Inside story of the cash haul in Kannauj and Kanpur and the ongoing raids

Raids by central agencies in Kannauj and Kanpur in the last 10 days of December are the stuff that films are made of. And they have created a perfect political storm before the Uttar Pradesh assembly elections due in FebruaryMarch. Four business establishments were raided, among them transporters, paan masala manufacturers and two perfumers or perfume traders. The raids were triggered when several trucks were intercepted in Gujarat carrying the Shikhar brand paan masala with invoices that did not match with the consignments.

Paan masala makers of Kanpur are the bigger players but raids on two perfume traders, Peeyush (Piyush) Jain and Pushpraj alias Pammi Jain, have hogged the headlines. The Shikhar paan masala manufacturer Pradeep Agarwal, who flaunted his close ties with BJP, has dropped off the radar.

While Pammi Jain is a Samajwadi Party MLC and is more prominent of the two, searches at the more obscure Peeyush Jain’s house in Kannauj unearthed a whopping Rs. 197 crore in cash, 25 kg of gold biscuits and bars and sandalwood oil worth Rs. 6 crore.

The agencies however appeared to downplay the sensational recovery of Rs. 197 crore in cash by the Directorate General of GST Intelligence (DGGI). The perfumer, the court was informed, had admitted to the ownership of the cash and offered to pay the GST dues and penalties. Officials were quoted as saying that tax and the penalties would come to around Rs. 55 crore.

What the recovery, however, suggests is:

• That the Prime Minister’s Demonetisation goal of ‘cashless’ or ‘less cash’ economy was just empty rhetoric, a jumla.

• That it is possible even in ‘Digital India’ to conduct business in cash and evade taxes by inflating or deflating invoices.

• That tax evasion and money laundering are thriving even as central agencies bark up the wrong trees.

• There are serious leakages in GST collection.

UP police officials pleaded ignorance because the state police is not involved. But in private conversations they say the narrative that a perfume manufacturer in Kannauj and Kanpur stashed Rs.197 crore in cash to evade Rs. 35 crore of Goods and Services Tax is laughable. He could have paid the GST and the Income Tax and would still have been left with Rs.100 crore of legitimate, ‘white’ money’, they point out. Why would the businessman risk detection and raids?

The cash and gold, significantly, were recovered from the modest ancestral house of Peeyush Jain in Kannauj. There the businessman would move around on a scooter and a second-hand car. But he had a more palatial and more ostentatious house in Kanpur.

The cash, confide sources close to the investigation, were neatly packed in wrappers and taped. The fact that wrappers in three different colours were used, they believe, suggests that the cash was parked with the businessman by different people for safe-keeping! But why would some of the cash be hidden in hollowed walls and secret cavities? That could indicate that the businessman wanted to siphon off a part of the booty for himself.

TV news channels and mainstream Hindi newspapers in UP, ostensibly briefed by officials, identified Peeyush Jain, mistakenly, as close to the Samajwadi Party. It was in fact the other Jain, the MLC, who had made and promoted ‘Samajwadi Itra’ (essence of socialism). BJP was quick to take pot shots at SP and both Prime Minister Narendra Modi and chief minister Yogi Adityanath accused Samajwadi Party of spreading the ‘essence of corruption’. It was Pushpraj Jain, however, who has been formally associated with Samajwadi Party for at least the past 20 years and has also been a Member of the Legislative Council.

SP leader and former chief minister Akhilesh Yadav retaliated in kind and claimed that while the target was indeed Pammi Jain, the government had scored a self-goal by raiding the other Jain. Either to prove him right or wrong, central agencies raided the premises of Pammi Jain on December 31, ten days after the other Jain’s premises were searched. The SP leader was quick to allege that the raid on Friday was being conducted to cover up the earlier faux pas.

But central agencies on Friday seemed to have targeted a large number of Kannauj based businessmen and perfumers. The raids have acquired political overtones partly because assembly elections are barely two months away and also because Kannauj and Kanpur are close to Saifai, where SP leader Mulayam Singh Yadav was born, and the region being SP’s stronghold. Demonetisation in November 2016 is widely believed to have crippled the opposition’s financial muscle before the 2017 assembly election. The raids in December 2021, some observers believe, are designed to strike a blow again at SP, which has been drawing huge crowds to Akhilesh Yadav’s rallies.

BJP insiders, however, claim that the businessmen raided have had close relations with Shivpal Yadav, MP and brother of Mulayam Singh. Relations between Akhilesh Yadav and Shivpal Yadav have been strained in the past and the latter parted ways with his followers and had floated Pragatisheel Samajwadi Party. A recent meeting between uncle and nephew however was believed to have brightened prospects of a tie-up. The alliance would have prevented traditional Yadav votes of SP from getting divided. The raids are seen by some as a strike directed more at Shivpal Singh Yadav.

If the official version is to be believed, it all started when the Ahmedabad branch of the DGGI intercepted four trucks transporting Shikhar brand paan masala and tobacco without paying GST. Search operations were carried out in Kanpur at the manufacturers of Shikhar, M/S Ganpati Road Carriers and Odochem Industries. Inquiries unearthed fake invoices and a mismatch in the stock register and books maintained by the manufacturers and the transporter.

On the night of December 22, the DGGI team raided the factory of Shikhar paan masala in Transport Nagar, Kanpur. Ganpati Transport’s office is also located near this factory, so, a team of DGGI raided Ganpati Transport too. As Shikhar paan masala owner Pradeep Agarwal was in Delhi, he could not be interrogated then, but DDGI took Ganpati Transport owner Praveen Jain into custody and started questioning him.

Significantly, a DGGI press statement says that manufacturers of Shikhar paan masala had admitted to GST evasion and had paid up Rs. 3.09 crore towards their tax liability Pradeep Agarwal drew attention to himself by deleting Instagram and other social media accounts with endorsement of the BJP and the Prime Minister. Why would he do that? There is no answer yet.

What linked Peeyush Jain to Agarwal was the ‘compound’ that he supplied to him. Jain’s ‘compound’ or perfume comprising sandalwood oil among other ingredients was the reason behind Shikhar’s popularity, claim business insiders. It was Jain’s secret ‘compound’ that made the difference and made Agarwal’s brand a distinct favourite.

The owner of the transport company turned out to be Jain’s brother-inlaw. But surely that was no reason for searching his premises?

Both the Jains happened to be from Kannauj and lived in the same locality on Jain Street. But Pushpraj Jain denies any association with Peeyush Jain. “We would exchange greetings when we occasionally met at temples or social gatherings,” he said, downplaying any association between the two. What is more, while Peeyush Jain had moved out to Kanpur, while retaining his modest house in Kannauj, Pushpraj Jain continues to operate from Kannauj, a traditional centre of perfumery.

Peeyush Jain’s neighbours did not suspect he was rolling in money because the family’s lifestyle was as ordinary as that of the neighbours. This despite disclosures that he was supplying the compound to over 100 small or big companies and had an office in Mumbai.

Those who have known him and interacted with him seem to be both shocked and surprised. “I do not recall any political conversation with him,” said a Kanpur businessman. Jain, he insisted, spoke little and never on politics. While he seemed to be reasonably well off, he never flaunted his wealth and people are indeed shocked to learn that he was sitting on Rs.197 crore pile of cash.

Residents of Mohalla Chhipatti in Kannauj also remember Jain as a simple soul with no political affiliation. A devotee of Mahavir, he apparently led a ‘lower middle class’ life in Kannauj.

Basic knowledge of chemistry came in handy for Peeyush Jain, who has an M.Sc. degree in chemistry. He used his knowledge to manufacture the ‘compound’– a flavour which is used to dilute the pungent smell of tobacco in paan masala and make it more palatable. It was a family business, his acquaintances claimed, as his wife and brother also had postgraduate degrees in chemistry. Very few people in Kannauj can manufacture the ‘compound’ like Jain, they claim, which is why he was called the ‘Compound King’.

People conversant with the trade claimed that the compound would generally be manufactured late at night and take around four hours to complete. No outsider was involved, in order to keep the formula a secret.

Peeyush’s grandfather Phool Chandra, they informed, was engaged in printing work while his father Mahesh Chandra worked in a soap manufacturing company in Mumbai. It was Mahesh Chandra who started making the compound and later his son Peeyush took charge of the business. He made sandalwood oil of such high quality that he was supplying the essence to major companies making paan masala and cosmetics.

Sensational recoveries of illegal wealth have mysteriously been buried in the past. The Income Tax department’s seizure of Excel sheets and computer printouts indicating huge payments to politicians from a guesthouse of Sahara Group in Delhi’s posh Greater Kailash-I locality is a case in point. An Income Tax Commissioner from Mumbai was entrusted then with the task of burying the case.

Similarly, CBI’s seizure of unaccounted cash worth Rs. 25 crore from the office of a Birla Group company, also in Delhi, has disappeared from the media.

The ‘cash in Kanpur’ too will undoubtedly get a decent burial.

Mystery of Cash as King

Why would a businessman sit over a cash pile of nearly Rs. 200 crore in this day and age? A few of the possibilities:

• HIS OWN MONEY? But the businessman then could have paid his taxes and still have enough left to lead a lavish life. He had options to invest the money or expand his business. Why would he hoard so much of cash at home?

• POLITICAL PARTIES: Political parties are known to park their cash in temples, mutts and with friendly businessmen, lawyers and bureaucrats. But after the Modi government made electoral bonds, anonymous donations and foreign donations to political parties legal, why park so much cash with an obscure businessman?

• OTHER BUSINESS BARONS: While the possibility of other business groups parking their illegal cash with a trusted and friendly businessman cannot be ruled out, it seems a bit of a stretch.

(This article was first published in National Herald on Sunday)