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Friday, Jan 02, 2004

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Stamping out stamp scams

S. Arvind

The Stamp-paper scamster, Abdul Karim Telgi: There is a need for both the Central and State governments to devise better ways of collecting the dues from the sale of stamp paper and stamps of different categories.

THE latest scam to hit the country, involving the large-scale printing and sale of postal and insurance stamps, non-judicial stamp-paper, court-fee stamps, and so on, has come to light at least now only because of its all-India ramifications, the magnitude of the operations in terms of the value of stamps and stamp papers forged and the players involved. The scam has claimed its victims amongst politicians as well as the police force.

While stamp-paper/stamp forgeries have happened at the local level in isolated cases, the scam perpetrated by Abdul Karim Telgi and his associates is rather daunting because of its modus operandi and coverage. Apart from criminal prosecution of those involved, corrective action needs to be taken to prevent such scams from happening.

The modus operandi has been truly professional. Forgery of security documents involves two distinct processes. First, identifying the means of forging the documents so as to ensure that they are as similar to the original. And, second, putting these forged documents into circulation without rousing the suspicion about their genuineness.

Telgi and his cohorts made use of equipment discarded by the India Security Press (ISP) at Nashik and were able to get the assistance of technical personnel, both serving and retired, of the ISP. They were also able to obtain raw materials, such as specialty paper, needed for printing the documents from the sources that supplied to the ISP and affix the same security marks as used by the Security Press.

Some of the retired technicians even set up a unit to assist Telgi in certain critical processes. And Telgi, too, set up one to carry on these operations.

It is the treasury of a State Government that receives the stamps and stamp papers from the Security Press and distributes the same to stamp vendors. The scamsters were either able to make inroads into the treasury and ensure that it distributed the fake stamps, or directly supply to the stamp vendors, which reflects the failure of the system to check the supply sources of the vendors.

The Revenue Departments in the States, which are required to licence stamp vendors and check their business activities, also failed in their supervisory role. Telgi was, thus, able to get stamp vending licences for stamp vendors of his choice, create artificial shortages of stamps/stamp papers in connivance with the Security Press officials, and sell the forged papers in the market.

The scam has meant huge revenue losses to States, the beneficiaries of collections made under the Stamp Act. It is estimated that the forged documents seized thus far itself is worth Rs 3,500 crore. New seizures are being reported on a continuing basis and the connection between these and the scamsters need to be established. No estimate has yet been made of the value of forged stamp papers used as genuine to register documents. This would, no doubt, be a Herculean task.

There is a need, therefore, for both the Central and State governments to devise better ways of collecting the dues from the sale of stamp paper and stamps of different categories.

The current system was devised by the British at a time when the banking system was not developed in the country and revenue collection was possible only through direct payment of the dues into the treasury or through purchase of stamps and stamp-paper. This was a convenient method during those times. And forgery of such papers and stamps was almost unheard of.

Considering the development of the banking network in the country and the computerisation of the registration offices in many States there is no need for sale of stamp-papers to collect the dues to government for registration of documents. The dues to the government can be paid into the nearest designated branch of a nationalised bank and, based on the receipts issued, the document submitted by the person desiring to register the document can be franked by the Registrar. To avoid forgery of bank receipts a system of secure electronic intimation of payments by the bank to the Registrar's Office can also be introduced. The registration of the document would be done only after receipt of such intimation. This procedure, already introduced in Karnataka, should be followed in other States as well.

Similarly, in the insurance sector, which has only a limited number of players, taxes can be paid directly by insurance companies to the State government based on returns filed by them, and the need to buy and stick stamps on policies issued can be avoided. This procedure will be akin to the procedure for payment of service tax and not pose any problems of revenue collection or leakage to State governments.

Similarly, all dues now being collected through the sale of stamps from the organised sector can be collected directly through the returns to be filed by the parties concerned.

Only petitions presented by the public to various government departments and courts should require affixing of stamps; the volumes in such cases are anyway low.

These measures would go a long in reducing the requirements of stamp-papers/stamps and ensure that revenues are not lost through scams.

The Telgi scam points to the need for better surveillance on the part of the Central security agencies, keeping a close watch on security printing organisations and presses.

Economic intelligence gathering should also be stepped up so as to get information on leaks in the security presses and, thereby, detect scams early on.

Attention also needs to be paid to disposal of used equipment and consumables by the security presses. And checks on existing and retired staff of the presses should be made to ensure that they do not indulge in undesirable activities.

(The author, a former IAS officer, is a Chennai-based venture management consultant.)

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