The probe by the Central Bureau of Investigation (CBI) into the seizure of ₹33.6 crore in new notes (₹2,000 denomination) belonging to SRS Mining Company, in which industrialist J. Sekar Reddy was one of the partners, suffered a setback with the currency chests of the Reserve Bank of India (RBI) not being able to provide the record of serial numbers of cash dispatched to banks in the post-demonetisation period.
According to sources, a huge quantum of freshly printed ₹2,000 notes were sent to the RBI for dispatch to various banks through currency chests immediately after the demonetisation policy was announced by Prime Minister Narendra Modi on November 8, 2016.
The RBI received cash consignments with details of serial numbers from high-security printing presses across the country. The cash was then sent to the currency chests for dispatch to various banks. When contacted, RBI and bank officials said there was no such guideline to maintain record of serial notes at the time of dispatch to banks from currency chests.
However, after the need for maintaining such data arose, a circular was sent to all currency chests in the second week of December to note down serial numbers of new currency bundles. It would be practically impossible to keep serial numbers of old or reissued currency notes of any denomination. “The currency chests did not maintain the serial numbers of cash bundles sent to banks. This is a crucial evidence not only to establish the source of the cash seized from the accused but prove suspicion of money laundering or exchange of demonetised currency notes with the help of bank officials,” a senior investigator said.
After the Income Tax Department conducted a raid on the premises of SRS Mining company on December 8, 2016 and seized huge amounts of cash and gold, the CBI registered a case and arrested Mr. Reddy and his two associates on charges of possessing ₹33.6 crore of ₹2,000 denomination currency. The allegation was that the money was sourced through banks on exchange of demonetised notes. Since the CBI could not file a charge-sheet within the mandatory 90 days after arrested, a special court released the accused on bail. “We examined several witnesses and scrutinised hundreds of documents. The officials of banks where SRS Mining Company held accounts have given statements that there was no withdrawal during the suspected period. We then started our probe from the high security printing presses in Mysuru and other places where the notes were printed…but we could not go beyond the RBI currency chests because there is no material to proceed further,” the official said.
The contention of the accused was that the new currency came from their business activities. “We are making inquiries with their clients and other business partners on how they sourced new currency immediately after demonetisation. Discreet inquiries are being made in establishments where the accused held positions before,” he said.
The counsel for SRS Mining Company maintained that the money seized from the premises of his clients was genuine business income for which advance tax to the tune of ₹31 crore was paid for 2016-17 and 2017-18; as much as ₹30 crore was also paid as service tax. The company owned hundreds of trucks and earth-movers engaged in sand mining business. Clear evidence on the source of money and gold that was seized was already submitted to the Income Tax department; he said and added that ₹5 crore of new currency (₹2,000 denomination) which came from the business was deposited in company accounts between November 8 and December 8. Inquiries made by The Hindu revealed that SRS Mining Company made cash deposits to the tune of ₹300 crore in City Union Bank, Axis Bank and Indian Overseas Bank during April 2015-March 2017. There was no cash withdrawal in these banks during the last quarter of 2016 that could be linked to the seizures. As regards the Enforcement Directorate attachments of properties worth several crores of rupees belonging to SRS Mining Company, a senior ED official said their case, though derived from the CBI FIRs, would hold good independently. However, whether offences under the Prevention of Money Laundering Act (PMLA) could sustain as stand-alone cases was subject to the outcome of a case in the Supreme Court, he said.