Madhya Pradesh chief minister Shivraj Singh Chouhan personally lobbied for a controversial diamond project in the state’s Chhatarpur district owned by multinational resources giant Rio Tinto despite serious questions over the legality of its license raised by then Union minister of mines BK Handique, and objections from top law ministry officials.
Documents obtained by Hindustan Times illustrate just how hard Chouhan pushed for the project. They also reveal a series of changes in the project’s ownership that went unnoticed within the government, and may have rendered Rio's license to work the rich deposit invalid.
During 2010 and 2011, when critical deliberations on the lease were underway, Chouhan wrote to both Handique and Prime Minister Manmohan Singh asking for their "personal intervention" to secure the huge deposit for the London-listed firm.
With reserves estimated at 27.4 million carats, the Bunder project is the first globally significant diamond discovery in India. It has, however, been at the centre of protests over its potential impact on environmentally sensitive forest areas, the nearby Panna tiger reserve, and on water resources in drought-prone Chhatarpur.
The CM's intervention came as the project ran into stiff resistance in Delhi. Amongst the concerns raised by Handique was a change in the name of the company set up by Rio and its Indian partner, ACC Limited, to pursue the project.
Responding to Handique’s queries, RS Shukla, the additional legal advisor in the law ministry, wrote on November 12, 2010, "Subsequent to the change of name, the old company has ceased to exist… Thus, the prior approval of the central government was granted in the name of a non existing company. Hence, cannot be said to be legally valid."
That red flag resulted in the file being sent right to the top — to Parag Tripathi, the then additional solicitor general of India. Tripathi said that there was nothing on the file marked to him to establish a change in the shareholding or in the management control. He, however, concluded by saying: "… If along with the change in name of the applicant company there is a significant change in the shareholding pattern or management or control of the company, i.e., a change in the directors, then different consequences may obtain."
The law requires that no significant changes in shareholding take place as a potential miner moves through the licensing process from an initial Reconnaissance Permit, to the second phase Prospecting Lease and the ultimate Mining Lease. This is intended to ensure that licensing authorities are dealing with one entity throughout the process.
HT's examination of company records shows that the shareholding of the local partner, ACC Limited, fell from 50 per cent at the project's inception in 2000 to zero by the time a Prospecting Lease was awarded in 2006.
That did not stop the in-principle Mining Lease being awarded to Rio Tinto in November 2011. Chouhan’s interventions seem to have come at a critical time for Rio Tinto. The CM wrote to Handique in October 2010, calling the work done by Rio "commendable" while highlighting investments of Rs 2,000 crore and the creation of 500 jobs by the company. In April 2011, he wrote to the PM, saying the project would create 1,000 jobs and an investment if Rs 2200 crore. A PMO official told HT that they did not interfere in the granting of the Mining Lease in any way.
On July 25, environmental activist Shehla Masood wrote to the Union environment minister Jayanthi Natarajan saying that a district collector had uncovered illegal mining by Rio Tinto, and that a Public Interest Litigation over the issue would begin. She was murdered two weeks later. Her supporters link her murder to her activism, though the CBI points in the direction of a romantic rival.
Rio Tinto is still awaiting final clearance from the ministry of environment and forests.
Ashutosh Kumar Mishra, director, Transparency international India, who has been corresponding with the company and government agencies on the issue, said, "Why would Chouhan choose to personally intervene when the matter of name and shareholding pattern change was being examined."
Chouhan told HT that there was no quid-pro quo and he personally intervened in the best interest of the state. "The allegations are totally baseless and without any substance," he insisted.
When asked specifically whether he was aware of the change in the shareholding pattern, Chouhan evaded the question saying that there is no illegality in the name change. Dr Nik Senapati, managing director of Rio Tinto, India, maintained that at all times the applicant company continued to be a subsidiary of Rio Tinto Minerals Development Ltd. Senapati said, "All filings and submission of documents and explanations have been done in compliance with applicable laws and rules."
The portfolio of Union Ministry of Mines was taken away from Handique in between Chouhan’s two letters. Handique, ACC and Tripathi did not respond to requests for comment.