Even as the Adani solar power scandal continues to engulf former Andhra Pradesh chief minister YS Jagan Mohan Reddy, his name has cropped up in yet another case of allegedly fraudulent government deal. A Hyderabad-based businessman has accused Jagan of forcefully acquiring his shares in the Kakinada Port and Kakinada special economic zone (SEZ) at highly undervalued prices.
Karnati Venkateswara Rao (KV Rao), who is a shareholder in both Kakinada Seaports Limited and Kakinada SEZ, has alleged that Jagan’s associates threatened to arrest him and extort money with fabricated audit reports that accuse him of depriving the state government of revenue share in the port of nearly Rs 1000 crore.
“There was a concerted plan to take over the shareholdings of Kakinada Seaports and Kakinada SEZ by hook or crook by Mr YS Jagan Mohan Reddy,” KV Rao said in his complaint, alleging that he was forced to transfer his shares to Aurobindo Infrastructure “for a pittance of price”. He also alleged that since then, the Aurobindo Group, which is run by relatives of YSRCP leader V Vijayasai Reddy, used Kakinada Seaports as a “cash cow”, receiving “inter-corporate deposits to the tune of Rs 280 crore”.
The shares in question were 41.12% of Kakinada Seaports and 48.74% of Kakinada SEZ, held entirely by KV Rao and his family members through various holdings.
While Jagan himself is not named in the case registered by the Andhra Pradesh Crime Investigation Department (CID), the accused include his close aide and Rajya Sabha MP V Vijayasai Reddy; his son-in-law’s brother and an accused in the Delhi liquor scam Sarath Chandra Reddy; Y Vikranth Reddy, son of YSRCP leader and Jagan’s uncle YV Subba Reddy; Sarath Chandra Reddy’s family-run firm Aurobindo Realty and Infrastructure Pvt Ltd; and the accounting firm PKF Sridhar & Santhanam LLP, which was hired by the state government to conduct audits of KV Rao’s businesses.
While the Kakinada Deep Water Port was commissioned by the state government in 1997, it was privatised in 1999. Kakinada Seaports Ltd, of which KV Rao is a shareholder, was handed over the maintenance and operation of the port. This happened during CM Chandrababu Naidu’s first chief ministerial term. Kakinada Seaports’s agreement is to share 22% of the company’s gross earnings with the state government.
The port deals with cargo such as agricultural products, minerals, coal, and fertilisers. It was in the news lately, with Deputy Chief Minister Pawan Kalyan ordering officials to seize a ship bound for West Africa, alleging illegal export of rice supplied through the public distribution system (PDS).
In a complaint filed with the CID on December 2, KV Rao alleged that since Jagan came to power in 2019, Kakinada Seaports “stopped receiving co-operation from the Directors of the Port/AP Maritime Board in the conduct of operations”.
According to KV Rao, in November 2019, the state government appointed the accounting firm PKF Sridhar & Santhanam LLP, which audited Kakinada Seaports’ finances from 2015 to 2019. A month later, the government also hired another Bombay-based firm, KROLL India, to conduct a forensic audit of the company, but terminated the contract after it submitted its report.
PKF, however, also audited other companies connected to KV Rao with no government contracts, and orally informed that they found huge accounting irregularities in Kakinada Seaports, suggesting that the company had failed to pay nearly Rs 1000 crore of the government’s revenue share between FY14 and FY19. KV Rao has denied this, calling it a false and fabricated accusation.
A few months later, MP Vijayasai Reddy set up a meeting between KV Rao, Vikranth Reddy, and Sarath Chandra Reddy, the complaint states. When KV Rao met Vikranth in Hyderabad in May 2020, the latter allegedly threatened that the state government would demand Rs 1000 crore from Kakinada Seaports based on the audit.
Under this threat, Vikranth allegedly coerced KV Rao into parting with his shares in Kakinada Seaports and Kakinada SEZ. KV Rao alleges that Vikranth admitted to doing so at Jagan’s behest, and that it was the then chief minister who wanted to acquire these shares. Vikranth allegedly threatened him with “a spate of criminal cases and vigilance enquiries” leading to his and his family members’ arrest, if KV Rao didn’t comply.
At this point, KV Rao says he tried to meet Jagan but couldn’t get an appointment.
In June 2020, KV Rao says, he was coerced to transfer 41.12% of the Kakinada Seaports shares to Aurobindo for an unspecified amount, in the presence of Vikranth and Sarath Chandra. Only after this did Aurobindo appoint a firm that valued these shares at Rs 494 crore, based on the agreement. KV Rao alleges that the shares were severely undervalued, but he was threatened to accept this price. He states that he estimated the shares to be worth at least Rs 2,500 crore.
After this agreement, KV Rao says Vikranth and Sarath Chandra took him to a meeting with Jagan at his house in Vijayawada. “When I tried to protest, Mr Jagan Mohan Reddy didn't allow me to say anything, except asking me to follow what was said by Mr Vikranth Reddy. Thus it is clear that all this is done at the instance of Mr Jagan Mohan Reddy,” KV Rao says in his complaint.
Again in October 2020, KV Rao says he was coerced into transferring 48.74% of shares in Kakinada SEZ to Aurobindo. According to the complaint, KV Rao was already negotiating with GMR Group, which already held 51% of the SEZ’s shares and had lent almost Rs 2000 crore to the SEZ, to acquire his shares for Rs 400 crore. However, he says, he was forced to transfer them for only Rs 12 crore to Aurobindo, which later also acquired GMR’s shares and became a 100% shareholder in the SEZ, KV Rao alleges. The SEZ owns 8320 acres of land in various villages around Kakinada.
“The share sale and purchase agreement between my group and Aurobindo is a part of fraud, coercion based on fabricated documents,” KV Rao said in his complaint.
The CID has registered a First Information Report under Sections 506 (punishment for criminal intimidation), 384 (punishment for extortion), 420 (cheating and dishonestly inducing delivery of property), 109 (punishment for abetment if the act abetted is committed in consequence and where no express provision is made for its punishment), 467 (forgery of valuable security, will, etc.), and 120(B) (punishment for criminal conspiracy) of the Indian Penal Code, and Section 111 (organised crime) of the BNS (Bharatiya Nyaya Sanhita).