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The former Karnataka tourism minister faces a prolonged stay in jail, without the prospect of bail, as the enforcement directorate prepares the ground for booking a money-laundering case against him

Former minister B Sriramulu’s thumping victory in Bellary will be little solace to his mentor, G Janardhana Reddy, who is cooling his heels in Hyderabad’s Chanchalguda jail. Reddy, former Karnataka tourism minister, has been behind bars for three months after he was arrested and booked by the CBI in a case of illegal mining. Now, any hopes he may have harboured of getting bail are looking increasingly bleak as the Centre gets ready to book him for money-laundering.

According to sources, following the CBI chargesheet on Saturday pertaining to the illegal mining activities of Reddy and his associates, the Union finance ministry has given the go-ahead to sleuths of the enforcement directorate (ED) to book Reddy under the Prevention of Money Laundering Act (PMLA). The move is being monitored at the top level in North Block. Should this happen, the stringent provisions of the PMLA will almost certainly ensure that Reddy, like former Jharkhand chief minister Madhu Koda, faces a long stay in jail.
 
Speaking to Bangalore Mirror, a senior CBI official said, “There is a clear case of money laundering against the Reddys.” According to the official, the Reddys floated a single-dollar investment firm in Hong Kong (along with Macau, a special autonomous region of China) called JLR Trading Company (‘J’ stands for Janardhana, ‘L’ for his wife, Lakshmi Aruna, and ‘R’ for Reddy).

The Reddys allegedly supplied iron ore to various Chinese firms,  routing the consignments through JLR Trading Company instead of the family-owned Obulapuram Mining Company (OMC) and Anantapur Mining Company (AMC). They invoiced JLR Trading at a lower price, and the latter in turn invoiced the Chinese firms at the actual prevailing price of iron ore.
 
In this manner, they allegedly made less profits in India and more in Hong Kong. The Hong Kong profits were diverted to tax havens in Malaysia, Mauritius and the Virgin Islands. That money came back to India as FDI in various firms owned directly and indirectly by the Reddys. Investments made in Indonesian mines by the Reddys are also being probed by the ED.
 
Sources said that by resorting to these methods, the Reddys cheated the country’s exchequer of huge amounts by way of tax and, in the bargain, got their black money converted into white through FDI.
 
The ED is going through documents collected by the CBI which have substantial information on the Reddys’ financial transactions. Once the scrutiny is over, a case under the PMLA will be booked against Reddy and other members of his family, sources in the finance ministry said.
 
Once a person is booked under the PMLA, obtaining bail from a court becomes near-impossible till the case is decided. Former Jharkhand chief minister Madhu Koda, who has been in jail for two years now, is a case in point. Koda faces charges of money-laundering, and his bail pleas have been rejected several times, the CBI officer said.
 
Alongside, under the PMLA any written statement given by Reddy to ED officials will be admissible evidence in the courts, unlike the statements given to the police and the CBI which are not admissible if the accused retracts, sources said.
 
Thus, with the PMLA’s Damoclean sword hanging over his head, it’s safe to say that his protege Sriramulu’s poll victory won’t exactly be top of Reddy’s mind for some time to come.