Fodder scam case

Fodder scam case

July 10, 2022

4916

This article has been written by Naveen Talawar, a law student at Karnataka State Law University’s law school. The article goes into detail about the fodder scam case, how it began, and its timeline.

This article has been published by Sneha Mahawar.

Introduction

The Fodder Scam (Chara Ghotala) was a corruption scam that involved the district treasuries of Ranchi, Chaibasa, Dumka, Gumla, and Jamshedpur in Jharkhand and Banka in Bihar. The fodder scam was expected to be worth Rs 950 crore (in rough value through dollar conversion, it would be about Rs 2,255 crore today). The alleged fraud lasted many years, involved the fabrication of massive herds of fictitious livestock for which fodder, medicines, and animal husbandry equipment were allegedly obtained, and was perpetrated by many Bihar state government administrative and elected officials across multiple administrations (run by opposing political parties).

Even though the scandal surfaced in 1996, the fraud had been going on for more than two decades. It was one of the first cases in which sitting politicians were found guilty and compelled to resign from their positions in the Assembly and Parliament.

How did the fodder scam case start

The scam is said to have started with small-scale embezzlement by government officials filing false expense reports, but it grew in breadth and recruited more participants over time, including politicians and businessmen, until it became a full-fledged empire. The first chief minister to be accused of knowing about the scam was Jagannath Mishra, who served as Bihar’s chief minister for the first time in the mid-1970s.

In 1977, a scam was perpetrated in the districts of southern Bihar (which became Jharkand in 2000). In that year, Lalu Prasad Yadav, a legatee of Jayaprakash Narayan’s anti-corruption movement in the state, was elected to parliament. When the scam started, he had nothing to do with it. Until 1990, the illicit withdrawal of government funding, with money exchanged between suppliers and animal husbandry department personnel, remained undiscovered. It was brought to the notice of the government for the first time when Yadav became chief minister of Bihar in 1990.

Rather than intervene, Yadav let things happen after assuring that a share of the spoils came to him. The amount of money fraudulently stolen from the Treasury increased considerably between 1990 and 1996. A large portion of the Rs 950 crore was drawn during Yadav’s tenure as chief minister.

T.N. Chaturvedi, the then Comptroller and Auditor General of India, took notice of delayed monthly account submissions by the Bihar state treasury and departments in February 1985 and wrote to Chandrashekhar Singh, the then Bihar chief minister, warning him that this could be indicative of temporary embezzlement. This triggered a continuous chain of closer scrutiny and warnings to the Bihar government by Principal Accountant Generals (PAGs) and CAGs across the tenures of multiple chief ministers (across party affiliations), but the warnings were ignored in a pattern by extremely powerful people.

Leading political and administrative officials in Bihar’s government, Bidhu Bhushan Dvivedi, a police inspector of the state’s anti-corruption vigilance unit, filed a report to G. Narayan, the director-general of the same vigilance division, in 1992, describing the fodder scam and suspected involvement at the chief ministerial level.

Amit Khare, the deputy commissioner of the animal husbandry department, finally authorised a raid in 1996. According to the papers retrieved, money was misappropriated under the pretext of supplying food. It started with small-scale fraud perpetrated by low-level government officials and has now expanded to involve businesses and politicians.

The state government established two commissions in the midst of the raids. One of them was led by Phoolchand Singh, the state development commissioner, who was later involved in the scam. As a result, the commission had to be cancelled. Meanwhile, under the state government’s directions, the Bihar police filed many FIRs. Later on, many public interest litigations (PILs) were also filed in the Patna high court, seeking that the matter be transferred to the CBI.

In a March 11, 1996, order, the Patna high court declared, in answer to the petitions, that “Excess withdrawals in the Department have been recurring since 1977-78.” As a result, the suggested investigation and inquiry should include the years 1977-1978 through 1995-1996.”

Further, the court ordered the “CBI to investigate and scrutinise all cases of excessive withdrawals and expenditure in the Department of Animal Husbandry in the State of Bihar from 1977-78 to 1995-96, and to lodge cases where the withdrawals are found to be fraudulent in character and to complete the investigation in those cases as soon as possible; preferably within four months.” When the CBI began its inquiry, it interrogated Lalu, former Chief Minister Jagannath Mishra, and senior officials about their participation.

CBI Investigation

Following the direction of the Patna High Court, the agency began investigating 41 cases already recorded by the State Police, and 23 cases were registered based on intelligence reports and complaints. In total, the CBI looked into sixty-four incidents of fodder scams. The CBI filed the first FIR in the Chaibasa treasury case on March 27, 1996.

On March 27, 1996, the CBI filed the first FIR in the Chaibasa treasury case. In June 1997, the CBI asked the governor of Bihar for permission to prosecute Lalu, who was the chief minister at the time, and filed a charge sheet against him and 55 others under Sections 420 (forgery) and 120 (b) (punishment of criminal conspiracy) of the Indian Penal Code, as well as Section 13 (b) (criminal misconduct by a public servant) of the Prevention of Corruption Act.

Once Lalu was named in the CBI charge sheet, there was political fallout. He was a member of the Janata Dal, which opposed him keeping his job as chief minister while under investigation for a scam. In response to rising pressure from the Janata Dal, he formed the RJD in July 1997. He resigned as chief minister but appointed his wife Rabri Devi as his replacement. She received a vote of confidence.

In 2001, the state of Jharkhand was formed, and the cases were transferred there. The CBI mentions the scam’s method of operation as “The Scamsters adopted a unique modus operandi in all the cases by making fraudulent, excess withdrawals from the treasuries in Bihar on the strength of forged and fabricated allotment letters and fake supply orders for making payment to suppliers, who submitted bills without affecting the supply or, in a few cases, by making a partial supply of feed, fodder, medicine, instruments and other materials.”

First fodder scam Case

The first trial in the fodder scam case began 20 years ago in February 2002. A total of 170 persons were charged at the outset, with 55 of them dead, seven government witnesses, six fleeing, and two accepting the allegations. In March 2012, Lalu and Mishra were accused of fraudulently withdrawing money from the Banka and Bhagalpur districts. In September 2013, Prasad was found guilty for the first time in this matter of stealing Rs. 37.7 crores from the Chaibasa treasury. He was sentenced to five years in prison, but in December 2013, the Supreme Court granted him bail. His conviction, however, barred him from participating in the Lok Sabha, where he had been elected at the time.

Second fodder case

The RJD supremo’s problems reappeared in 2017 when a special CBI court found him guilty in the second scam case, which involved the illegal withdrawal of Rs 89.27 lakh from the Deoghar treasury in December 2017.

In December 2017, he was found guilty of fraudulently withdrawing money from the Deoghar treasury and was sentenced to three and a half years in prison and a Rs 10 lakh fine in another case. He was granted bail in July 2021 after serving half of his 3.5-year sentence. Jagannath Mishra, on the other hand, was found not guilty.

Third fodder case

Fourth fodder case

Lalu Prasad was convicted for the fourth time in the Dumka treasury case. A Special CBI Court convicted Prasad in the fourth fodder case in March 2018, for illegally withdrawing Rs. 3.76 crores from the Dumka treasury between December 1995 and January 1996.

He was sentenced to 14 years in prison and a Rs 60 lakh fine for fraudulently withdrawing Rs 3.76 crore from the Dumka treasury. In April of last year, he obtained bail from the Jharkhand High Court on this issue.

Fifth fodder case

The embezzlement of Rs 139.35 crore from the Doranda Treasury (Ranchi) was Lalu Prasad’s fifth conviction. In the Doranda treasury embezzlement case, he was sentenced to five years in jail and a fine of Rs 60 lakh.

This was the fifth and last instance in which Lalu Yadav has been accused of a Fodder Scam. In two separate cases of Chaibasa treasury, Lalu Yadav was sentenced to seven years in prison, five years in prison for illicit withdrawal from Dumka treasury, and four years in prison for illegal withdrawal from Deoghar treasury. Lalu Yadav has served half of his sentence in each of the four instances.

Timeline of the fodder scam case

January 1996

Deputy Commissioner Amit Khare raids the Animal Husbandry Department offices and seizes records revealing the shipowning of funds by non-existent entities in the pretence of supplying fodder.

March 1996

The Patna High Court ordered the CBI to investigate the scam and the Supreme Court upheld the order.

March 27, 1996

The CBI filed an FIR in the Chaibasa Treasury case.

June 1997

The CBI filed a charge sheet in the investigation, accusing Mr Prasad and 55 other people. Sixty-three cases were brought under IPC Sections 420 (forgery) and 120 (b) (criminal conspiracy), as well as Section 13 (b) of the Prevention of Corruption Act.

July 1997

Mr Prasad appeared in front of a CBI court and was taken into custody.

April 2000

Charges have been laid before the special CBI court. Rabri Devi was named as a co-accused and she was granted bail. Mr Prasad’s bail request was denied, and he was placed in judicial custody.

October 2001

Following the formation of the new state, the Supreme Court transfers the scam cases to Jharkhand.

February 2002

The trial begins in Ranchi’s special CBI court.

December 2006

Mr Prasad and Ms Rabri Devi were cleared of charges in the CBI’s disproportionate assets case.

June 2007

For fraudulently withdrawing Rs. 48 crore from the Chaibasa Treasury in the 1990s, a special CBI court in Ranchi sentenced 58 people, including two nephews of Railway Minister Lalu Prasad, to prison terms ranging from two and a half to six years.

March 2012

Mr Prasad and Mr Mishra face charges six months after their appearance before the Special CBI court. The court accuses the former Chief Minister of fraudulently withdrawing Rs. 47 lakh from the treasuries of Banka and Bhagalpur districts in 1995-96, when the Animal Husbandry Department allegedly issued fabricated and fake invoices.

August 2013

Mr Prasad’s request for the trial court judge hearing the case to be transferred was denied by the Supreme Court.

September 17, 2013

The Special CBI court reserves its decision.

September 30, 2013

Mr Prasad and Mr Mishra, as well as 45 others, were found guilty by Special CBI Judge Pravas Kumar Singh. Mr Prasad was no longer qualified to serve in the Lok Sabha as a result of the verdict. The two were barred from competing in any election for six years after their release from jail, including those for the Assembly/Council.

November 2014

The CBI challenged the Jharkhand High Court’s order quashing four pending fodder scam cases against Mr Prasad on the grounds that a person convicted in one case cannot be prosecuted in comparable instances based on the same witnesses and evidence. The court upholds the CBI’s request to continue proceedings against Mr Prasad in the trial court.

November 2016

Mr Mishra was charged by the Supreme Court for dragging and delaying the CBI’s plea against the quashing of four pending fodder scam cases against him.

May 2017

The Supreme Court held that Mr Prasad and other accused people, including Mr Mishra, were to be prosecuted separately for corruption in a criminal case involving the withdrawal of Rs. 84.53 lakh from the Deoghar Treasury and forgery of documents between 1991-94.

December 2017

In December 2017, Lalu Prasad Yadav was found guilty of fraudulently withdrawing money from the Deoghar treasury and was sentenced to three and a half years in prison and a Rs 10 lakh fine in another case. Jagannath Mishra, on the other hand, was found not guilty.

January 2018

Lalu Prasad Yadav was convicted in the third fodder case in January 2018 for fraudulently withdrawing Rs. 33.13 crores from the Chaibasa treasury. In this case, he was sentenced to five years in prison. A Special CBI Court convicted Prasad in the fourth fodder case in March 2018, for illegally withdrawing Rs. 3.13 crores from the Dumka treasury between December 1995 and January 1996. He was sentenced to 14 years in prison and a Rs 60 lakh fine for fraudulently withdrawing Rs 3.76 crore from the Dumka treasury.

April 17, 2021

The Jharkhand High Court granted the RJD chief bail in a fodder scam case involving an illegal withdrawal of Rs 3.13 crore from the Dumka Treasury, and he was released on April 30.

February 2022

In the case of the illegal withdrawal of 139.5 crores from the Doranda Treasury, a special court of the Central Bureau of Investigation (CBI) in Ranchi imprisoned former Chief Minister of Bihar Lalu Prasad Yadav for five years in jail and for a fine of 60 lakhs.

April 22, 2022

The Jharkhand High Court granted Lalu Yadav bail on the condition that he deposit a fine of Rs 10 lakh to the court.

Penalties imposed on fodder scam convicts

Lalu Prasad Yadav was found guilty under Sections 120B, 409, 420, 467, 468, 471, 477A of IPC and Section 13 in The Prevention of Corruption Act, 1988.

Criminal conspiracy

Section 120B imposes penalties for criminal conspiracy. It is the punishing section for the criminal conspiracy offence defined in section 120A of the IPC. The provision divides conspiracy into two categories for the purposes of punishment.

In the first case, where no express provision in the code exists for the punishment of a conspiracy to commit an offence punishable with death, life imprisonment, or rigorous imprisonment for a term of two years or more, the person would be punished in the same manner as if he had abetted such an offence.

In the other situations of conspiracy, the punishment proposed is either imprisonment for a term not exceeding six months, a fine, or both.

Criminal breach of trust by a public servant, or by banker, merchant or agent

Section 409 applies to public servants, bankers, merchants, factors, brokers, attorneys, and agents. In general, such officials’ responsibilities are highly classified, involving tremendous powers of control over the property entrusted to them; therefore a breach of trust by such individuals may commonly result in major public and private catastrophe.

Two factors must be demonstrated to support a conviction under section 409 of the IPC:

The accused, a public servant, banker, or agent, was entrusted with property for which he is obligated to account; and
The accused committed a criminal breach of trust.

The punishment stipulated by the provision is life imprisonment or imprisonment of either type for a term that may extend to 10 years, as well as a fine.

Cheating and Dishonesty

Some classes or aggravated kinds of cheating are covered by Section 420. It covers situations of deception if the victim is dishonestly persuaded to:

Surrender any property to anybody;
Create, alter, or destroy,

the entirety of valuable security;
anything signed or sealed and capable of being converted into a valuable security. must be proved that the accused’s deceptive enticement caused the complainant to leave with the property. The property must have monetary value to the victim of the deception.

The prescribed punishment is either type of imprisonment for a duration that may last up to seven years, and shall also be liable to a fine.

The Supreme Court listed the following criteria as necessary to create the offence of cheating in the case of RamJas v. State of Uttar Pradesh.

It must be a fraudulent or dishonest inducement of a person by deceiving him
(a) the person so deceived must be induced to deliver any property to any person, or to consent that any person shall retain any property or

(b) the person so deceived must be intentionally induced to do or omit to do anything which he would not do or omit to do if he were not so deceived and

In situations covered by (2)(b), the act or omission should be one that damages or harms the person in their body, mind, reputation, or property, or is likely to do so.

Forgery

Section 467 provides for valuable security, wills, etc and anybody who forges a document that may be a will, valuable security, a document authorising the adoption of a son, a document granting someone the right to create or transfer valuable security, a document authorising someone to receive the principal interest or dividends, a document authorising someone to receive or deliver movable property, a document that is falsified to be a receipt acknowledging the payment of money, shall be punished with imprisonment for life, or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine.

Section 468 provides for forgery for the purpose of cheating; it only applies when forgery is perpetrated with the intention of cheating. Under the Indian Penal Code, forgery for cheating is a non-bailable and non-compoundable offence. The punishment for forgery, as specified in Section 468, is imprisonment for up to seven years and a fine.

The form of forgery that is being considered here must inevitably entail cheating as an intent. When the cheating is complete, the section will not apply, and the subsequent forgery is just meant to cover that offence. In the case of Aniceto Lobo v. State, bank employee X used a blank draft on which agent Z’s signature had been forged by agent Y. He then created a new account in the fake person’s name and cashed the cheques. In this case, the accused was regarded as having been properly found guilty of offences under sections 467, 468, and 120B of the IPC.

Section 471 covers the liability of a person who, knowing or having cause to suspect that the document is forged, fraudulently or dishonestly uses a forged document as genuine, rather than the liability of the person who forged it. It also requires the accused to present the falsified document as genuine, even when he knew or had cause to suspect it was forged. The clause is intended to give an alternative charge in circumstances when the individual who forged it is unknown. The person will be punished in the same manner as if he had forged the document.

In the case of AS Krishnan & Anor v. State of Kerala, the Supreme Court stated in explaining the purpose and application of section 471: “The essential elements of Section 471 are:

(i) fraudulent or dishonest use of the document as genuine; and

(ii) knowledge or reasonable belief on the part of the person using the document that the document is forged.“

As long as the use of the forged document was established or proved to be a forged one, Section 471 does not require that the person charged independently with forging the document be found guilty or that the person independently charged with forging the document be found guilty before the person using the forged document and knowing it to be a forged one can be found guilty.

Falsification of Accounts

Section 477A deals with the falsification of accounts. It primarily refers to two offences:

Deceiving, manipulating, destroying, mutilating, or fabricating any book, account, or electronic record; and
Creating or assisting in the making of fraudulent entries in the same way. These two offences are distinct and not interdependent.

The punishment provided is either imprisonment of any description for a term up to seven years, a fine, or both.

The Prevention of Corruption Act, 1988

Section 13 of the Act criminalises criminal activity by a public servant. A public servant is said to commit criminal misconduct if he dishonestly or fraudulently misappropriates or otherwise converts for his own use any property entrusted to him or any property under his control as a public servant, or if he allows any other person to do so, or if he intentionally enriches himself illicitly during the period of his office.

A person is believed to have purposefully enriched himself illicitly if he or any person acting on his behalf has or has been in possession of financial resources or property disproportionate to his known sources of income, which the public servant cannot properly account for. The offence of criminal misconduct, as defined in Section 13, is punished by imprisonment for a term of not less than four years but not more than ten years, as well as a fine.

Recent scenario surrounding the fodder scam case

In April 2022, the fifth fodder scam case appeared on the scene. Former Bihar Chief Minister and Rashtriya Janata Dal President Lalu Prasad Yadav was found guilty of fraudulently withdrawing Rs. 139.35 crores from Ranchi’s Doranda treasury between 1995 and 1996 by a special CBI court in Ranchi. He is one of the 74 defendants found guilty by Special Judge S.K. Sashi in a case in which 99 persons were accused. The other twenty-four have been found not guilty.

The special CBI court sentenced Lalu Prasad Yadav to five years in prison and fined him 60 lakh for illegal withdrawals of 139.5 crores from the Doranda Treasury. The Doranda case is the fifth and last case of embezzling government funds in which the leader was found guilty as a key conspirator.

Yadav appealed his conviction in the fifth fodder scam case to the Jharkhand High Court, where a special CBI court in Ranchi sentenced him to five years in prison and fined him Rs 60 lakh. In April 2022, the Jharkhand High Court granted bail to RJD chief Lalu Prasad Yadav, rejecting the CBI’s arguments and ordering him to deposit Rs 10 lakh with the court.

In an interview, Lalu Yadav’s lawyer Prabhat Kumar stated, “Lalu Yadav has been granted bail by the Jharkhand High Court on the condition that he pay the court a fine of Rs 10 lakh.” “We submitted a bail plea based on him serving half of the term issued by the special CBI court because he has already served 42 months of his sentence in this case,” He further said that the CBI, while opposing the bail plea, claimed that Lalu had not yet finished half of the sentence imposed by the trial court, which was rejected by the court.

Lalu’s Yadav Kumar went on to say that they had included all of the documents in support of his claim that Lalu Yadav had already served 42 months in prison, as well as certified copies of trial court decisions indicating when he was sent to jail and when he was released. He stated that Lalu’s sentence will be completed in half after only 30 months in prison.

Since December 2017, Mr. Prasad has been held at Ranchi’s Birsa Munda Central Jail. He had gone to Ranchi a few months earlier to physically appear in court in the Doranda case, but his health had deteriorated there, and he was brought to the Rajendra Institute of Medical Sciences (RIMS). After that, he was sent to the AIIMS in Delhi for medical care. Mr Prasad is currently being treated for a variety of ailments at the All–India Institute of Medical Sciences (AIIMS) in Delhi. In each of the other four cases, Mr. Prasad has been granted bail.

Conclusion

The multi-billion-dollar Animal Husbandry Department fraud, commonly known as the fodder scam, was exposed in the mid-1990s, with animal fodder allegedly supplied on trucks and lorries with scooter and motorcycle registration numbers. It was one of the first cases in which sitting politicians were found guilty and compelled to resign from their positions in the Assembly and Parliament. Despite the fact that the scandal broke in 1996, the fraud had been going on for more than two decades. Officials from the Animal Husbandry Department have been accused of stealing money from treasuries in return for fictitious bills for fodder, medicine, and artificial insemination equipment.

With the Central Bureau of Investigation’s special court convicting Lalu Prasad Yadav in the fodder scam case, his lengthy career in Bihar politics is likely to come to an end. Despite his political savvy and lofty language, a spell of 11 years in the political wilderness following his conviction is unlikely to see him or his Rashtriya Janata Dal re-emerge as powerful forces.

Frequently Asked Questions (FAQs)

Who raised the issue of the scam?

Ramjivan Singh, the then-AHD Minister in the Lalu Prasad Yadav Cabinet, raised the issue in the Assembly and proposed a CBI probe. However, the administration, led by Mr Prasad, who also held the ministry for finance, did nothing. Later, in January 1996, Amit Khare was tasked with investigating the excessive and fraudulent withdrawals from the district treasury in Chaibasa, by the then-finance commissioner, V.S. Dubey.

When did the scam begin?

The scam is said to have started with small-scale embezzlement by government officials filing false expense reports, but it grew in breadth and recruited more participants over time, including politicians and businessmen, until it became a full-fledged mafia. The first chief minister to be accused of knowing about the scam was Jagannath Mishra, who served as Bihar’s chief minister for the first time in the mid-1970s.

When did the CBI file its first FIR?

The CBI filed the first FIR in the Chaibasa treasury case on March 27, 1996.

What was the effect of the scam on the Bihar elections in 2000?

There was no effect on the Bihar election in 2000. RJD won the election quite comfortably. But in 2005 Sushil Modi & JDU made Fodder Scam the main issue and Won the 2005 elections.

References

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skills.

LawSikho has created a telegram group for exchanging legal knowledge, referrals, and various opportunities. You can click on this link and join:

https://t.me/lawyerscommunity