KIRIT P MEHTA, SCHOOL OF LAW, MUMBAI

A Project Submitted

ON

The Great Cobbler Scam

IN COMPLIANCE TO THE FULFILLMENT OF THE MARKING SCHEME, FOR

SEMESTER 2 OF 2017-18, IN THE SUBJECT OF Law of Crimes (IPC)

SUBMITTED TO: - SUBMITTED BY:-

Professor Ashraya Singh- A018
Prof. Nazima Munshi Rajeev Tekwani- A059
(FIRST YEAR)

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 Contents

S.No. Index Page No.

1. Abstract 3

2. Literature Review 4

3. Introduction 7

4. Facts of the Case 8

5. History of the Case 9

6. Present Scenario 10

7. Criminal Charges 11

8. Similar Cases 12

9. Conclusion 14

10. Suggestions 15

11. Bibliography 17

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 Abstract
The cobbler scam is one of the biggest scams of India involving around 1600cr.
of money. This money was meant to be provided to the poor cobblers at low
rates if interest and tax modifications. The money however did not reach the
cobblers because of involvement of some of the top businessmen and politicians
including Saddruddin Daya-owner of Dawood shoes, Rafique Tejani-Owner of
Metro Shoes, Kishore Signapurkar-Owner of Milano Shoes, Abu Asim Azmi-
Partner in City walk Shoes. The investigation was started by a complaint by the
BMC and charge sheets were filed against the 28 people accused however, all of
them are out on bail and the case is still waiting for a trial.

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Literature Review
I. Books

1. Why Scams are here to Stay: Understanding Political Corruption in India

-by N.Ram
Pages-1-162
Year of Publication-2017
The writer in this book talks about the scams taking place in India and their
relations with businessmen, political leaders and other influential people
including people associated with criminal element through the help of Bofors
Grand Corruption Scandal case. He talks about the chain of corruption blocking
our system and because of this; corruption has become an untraceable problem
in India. This book helped to understand the involvement and control of the
politicians and bureaucrats.

2. Corruption and Anti-Corruption

-by Peter Grabosky
Pages 146-198
Year of Publication-2013
A part of the book talks about the economic crimes taking place whether in form
of Insurance fraud, bribery and corruption, money laundering,
telecommunication fraud, forgery, electronic banking fraud and others and
countermeasures to prevent these economic crimes through auditing,
transparency, public awareness and political change. This book helped to

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understand the various ways in which the economic crimes take place and
moreover the ways to cure this problem through better laws.

3. Frauds in Banks
-by Narasimhan R.
Pages-1-20, 182-213
Year of Publishing-2005
The author in the book explains the various crimes committed against the banks
with the help of various bank frauds around the world and in India like Rustom
Sohrab Nagarwala to understand the modus operandi of the people committing
such crimes and to provide defence from the same.

4. Crime and Money Laundering: The Indian Perspective

-by Jyoti Trehan
The author in this book speaks about the scams and crimes taking place in India
to make huge sums of money and the mode of operation behind it. Several other
cases can be used for a comparative study.

II. Journals

1. Economists on Bank Scams

Journal-Economic and Political Weekly
Date of Issue-10 March 2018
Talking about the recent scam involving Punjab National Bank which is the
second largest public sector bank the author looks for the loopholes in the
present system being exercised by the banks in India.

2. Criminal Conspiracy
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Journal-Harvard Law Review
Date of Issue-4 Feb 1992
Author-Francis B. Sayre
The articles explains the concept of criminal conspiracy and its practical
implications using cases from various countries to understand what concludes
criminal conspiracy or whether just the planning and not execution for the crime
is enough to prove this charge.

3. Framework for Issuing, Using, and Validating Identification Documents

Journal-Economic and Political Weekly
Date of Issue-15 October 2016
This article deals with the procedure for issuing identification documents using
the six step procedure involving identification, certification, use of documents,
authentication, regulation and audit of the documents to find out how people
involved in the scam created more than 50,000 fake identities through duplicate
documents.

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Introduction
There is no end for corruption in India, for by the time one is brought to light
another one starts somewhere. One of the biggest scams that has happened in
the Indian history is the Cobbler scam which involves money worth several
multi million dollars. This was most popularly discussed as the Great Cobbler
scam. The cobbler scam revolved around a number of political heads and even
top businessmen siphoned off lot of illegal money into their own account which
is a huge figure of about $600 million US dollars. This money was actually
given by the government of India especially for the benefit and the well being of
the poor cobblers of Mumbai. But unfortunately the money was mostly
swindled by the top businessman and politicians for their enrichment of life to
build posh houses and to improve their lifestyle to the best.

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History of the case
The Government of India planned this plan which was intended to give credits
to the poor shoemakers at a low rate of interest and assessment alteration for
even after 16 hours of work they wound up gaining just 80-100 rupees for each
day. However this plan did not favor them because not a single penny reached
them. The reason for activity and the strategy for working behind the
shoemaker's plan were to enact a helpful society which would empower the
shoemakers to make utilization of the upside of soft government credits with the
distinctive kinds of schemes which was accessible. But the politicians and the
top business heads just to make use of these soft loans came up with a number
of bogus small companies and societies. Some of the main individuals who
were engaged with the shoemaker trick were Saddrudin Daya, previous sheriff
of Mumbai and proprietor of Dawood Shoes, Rafique Tejani, proprietor of
Metro Shoes, Kishore Signapurkar, proprietor of Milano Shoes, and Abu Asim
Azmi, leader of Samajwadi Party's Mumbai unit and accomplice in Citywalk
Shoes. Aside from these individuals the multi million dollars shoemaker trick
likewise included different authorities of banks and budgetary organizations like
Maharashtra State Finance Corporation, Citibank, Bank of Oman, Dena Bank,
Development Credit Bank, Saraswat Co-agent Bank, and Bank of Bahrain and
Kuwait who all considered an extremely who all held a very responsible
position and were highly reputed.

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Facts of the case
The investigation started based on the complaint filed by the officials of the
Brihanmumbai Municipal Corporation’s octroi department when they realized
there was enormous quantity of raw materials which were brought into the
Mumbai city on an extremely huge scale. The duty which levied on these
materials was at considerable concessions as they were into the city in the name
of fictitious cooperative societies which were formed by the people involved in
the scam. Thus once the complaint was lodged the police from its side started to
probe their investigation. As a result of the investigation one of the officers in
the Registrar of Cooperative Societies who was keener on conscientiousness in
his work and duties made up his mind and decided to do a thorough and a
complete survey of all the registered cobbler societies in Mumbai. In 1995,
Sudhir Thakre , the then joint registrar of the Cooperative Society for Mumbai
division who just then took in charge gave an authoritative instruction to do a
complete survey of all the registered societies which came under the Mumbai
division. Not a single society was missed out from this survey.

The survey stated that the officials from Sudhis Thakre’s office who were
especially auditors of each of these societies complained that most of these
societies did not exist at the registered addresses furnished attached to this
office. During an exclusive interview to Express Newsline Sudhir Thakre stated
that the series of actions or steps taken in the investigation into the big business
way to success through fictitious cobbler societies. Thakre also narrated that
since most of the cobblers were from a poor and uneducated background that
did not want to harass them in the name of investigation. But however because

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of the fact or quality of being more merciful or tolerant from the Registrar’s part
was misused by the businessman who was all involved in the cobbler scam. So
Sudhir Thakre decided to survey and investigates all the cooperative societies
which were formed. Also at the same time a Bicycle Manufacturing Company
lodged a complaint to the police stating that lot of raw materials used in the
manufacture of shoe making worth around two crores were brought into the
city.

Present Situation
On the basis of the complaints of BMC, police started the investigations. The
banks whose officials were involved in this scam include Maharashtra State
Finance Corporation, Citibank, Bank of Oman, Dena Bank, Development Credit
Bank, Saraswat Cooperative Bank, and Bank of Bahrain and Kuwait and they
were subsequently charge sheeted. The Officials of Bank of Baroda, Saraswati
Co-operative Bank and the Bombay Mercantile Co-operative Bank are also
facing charges for manipulation of the funds of the government. As the inquiry
progressed, Dawood, Metro, Milano, City walk shoes and, many of other shoe
shops were sealed and were opened only after a long battle. Presently, the shoe
scam is waiting in the queue of cases to be taken up by the court of the 19th
additional chief metropolitan magistrate. All the accused are out on bail. Files
on the multiple cases of the shoe scam are gathering dust on court shelves. The
case is still waiting for a trial.

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Criminal Charges
Many people along with Sadruddin Daya, the prime accused in the case and
former sheriff of Mumbai, his wife Shauheen, two international banks and five
co-operative banks have also been charge sheeted under various sections of the
Indian Penal Code (IPC). The charge-sheets were filed before the additional
chief metropolitan magistrate, Sharad N Chimade. However, Rafique Tejani of
Metro Shoes, Kishore Signapurkar of Milano Shoes and Abu Asim Azmi of
City walk Shoes have not been charge-sheeted. EOW officials said the role of
the three companies in the scam is still being investigated.

The sections of IPC under which the above suspects are charges include
criminal conspiracy1, forgery2, preparing and using duplicated documents for
financial benefits3, criminal breach of trust4, cheating, jumping bail limits,
fraudulently setting up fake co-operative societies and making money.

1
According to Section 120A of the IPC, when two or more persons agree to commit
an offense punishable with death, imprisonment for life, or imprisonment of
either description for a term of two years or upwards, or to cause such an
offense to be committed, the agreement in designated a criminal conspiracy.
2
 According to Section 463 of the Indian Penal Code, "whoever makes any false
document or  electronic record or part of a document or electronic record with intent to
cause damage or injury, to the public or to any person, or to support any claim or title,
or to cause any person to part with property, or to enter into any express or implied
contract, or with intent to commit fraud or that fraud may be committed, commits
forgery.
3
Section 464 if the IPC
4
According to the Section 405 of the IPC,whoever, being in any manner entrusted with
property, or with any dominion over property, dishonestly misappropriates or converts to
his own use that property, or dishonestly uses or disposes of that property in violation of
any direction of law prescribing the mode in which such trust is to be discharged, or of
any legal contract, express or implied, which he has made touching the discharge of such
trust, or wilfully suffers any other person so to do, commits “criminal breach of trust”
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Similar Cases

1. PNB Fraud

The recent Nirav Modi case deals with the use of duplicate documents to get the
money from the bank. The suspect in this case obtained fake Letters of
Understanding (LOU) and Letters of Credit (LOU) from the bank ultimately
amounting to Rs. 11,384 crores.

Modi was able to do so because none of the transactions were routed through
the CBS system, thus avoiding early detection of fraudulent activity, it added.
The bank also cautioned of a similar modus operandi used by the same branch
official in companies belonging to Gitanjali Gems Ltd, promoted by Mehul
Choksi viz. Gitanjali Gems, Gili India and Nakshatra while issuing LOUs.5

Apart from Modi, Gokulnath Shetty, deputy manager who was posted at PNB’s
foreign exchange department in Mumbai who allegedly with help of another
official Manoj Kharat issued the fraud LOU’s and LOC’s to the company
without following the required norms and steps and without making the entries
which are required to be made in the system of the bank which is the reason that
transactions were not detected.

Nirav Modi with his wife and brothers left India in the first week of January
before Punjab National Bank brought up charges of fraud against him. Since
then, they have not returned to India.

5
Nirav Modi Case: Business Today https://www.businesstoday.in/sectors/banks/nirav-modi-case-pnb-fraud-
11400-crore-scam-ed-cbi-raid/story/270708.html
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2. Dwarka Seth International Scam

The United Co-operative brought up the case against Dwarka Das International
for a default on the loans through the instruments called Letters of Credit (LC)6
which are used to pay liabilities like creditors.

Dwarka Das International used the LC’s to pay the offshore creditors from
which they purchased raw materials like gold and precious stones however the
transactions were only fictitious and the money went to the group itself through
foreign ties which amounted to around Rs.390 crores. Dwarka Das International
also misrepresented the facts including information about the creditors,
customers and the annual turnover of their company to the bank. The company
reported the annual turnover to be Rs.1 billion wherever its actual turnover was
Rs.140-150 million.

The issue of LC’s continued until the bank noticed that the banks were rated
poorly and thus stopped the credit facility. The group then stopped paying the
loan amount and asked for an extension due to poor condition of the business.

Now more than 10 months have passed and there has been no response from the
customer and his family and the are not present at address according to the
records.

6
Definition of Letter of Credit http://www.businessdictionary.com/definition/letter-of-credit-L-C.html
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Conclusion
India is a country exhausted with corruption. The Cobbler Scam costed the
government $600 million. The irony is that the money was taken from a plan
that should have benefited the poor of Mumbai. Instead it went into the pockets
of the wealthy elite people of Mumbai.  “For India’s poor, the Great Cobbler
Scam is just confirmation that fifty years after independence, little has
changed.” said Dominique Schwartz.
The Cobbler Scam was extensively covered by the Indian media from 1995-
2009 writing in detail about the several elites and politicians involved in the
scam and the investigations being carried out. This scam had headlined leading
newspapers like The Times of India, Hindustan Times, The Indian Express,
Business Standard, Mid Day and Outlook, the weekly magazine. It was a case
that made front page headlines in 1995, managed to stay there for almost two
years — before disappearing. Papers like The Indian Express and Hindustan
Times continued to cover the Cobbler Scam and how it was handed over to the
Economic Offences Wing (EOW) in the year 2006 and how even almost a
decade later the cobbler scam, which involved 40 politicians, bureaucrats and
well-known shoe manufacturers in Mumbai is still waiting for a trial.
Times of India had even put forth the grievances of the people impacted by the
scam. Indian Express informed how the shoe scam was exposed by three
agencies after the BMC filed a complaint about raw materials being brought
into the city on a large scale. The media did an excellent job in extensively
covering the Cobbler scam and how another Cobbler scam was barred in 2006
where families had got recovery notices for loans taken by complete strangers.
Political implications in the 1,000 crore cobbler scam was also elaborately
mentioned in the Indian media.

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 The introduction of digital technology especially for scanning and copying,
enables almost perfect reproduction which may not only leave the recipient
holding a worthless piece of paper, but the forged documents can also be used
to facilitate a variety of other economic crimes.7
However, though the media high lightened all the aspects of the Cobbler Scam,
the trial is yet pending in court and the accused out on bail; hence the media
pressure on the Government to take quick action against those on the 
chargesheet was not as strong  should have been. The investigation files now
continue to gather dust while justice has yet not been delivered after more than a
decade.

Suggestions

All the banks should review their critical systems and processes including the IT
segment regularly. Ethical banking practices should be preferred. Disclosures to
RBI, SEBI and other regulators should be made with consistent periodicity.

1. Banks should ensure that there are adequate systems and controls in place to
identify potential risks and that they are being followed at all relevant branches.
SWIFT-CBS linking must be made mandatory for all LoUs. Confirmation from
lending foreign branches must be done for each of the LoUs.

7
Page No. 150, Para 4,Corruption and Anti-Corruption

-by Peter Grabosky

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 At this juncture, it is critical to focus on effective regulation and supervision of
all banks, and to make the regulatory process stricter, as well as more
transparent and accountable.8
2. All internal and external audits must be completed on time at branch level. The
audit reports should be shared with the government's auditors and examined by
the RBI, which should conduct a separate audit every year. In the PNB fraud
case, the bank has told the finance ministry that the last audit by RBI was done
in March 2009. “It is by no means fail-safe, as accountants often fail to detect
irregularities, but the very necessity of having to prepare accounts in a form
suitable for independent scrutiny and then subjecting them to a degree of
examination is an important first step”9.
3. Training of bank staff should be undertaken for skill up gradation and creating
awareness about the possible modes of banking fraud. Use of technology for
preventing fraud should be encouraged within banking ecosystem.
4. New technology like block chain can be used to record all banking transactions.
Some experts have said that block chain could have detected the first of the
series of frauds in the PNB. And, once a fraud is detected, it should be
immediately flagged by the bank and concerned agencies roped in for probe.

8
Para 6, Economists on Bank Scams

Journal-Economic and Political Weekly

Date-10 March 2018
9
Page No. 154, Para 2,Corruption and Anti-Corruption

-by Peter Grabosky

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 Bibliography
1. Why Scams are here to Stay: Understanding Political Corruption in India
-by N.Ram
2. Corruption and Anti-Corruption
-by Peter Grabosky
3. Frauds in Banks
-by Narasimhan R.
4. Crime and Money Laundering: The Indian Perspective
-by Jyoti Trehan

Journals

1. Economists on Bank Scams

Journal-Economic and Political Weekly
Date of Issue-10 March 2018
2. Criminal Conspiracy
Journal-Harvard Law Review
Date of Issue-4 Feb 1992

3. Framework for Issuing, Using, and Validating Identification Documents

Journal-Economic and Political Weekly

Date of Issue-15 October 2016

Newspaper Articles

1. DNAIndia.com

http://www.dnaindia.com/india/report-now-dwarka-das-seth-international-
under-cbi-scanner-for-loan-fraud-case-2588853
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17
2. DeccanChrinicle.com

http://www.deccanchronicle.com/nation/current-affairs/100318/nirav-modi-
will-take-time-to-return-to-india-pnb-case-not-a-scam-law.html

3. Business Standard.com

http://www.business-standard.com/article/specials/daya-among-28-
chargesheeted-cobbler-scam-197071701015_1.html

4. IndiaToday.in

https://www.indiatoday.in/magazine/indiascope/story/19961231-cobbler-scam-
shoe-firms-charged-with-misappropriating-concessionary-funds-834263-1996-
12-31

5. EconomicTimes.com

https://economictimes.indiatimes.com/topic/Cobbler-Scam

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