SC grants bail to accused in Valmiki Corporation Money Diversion Case

The Karnataka government constituted a SIT under the CID to investigate the case.

New Delhi: The Supreme Court on Monday, August 17, granted bail to Kaki Srinivas Rao, an accused in the multi-crore Karnataka Maharshi Valmiki Scheduled Tribes Development Corporation money diversion case, in which more than Rs 89 crore was allegedly siphoned off through forged documents and fictitious bank accounts.

A bench comprising Justices Manoj Misra and Vijay Bishnoi allowed the special leave petition filed by advocate Anil Chandrashekhar Nishani, challenging the Karnataka High Court’s December 19, 2024 order rejecting Rao’s bail plea. Senior advocate Madhavi Divan appeared for the petitioner.

According to the chargesheet, Rao, who was running a share-trading firm, was not accused of playing a central role in the alleged diversion of funds. The prosecution has alleged that he assisted in converting the allegedly diverted cash into gold and helped facilitate the creation of 18 fictitious bank accounts.

The Supreme Court took into consideration Rao’s age, health condition and the period he had spent in custody while granting him bail. Rao, 32, is reportedly suffering from a serious spinal ailment and has been in judicial custody for more than 22 months.

The court also considered the fact that the trial was unlikely to conclude in the immediate future.

The case relates to the alleged illegal transfer and misuse of funds belonging to the Valmiki Corporation using forged documents and fake bank accounts. The alleged financial irregularities came to light in 2024 after the corporation lodged a complaint against officials of Union Bank of India over the alleged misuse of funds.

In June 2024, Union Bank of India also approached the Central Bureau of Investigation (CBI) over the alleged fraud involving public money.

The Karnataka government subsequently constituted a Special Investigation Team (SIT) under the Criminal Investigation Department (CID) to investigate the case. The Enforcement Directorate (ED) and CBI also registered separate cases and initiated investigations into various aspects of the alleged financial irregularities.

Rao was arrested on July 15, 2024, as part of the investigation.

The alleged scam had also triggered a major political controversy in Karnataka, with opposition parties raising questions over the handling of funds meant for the welfare and development of Scheduled Tribes. The name of former minister B Nagendra had also figured prominently in the political controversy surrounding the case.

The bail order, however, does not amount to a finding on the merits of the allegations against Rao. The prosecution proceedings and investigations into the larger alleged financial irregularities will continue.