The Telgi scam, also known as "The Stamp Paper Scam" jolted the nation when it got exposed. It is one of the most notorious financial frauds in the history of India. The mastermind behind this scam was Abdul Karim Telgi, who successfully swindled approximately Rs. 30,000 crores by selling counterfeit stamps in the market. It has been called the biggest scam in India, surpassing the infamous Harshad Mehta scam of 1992.
Telgi hailed from a very humble background and initially began his career as a fruit vendor. His early life did not hint at the grand-scale fraud he would later perpetrate. Despite financial struggles, he completed his education and secured employment. However, a series of job losses propelled Telgi into the realm of petty crimes and other scams, which gradually set the stage for the infamous scam that he would later be associated with.
Telgi set foot in the world of fraud by establishing his traveling company named ‘Arabian Metro Travels’ in Mumbai. He helped people illegally migrate to Saudi Arabia by forging passports and other necessary documents so that they could evade immigration scrutiny. However, this business was short-lived as he got booked for cheating and forgery and was consequently jailed in 1993.
While serving time in jail, Telgi made powerful connections with criminals, politicians, and underworld figures, which played a crucial role in pulling off the stamp paper scam. An important person he met in jail was Ratan Soni, a government stamp vendor who was also arrested for fraud. It was Soni who planted the seed of starting a counterfeit stamp business in Telgi's mind. They were confident about the sustainability of the business as the Stamp Paper Office was the most unmonitored department of government and operated with minimal oversight from the authorities at that time, meaning that their scam could easily go unnoticed.
Their aim was to make big money by printing fake stamps. In India, stamp paper is used for a variety of purposes like revenue collection on documents requiring stamping, such as leases, agreements, court documents etc. It is also an important seal of legal validity. The government sells stamp papers in different denominations, starting from Rs 10 to Rs 500 and above, with the corresponding fees remitted to the respective state authorities. If they succeeded in this business, they would be able to create a parallel economy of stamps and earn profit in crores.
So, in 1994 the duo got together and started to devise the counterfeit scheme. The connections made by Telgi proved to be helpful here. He was able to approach Anil Gote, an MLA at that time, and got a meeting arranged for himself with Vilasrao Deshmukh, the Revenue Minister of Maharashtra. Through bribes and corruption, Telgi was able to obtain the stamp vendor’s license and opened up a stamp paper office in Mumbai. Since he was a legally licensed vendor, no one bothered verifying the turnover and receipts of his business.
The Telgi-Soni duo worked together till 1995. They cheated their clients by mixing 25% original stamp papers with 75% fake ones which made their detection a bit difficult. The forged documents encompassed a wide range, including stamp papers, court fee stamps, revenue stamps, special adhesive stamps, broker's notes, insurance policies, share transfer certificates, foreign bills, etc. According to the official CBI records, Telgi purchased genuine stamp papers worth Rs. 2.5 crore in one year, which were then mixed with fake stamp papers and sold, leading to an annual turnover of almost Rs 10 crore.
Soon however, police got a whiff of Telgi’s fake stamp business after receiving complaints from some of his clients and as a result, his vendor’s license got canceled. But rather than being discouraged by this incident, Telgi was determined to expand the scale of his fraud. In 1996, he set up his own printing press on Mint Road in Mumbai. Again, he was able to exploit the connections he made in 1993 and got in touch with the officials at India Security Press- which officially printed government stamps. He bought all the used printing machinery which was supposed to be dismantled and auctioned off, along with the ink and papers used for printing and as a result he was able to print the exact copy of original stamp papers.
The production and supply of stamps were now ensured. The next step was to create demand. Telgi and his men gave lucrative 20-30% commissions to the stamp vendors, who usually got 2-3% commission from the government. So, in this case buying stamps from Telgi seemed profitable to the vendors. Moreover, he was also accused of creating an artificial scarcity of stamps in the market with the help of his connections. He expanded his network to over 74 cities spanning 13 Indian states.
This scam went on smoothly until the year 2000 when two of his fake stamp paper courier packages were caught on the spot while being transported to Karnataka. Inevitably, Telgi was arrested in November 2001.
By 2003, all fake stamps were seized and a Special Investigation Committee was set up to investigate the scale of the scam. The investigation unveiled the names of many politicians, policemen, IAS officers, and institutions that aided Telgi and were involved in this scam. It also revealed the shocking depth of corruption within the system.
In 2007, Telgi pleaded guilty and was convicted. He was given 30 years of imprisonment (which was later cut down to 13 years) and a fine of Rs. 202 crore. He died while in prison in 2017.
As an aftermath of this scam, several legal proceedings and reforms were initiated to address loopholes in the system to avoid the occurrence of such large-scale fraud again. The government introduced new measures to increase security. Each stamp now had a unique serial number and the state name was clearly printed on the stamps so that they could be tracked and monitored easily. Advanced security features were introduced like holograms, watermarks, and security threads, which made it harder to copy stamps. E-stamping system was introduced as well to ensure authenticity and security. It has been made mandatory in many states now. The Stamp (Prevention of Undervaluation of Instruments) Rules, 2007 was also implemented wherein rules were introduced to prevent the undervaluation of stamp papers and to ensure that the correct value of stamp duty is affixed on legal documents.
The Abdul Karim Telgi scam very clearly showed the negative impacts financial frauds have on our economy and nation. It serves as a stark reminder of the importance of regulation and management in governmental departments. Poor implementation of rules, rampant corruption and slow response to problems were the key factors that allowed the Telgi scam to thrive. It laid bare the weaknesses in India's administrative and law enforcement apparatus, highlighting the need for stronger measures to combat fraud and corruption.
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ABOUT THE AUTHOR
Snigdha Rudra
Snigdha Rudra is a finance enthusiast, currently pursuing a BA (Hons) Economics from Maitreyi College, Delhi University. She's passionate about researching and keen to learn new things. She's dedicated, hardworking and always up for a good discussion on finance, and Economics.
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