SOCIO ECONOMIC OFFENCES

PSDA REPORT
THE FODDER SCAM
ISHIKA VERMA
SEC-A, SEM-9TH
00917703819
INTRODUCTION
A corruption scheme known as the Fodder Scam (Chara Ghotala) involves the district
treasuries of Banka in Bihar and Ranchi, Chaibasa, Dumka, Gumla, and Jamshedpur in
Jharkhand. It was estimated that the fodder scandal would be about Rs 950 crore, which,
converted to US dollars, would be almost Rs 2,255 crore now. Many Bihar state government
administrative and elected officials, across multiple administrations (run by opposing
political parties), are accused of carrying out the long-lasting fraud, which involved the
fabrication of massive herds of fictitious livestock for which fodder, medicines, and animal
husbandry equipment were allegedly obtained. The fraud had been going on for over 20
years, even though the case only came to light in 1996. It was one of the first instances in
which lawmakers who were in office at the time were found guilty and had to leave the
Assembly and Parliament.

THE FODDER SCAM INTRODUCTION

According to sources, the scheme began as a modest-scale embezzlement by government
employees filing bogus expense reports, but it gradually expanded and attracted more
participants—including politicians and businesspeople—until it reached the heights of an
entire empire. Jagannath Mishra, who initially held the position in the middle of the 1970s,
was the first chief minister to be charged with knowledge of the scheme.
A fraud was carried out in the districts of southern Bihar in 1977 (the area was renamed
Jharkand in 2000). Lalu Prasad Yadav, a representative of Jayaprakash Narayan's statewide
anti-corruption campaign, was elected to the legislature in that year. He was not involved in
any way when the scheme got underway. The unreported removal of government funds, in
which suppliers and staff members of the animal husbandry department swapped money,
continued unreported until 1990. It was initially brought to the government's attention when
Yadav was appointed Bihar's chief minister in 1990.
Assuring himself of a portion of the riches, Yadav let things happen rather than step in.
Between 1990 and 1996, the amount of money that was fraudulently taken from the Treasury
increased significantly. The majority of the Rs 950 crore was obtained while Yadav was the
chief minister.
In February 1985, the state treasury and departments of Bihar delayed submitting their
monthly account submissions. The then Comptroller and Auditor General of India, T.N.
Chaturvedi, took notice of this and wrote to the chief minister of Bihar at the time,
Chandrashekhar Singh, cautioning him that this could be a sign of temporary embezzlement.
Principal Accountant Generals (PAGs) and Comptroller and Auditor Generals (CAGs) began
to closely monitor the Bihar government as a result, and this occurred during the
administrations of several chief ministers (regardless of their political affiliation). However,
there was a pattern of extremely powerful individuals ignoring these warnings.
Prominent political and administrative figures in the Bihar government, Bidhu Bhushan
Dvivedi, a police inspector of the state's anti-corruption vigilance unit, reported the fodder
scam and possible chief ministerial involvement to G. Narayan, the director-general of the
same vigilance division, in a 1992 report.

In 1996, a raid was ultimately allowed by Amit Khare, the deputy commissioner of the
animal husbandry department. The papers that were found indicate that money was stolen
while food was being supplied. It began with small-scale fraud committed by low-ranking
government officials and has since spread to include politicians and corporations.
In the middle of the raids, the state administration appointed two commissions. The state
development commissioner, Phoolchand Singh, who was subsequently implicated in the
scheme, headed one of them. It was necessary to cancel the commission as a result. In the
meantime, the Bihar police filed many FIRs at the state government's request. Subsequently,
numerous public interest lawsuits (PILs) were submitted to the Patna High Court, requesting
the transfer of the case to the CBI.

The Patna High Court responded to the petitions by stating in a decision dated March 11,
1996, that "Excess withdrawals in the Department have been recurring since 1977-78." The
recommended study and inquiry should therefore include the years 1977–1978 through 1995–
1996.
The court further mandated that the "CBI investigate and scrutinise all cases of excessive
withdrawals and expenditure in the State of Bihar's Department of Animal Husbandry from
1977–1978 to 1995–1996; they will also lodge cases where the withdrawals are found to be
fraudulent in nature and will conclude the investigation in those cases as soon as possible,
preferably within four months." When the CBI started its investigation, it questioned senior
officials, Lalu, and former Chief Minister Jagannath Mishra over their involvement.
CBI INVESTIGATION
As instructed by the Patna High Court, the agency started looking into 41 cases that the State
Police had already filed, and 23 cases were added to the database as a result of complaints
and intelligence reports. The CBI investigated sixty-four instances of fodder scams in total.
On March 27, 1996, the CBI filed the first formal complaint in the Chaibasa Treasury case.
Lalu was the chief minister when the CBI filed a charge sheet against him and 55 other
people in June 1997, asking the governor of Bihar for permission to prosecute. The charges
were brought under Sections 420 (forgery) and 120 (b) of the Indian Penal Code (punishment
of criminal conspiracy) as well as Section 13 (b) (criminal misconduct by a public servant) of
the Prevention of Corruption Act.
Following Lalu's inclusion in the CBI charge sheet, political repercussions ensued. He
belonged to the Janata Dal, which was against him continuing to hold the position of chief
minister while he was being looked into for a possible scam. In July 1997, he founded the
RJD in response to increasing pressure from the Janata Dal. Rabri Devi, his wife, was named
as the chief minister after he resigned. There was a vote of confidence for her.
The cases were moved to the newly established state of Jharkhand in 2001. "The Scamsters
adopted a unique modus operandi in all the cases by making fraudulent, excess withdrawals
from the treasuries in Bihar on the strength of forged and fabricated allotment letters and fake
supply orders for making payment to suppliers, who submitted bills without affecting the
supply or, in a few cases, by making a partial supply of feed, fodder, medicine, instruments
and other materials," the CBI notes in reference to the methods used by the scammers.

FIRST FODDER CASE

In February 2002, 20 years ago, the fodder scam case had its first trial. Initially, 170 people
were charged; 55 of them were found dead, seven of them were government witnesses, six of
them ran away, and two of them admitted the accusations. Lalu and Mishra were charged
with embezzling money from the districts of Bhagalpur and Banka in March 2012. For the
first time in this case, Prasad was found guilty in September 2013 of stealing Rs. 37.7 crores
from the Chaibasa treasury. Although he was given a five-year prison sentence, the Supreme
Court granted him bail in December 2013. But his conviction disqualified him from the Lok
Sabha, where he was elected at the time.

SECOND FODDER CASE

The RJD supremo's issues surfaced again in 2017 as he was convicted by a special CBI court
in the second scam case, which concerned the unauthorised removal of Rs 89.27 lakh from
the Deoghar treasury in December of that year.

He was convicted in December 2017 of taking money by deception from the Deoghar
Treasury and received a sentence of three and a half years in prison along with a fine of Rs
ten lakh in another case. In July 2021, having completed half of his 3.5-year sentence, he was
given bail. However, Jagannath Mishra was found not guilty.

THIRD FODDER CASE

In January 2018, Lalu Prasad Yadav was found guilty in the third fodder case of embezzling
Rs. 33.13 crores from the Chaibasa treasury using fraudulent means. He received a five-year
prison sentence in this instance.

FOURTH FODDER CASE

For the fourth time in the Dumka Treasury case, Lalu Prasad was found guilty. In the fourth
fodder case, which took place in March 2018, a Special CBI Court found Prasad guilty of
unlawfully taking out Rs. 3.76 crores from the Dumka treasury between December 1995 and
January 1996.

He was found guilty of taking out fraudulently Rs 3.76 crore from the Dumka treasury, and
he was sentenced to 14 years in prison and a fine of Rs 60 lakh. Regarding this matter, the
Jharkhand High Court granted him bail in April of last year.
FIFTH FODDER CASE
Lalu Prasad's sixth conviction was the misappropriation of Rs 139.35 crore from the Doranda
Treasury (Ranchi). In the Doranda Treasury embezzlement case, he received a five-year
prison sentence along with a Rs. 60 lakh fine.

This was the final and fifth time Lalu Yadav was charged with a fodder scam. Lalu Yadav
received sentences of seven years in prison in two different Chaibasa Treasury cases; five
years were for his unlawful withdrawal from the Dumka Treasury and four years were for his
illegal withdrawal from the Deoghar Treasury. In all four cases, Lalu Yadav has completed
half of his sentence.

PENALTIES IMPOSED ON CONVICTS

Lalu Prasad Yadav was found guilty under Sections 120B, 409, 420, 467, 468, 471, 477A of
IPC and Section 13 in The Prevention of Corruption Act, 1988.

Criminal conspiracy
Section 120B imposes penalties for criminal conspiracy. It is the punishing section for the
criminal conspiracy offence defined in section 120A of the IPC. The provision divides
conspiracy into two categories for the purposes of punishment.

In the first case, where no express provision in the code exists for the punishment of a
conspiracy to commit an offence punishable with death, life imprisonment, or rigorous
imprisonment for a term of two years or more, the person would be punished in the same
manner as if he had abetted such an offence.

In the other situations of conspiracy, the punishment proposed is either imprisonment for a
term not exceeding six months, a fine, or both.

Criminal breach of trust by a public servant, or by

banker, merchant or agent
Section 409 applies to public servants, bankers, merchants, factors, brokers, attorneys, and
agents. In general, such officials’ responsibilities are highly classified, involving tremendous
powers of control over the property entrusted to them; therefore a breach of trust by such
individuals may commonly result in major public and private catastrophe.

Two factors must be demonstrated to support a conviction under section 409 of the IPC:
  The accused, a public servant, banker, or agent, was entrusted with property for
which he is obligated to account; and
 The accused committed a criminal breach of trust.
The punishment stipulated by the provision is life imprisonment or imprisonment of either
type for a term that may extend to 10 years, as well as a fine.

Cheating and Dishonesty

Some classes or aggravated kinds of cheating are covered by Section 420. It covers situations
of deception if the victim is dishonestly persuaded to:

1. Surrender any property to anybody;

2. Create, alter, or destroy,

 the entirety of valuable security;

 anything signed or sealed and capable of being converted into a valuable security.
must be proved that the accused’s deceptive enticement caused the complainant to
leave with the property. The property must have monetary value to the victim of
the deception.
The prescribed punishment is either type of imprisonment for a duration that may last up to
seven years, and shall also be liable to a fine.

The Supreme Court listed the following criteria as necessary to create the offence of cheating
in the case of RamJas v. State of Uttar Pradesh.

1. It must be a fraudulent or dishonest inducement of a person by deceiving him

2. (a) the person so deceived must be induced to deliver any property to any person,
or to consent that any person shall retain any property or
(b) the person so deceived must be intentionally induced to do or omit to do anything which
he would not do or omit to do if he were not so deceived and

3. In situations covered by (2)(b), the act or omission should be one that damages or
harms the person in their body, mind, reputation, or property, or is likely to do so.

Forgery
Section 467 provides for valuable security, wills, etc and anybody who forges a document
that may be a will, valuable security, a document authorising the adoption of a son, a
document granting someone the right to create or transfer valuable security, a document
authorising someone to receive the principal interest or dividends, a document authorising
someone to receive or deliver movable property, a document that is falsified to be a receipt
acknowledging the payment of money, shall be punished with imprisonment for life, or with
imprisonment of either description for a term which may extend to ten years, and shall also
be liable to fine.

Section 468 provides for forgery for the purpose of cheating; it only applies when forgery is
perpetrated with the intention of cheating. Under the Indian Penal Code, forgery for cheating
is a non-bailable and non-compoundable offence. The punishment for forgery, as specified in
Section 468, is imprisonment for up to seven years and a fine.

The form of forgery that is being considered here must inevitably entail cheating as an intent.
When the cheating is complete, the section will not apply, and the subsequent forgery is just
meant to cover that offence. In the case of Aniceto Lobo v. State, bank employee X used a
blank draft on which agent Z’s signature had been forged by agent Y. He then created a new
account in the fake person’s name and cashed the cheques. In this case, the accused was
regarded as having been properly found guilty of offences under sections 467, 468, and 120B
of the IPC.

Section 471 covers the liability of a person who, knowing or having cause to suspect that the
document is forged, fraudulently or dishonestly uses a forged document as genuine, rather
than the liability of the person who forged it. It also requires the accused to present the
falsified document as genuine, even when he knew or had cause to suspect it was forged. The
clause is intended to give an alternative charge in circumstances when the individual who
forged it is unknown. The person will be punished in the same manner as if he had forged the
document.

In the case of AS Krishnan & Anor v. State of Kerala, the Supreme Court stated in explaining
the purpose and application of section 471: “The essential elements of Section 471 are:

(i) fraudulent or dishonest use of the document as genuine; and

(ii) knowledge or reasonable belief on the part of the person using the document that the
document is forged.“

As long as the use of the forged document was established or proved to be a forged one,
Section 471 does not require that the person charged independently with forging the
document be found guilty or that the person independently charged with forging the
document be found guilty before the person using the forged document and knowing it to be a
forged one can be found guilty.

Falsification of Accounts
Section 477A deals with the falsification of accounts. It primarily refers to two offences:

1. Deceiving, manipulating, destroying, mutilating, or fabricating any book, account,

or electronic record; and
 2. Creating or assisting in the making of fraudulent entries in the same way. These
two offences are distinct and not interdependent.
The punishment provided is either imprisonment of any description for a term up to seven
years, a fine, or both.

The Prevention of Corruption Act, 1988

Section 13 of the Act criminalises criminal activity by a public servant. A public servant is
said to commit criminal misconduct if he dishonestly or fraudulently misappropriates or
otherwise converts for his own use any property entrusted to him or any property under his
control as a public servant, or if he allows any other person to do so, or if he intentionally
enriches himself illicitly during the period of his office.

A person is believed to have purposefully enriched himself illicitly if he or any person acting
on his behalf has or has been in possession of financial resources or property disproportionate
to his known sources of income, which the public servant cannot properly account for. The
offence of criminal misconduct, as defined in Section 13, is punished by imprisonment for a
term of not less than four years but not more than ten years, as well as a fine.

Recent scenario surrounding the fodder scam case

In April 2022, the fifth fodder scam case appeared on the scene. Former Bihar Chief Minister
and Rashtriya Janata Dal President Lalu Prasad Yadav was found guilty of fraudulently
withdrawing Rs. 139.35 crores from Ranchi’s Doranda treasury between 1995 and 1996 by a
special CBI court in Ranchi. He is one of the 74 defendants found guilty by Special Judge
S.K. Sashi in a case in which 99 persons were accused. The other twenty-four have been
found not guilty.

The special CBI court sentenced Lalu Prasad Yadav to five years in prison and fined him 60
lakh for illegal withdrawals of 139.5 crores from the Doranda Treasury. The Doranda case is
the fifth and last case of embezzling government funds in which the leader was found guilty
as a key conspirator.

Yadav appealed his conviction in the fifth fodder scam case to the Jharkhand High Court,
where a special CBI court in Ranchi sentenced him to five years in prison and fined him Rs
60 lakh. In April 2022, the Jharkhand High Court granted bail to RJD chief Lalu Prasad
Yadav, rejecting the CBI’s arguments and ordering him to deposit Rs 10 lakh with the court.

In an interview, Lalu Yadav’s lawyer Prabhat Kumar stated, “Lalu Yadav has been granted
bail by the Jharkhand High Court on the condition that he pay the court a fine of Rs 10 lakh.”
“We submitted a bail plea based on him serving half of the term issued by the special CBI
court because he has already served 42 months of his sentence in this case,” He further said
that the CBI, while opposing the bail plea, claimed that Lalu had not yet finished half of the
sentence imposed by the trial court, which was rejected by the court.
Lalu’s Yadav Kumar went on to say that they had included all of the documents in support of
his claim that Lalu Yadav had already served 42 months in prison, as well as certified copies
of trial court decisions indicating when he was sent to jail and when he was released. He
stated that Lalu’s sentence will be completed in half after only 30 months in prison.

Since December 2017, Mr. Prasad has been held at Ranchi’s Birsa Munda Central Jail. He
had gone to Ranchi a few months earlier to physically appear in court in the Doranda case,
but his health had deteriorated there, and he was brought to the Rajendra Institute of Medical
Sciences (RIMS). After that, he was sent to the AIIMS in Delhi for medical care. Mr Prasad
is currently being treated for a variety of ailments at the All–India Institute of Medical
Sciences (AIIMS) in Delhi. In each of the other four cases, Mr. Prasad has been granted bail.

Conclusion
The multi-billion-dollar Animal Husbandry Department fraud, commonly known as the
fodder scam, was exposed in the mid-1990s, with animal fodder allegedly supplied on trucks
and lorries with scooter and motorcycle registration numbers. It was one of the first cases in
which sitting politicians were found guilty and compelled to resign from their positions in the
Assembly and Parliament. Despite the fact that the scandal broke in 1996, the fraud had been
going on for more than two decades. Officials from the Animal Husbandry Department have
been accused of stealing money from treasuries in return for fictitious bills for fodder,
medicine, and artificial insemination equipment.

With the Central Bureau of Investigation’s special court convicting Lalu Prasad Yadav in the
fodder scam case, his lengthy career in Bihar politics is likely to come to an end. Despite his
political savvy and lofty language, a spell of 11 years in the political wilderness following his
conviction is unlikely to see him or his Rashtriya Janata Dal re-emerge as powerful forces.

PERSONAL OPINION
The Fodder Scam, also known as the Chara Ghotala, was a major corruption scandal that took
place in the Indian state of Bihar. The scam primarily involved the embezzlement of
government funds allocated for the procurement of cattle fodder, which was intended for
livestock. Instead of being used for its designated purpose, a significant portion of these funds
was siphoned off by politicians, bureaucrats, and other officials.

The scam came to light in the 1990s and involved the fabrication of inflated bills for the
purchase and supply of fodder, medicines, and other livestock-related items. The exaggerated
invoices were used to withdraw public funds from the treasury illegally. The funds were then
redirected to personal accounts or used for various political and personal purposes, leading to
massive financial irregularities.
One of the key figures implicated in the scam was Lalu Prasad Yadav, a prominent politician
and former Chief Minister of Bihar. He was accused of being involved in the
misappropriation of funds during his tenure as the Minister of Agriculture in the state.

The investigation and legal proceedings regarding the Fodder Scam lasted for several years,
resulting in numerous arrests, trials, and convictions of politicians, bureaucrats, and
individuals involved in the scandal. The scam highlighted deep-rooted corruption within the
Indian bureaucracy and political system, leading to demands for transparency, accountability,
and reforms in governance and financial management.

LEGAL ASPECT
The legal aspect of the Fodder Scam involved extensive investigations, trials, and convictions
of individuals implicated in the corruption scandal. Several legal proceedings took place to
address the embezzlement of government funds and bring the perpetrators to justice. Here are
some key legal aspects of the Fodder Scam:

1. Investigations: Following the revelation of financial irregularities in the procurement of

fodder and related expenses, investigative agencies such as the Central Bureau of
Investigation (CBI) conducted thorough probes into the scam. These investigations aimed to
uncover the extent of the fraud, identify the individuals involved, and gather evidence for
legal action.

2. Trials and Court Proceedings: Numerous trials were conducted in various courts to
prosecute those accused in connection with the Fodder Scam. The trials involved multiple
defendants, including politicians, government officials, and suppliers accused of
embezzlement, conspiracy, and corruption charges.

3. Verdicts and Convictions: Over the years, several individuals were found guilty and
convicted in relation to the scam. Lalu Prasad Yadav, a prominent political leader, and others
were convicted in different cases related to the Fodder Scam. The legal process resulted in
significant convictions and sentencing of those found guilty of involvement in the corruption
scheme.

4. Appeals and Subsequent Legal Actions: Following the initial verdicts, some convicted
individuals appealed against their convictions in higher courts. The legal process involved
multiple appeals, hearings, and judgments, leading to further convictions, acquittals, or
modifications of sentences.
5. Impact on Politics and Governance: The Fodder Scam had a significant impact on the
political landscape of Bihar and India as a whole. It led to the disqualification of politicians,
including Lalu Prasad Yadav, from holding public office due to their criminal convictions.
The scandal also brought attention to the need for reforms in governance, transparency, and
accountability in public administration.

Overall, the legal aspect of the Fodder Scam involved complex investigations, trials,
convictions, and subsequent legal actions, highlighting the importance of accountability and
justice in cases of large-scale corruption within the government and bureaucracy.