, RC and AG in the documents seized by the Income Tax Department, according to the report.

The report said CMRL chief finance officer Suresh Kumar had explained these abbreviations as Pinarayi Vijayan, Oommen Chandy, Kunhalikutty, Ibrahim Kunju, Ramesh Chennithala and A Govindan. However, there is no reference to the amount of money allegedly paid to these individuals. Kumar was quoted in the I-T report as saying that the payments were made as demanded.

The report said, “Since the company cannot make illegal payments, and the company’s shareholders have not allowed it, the cash payments can only be treated as payments made by Kartha. Illegal payments should be assessed under section of 69C of the IT Act as unexplained expenditure in the hands of Kartha.”

Vijayan and Veena have not commented on the allegations.

The CPI(M) state secretariat said in a statement on Thursday: “Two firms have entered into a legal pact for providing service. The money was paid as per the conditions in the contract between the two firms. It was a transaction through the bank and was transparent. The Interim Board for Settlement has not heard Veena. Children of political leaders have every right to do their business. The issue between a firm and the Income Tax Department is being used for political ends.”

CMRL director and son of Kartha, Saran S Kartha, said that the issue had nothing to do with Vijayan. “We had an agreement with Exalogic Solutions for various services. They were paid for their services over a period of 36 months,’’ he said.

Congress leader Chennithala denied any illegality, but said he had received money from the CMRL as a contribution to the party. “I had got money from the CMRL during my terms as the president of the Congress state unit and Opposition leader. I don’t remember how much money I had got from them. It had been recorded in the party accounts,” he said.

IUML leader Kunhalikutty said if his party had gotten money from CMRL, it would be recorded. “We are running a party. I haven’t taken money by hand. If the party has received money, it would be recorded. Charity, sponsorship and advertisement are realities. Media institutions, journalists and press clubs have also got money.”

With names of both the CM and leaders of the Opposition being mentioned in the report, the Congress has been treading cautiously.

Senior Congress legislator and Leader of Opposition in the Assembly, V D Satheesan, said there was nothing wrong in political parties taking contributions from business houses. The Congress had assigned leaders to mobilise funds, and only those who were given that task had got money from CMRL’s Kartha, he said.

However, Satheesan said the issue pertaining to Veena is different. “The allegation against Veena is serious. It is worth registering a case under anti-corruption law. Veena’s firm had made the contract with CMRL only to illegally pocket money,” he said.

When Congress legislator Mathew Kuzhalnadan tried to draw the attention of the state Assembly to media reports regarding the controversy while taking part in a debate over a Bill, Speaker A N Shamseer intervened with a ruling, reminding the legislator to speak only about the Bill being debated.

Hitting out against both the CPI(M) and the Congress, BJP state president K Surendran said the state has a government and an Opposition that are “in the monthly payroll of robbers”. “Opposition leader Satheesan has become a slave to Vijayan. The Opposition is reluctant to raise the issue in the Assembly,” he said.