NEW DELHI: After a day of rapid and dramatic developments, BJP junked Nitin Gadkari as its presidential nominee and instead zeroed in on former party chief and UP leader Rajnath Singh to lead the party in the run up to the 2014 elections.

The U turn was forced by an in-house revolt triggered by fears that the controversy over the business dealings of Gadkari-linked Purti Group will continue to hemorrhage the party at a time when its battle with Congress seems set to escalate, with corruption being one of the combat themes.

Gadkari's benching is seen as a personal setback to RSS chief Mohan Rao Bhagwat, who continued to back his chosen one from Nagpur despite the near-total belief in party circles that persisting with the Mahrashtra politician would hurt the party.

With Bhagwat finally acquiescing to the desire of the BJP leaders as well as a majority of his colleagues, a grim-faced Gadkari appeared before the media persons to announce that he had decided not to seek a second term. He claimed that he was innocent, and that he was stepping aside only to save party from Congress's machinations.

The roller coaster events that turned a one-horse race on its head, proved two popular adages right : Even a day can be too long in politics and that a politician should never be ruled out, considering Singh was not in the reckoning and Gadkari was almost home and dry.

It was a dramatic anti-climax for him, considering that Gadkari had looked set to be re-nominated on Tuesday morning. The script began to unravel since morning as news of income tax visits on businesses that invested in Purti was followed by senior leader Yashwant Sinha threatening to contest against Gadkari. RSS leader Suresh Soni also attended the meeting.

The I-T inquiries against Gadkari belied the impression conveyed by the leader's associates that there was no case against Purti and that he was out of the range of official agencies, stoking the simmering misgivings.

Sinha's decision to seek a nomination form and his success in finding as many as 20 backers made it evident to RSS bosses that the bid to name Gadkari for a second term was not going to be bloodless. It became apparent that Gadkari lacks any significant support in BJP.

Gadkari's exit was greeted with relief by many in BJP as it was felt that his re-nomination would be very difficult to justify and paint the party as an outfit incapable of acting on its claims to being a "cleaner" alternative to Congress in view of Gadkari's links to Purti. Though the last Rajnath Singh regime having left its scars on the party (infighting at its peak) also did not lift spirits too much.

The position of RSS chief or "sarsanghachalak" has always been viewed by the saffron parivar as a "father figure" above the factional fray. On this occasion the attempt to force his protégé on a reluctant BJP badly misfired, eroding Bhagwat's stature.

A meeting in Mumbai saw senior RSS leader Dattatraya Hosale arguing a last-minute switch was better than incurring lasting damage as official inquiries against Gadkari gathered pace, hemorrhaging BJP's campaign against the Manmohan Singh government on corruption.

The view prevailed and RSS senior Suresh Soni is understood to have spoken to BJP veteran L K Advani, putting the process of shelving Gadkari in motion.

At the BJP meeting -– Sushma Swaraj, Arun Jaitley, M Venkaiah Naidu, Ananth Kumar — were among those present and they discussed the problem of having to defend Gadkari on Purti group being under the scanner for financial irregularities and prospect of having to do so on a regular basis in the run up to elections.

Gadkari who was in Mumbai was contacted and hearing out party leaders is learnt to have offered to step down. He resigned from the post of BJP president soon after.

Apart from Singh other choices like Goa chief minister Manohar Parikkar and former BJP chief M Venkaiah Naidu were reluctant.

If Sinha had contested on Wednesday, it would have been the first time this would have happened since inception of the party in 1980. To add to Gadkari's embarrassment, another party member Mahesh Jethmalani who had also threatened to contest earlier, complained he was being denied a nomination papar when he asked for one.

Both Sinha and Jethmalani, were among the first voices to revolt against Gadkari continuing as party chief, when reports of financial irregularities to do with his Purti Group of companies surfaced.

The choice of Rajnath Singh is seen as a compromise all BJP sections had to agree on as he meets the criteria of being close to the RSS. Having had to drop Gadkari, the Sangh would be keen on a nominee who remains mindful of their interests.

Advani's bid to propose leader of Opposition in Lok Sabha Sushma Swaraj as BJP had failed and anti-Gadkari factions were not in a position to exercise a "double veto" after getting their way on Gadkari and accepted Singh as the replacement. Singh's term as BJP president prior to Gadkari was marred by incessant factionalism.

Singh became the choice as Gadkari supporters have blamed the Narendra Modi-Arun Jaitley camp for targeting him over the Purti case, ruling out the possibility of the Gujarat strongman getting an enhanced role in the party just yet. The RSS in any case is wary of Modi as he would certainly limit the Sangh's say in party affairs.

A lack of consensus among senior leaders that enabled RSS to name Gadkari as party chief in 2009 and almost ensured him a second term also saw the former UP chief minister emerge as the surprise winner in 2013, staging a comeback none of his allies or detractors anticipated.

The 12-hour drama saw BJP leaders like M Venkaiah Naidu, Arun Jaitley and Sushma Swaraj engage in hectic consultations before the evening meeting adopted the "no-leader-is-above-the-party" line, a formulation that saw Gadkari announce his withdrawal as presidential nominee.

Sangh's retreat has stunned many in BJP but turning point seems to have been Sinha's decision to challenge Gadkari that belled the cat. It became evident to the Sangh that its favourite is not going to find the going easy and may have to face a contest that has not happened before.

The "on-field inquiries" conducted by the I-T on 11 premises where alleged shell companies behind Gadkari's Purti Group were registered might seemed to have resulted in Sinha firing his bolt. The developments, seen from a political perspective, might have helped BJP.

In total 24 companies were covered and according to sources in each case the company was bogus. "None of the companies exist on the address as declared by Purti Group to Registrar of Companies (RoC)," said an IT official. For example, one of the companies suspected to have investments in Purti was registered at the Fort address of Vazir Surface Protection Pvt Ltd, a company with no connection with the group.

Sources said all companies have come up in the past two years and were filing returns regularly without any existence on the ground. They even have PAN cards issued in their name.

All companies are connected to Purti Group with many of them investing through a layered structure. "Their names had cropped up in our Nagpur investigations. Some of the companies have bought and sold shares in Purti Power and Sugar Ltd (PPSL). We will make further enquiries on how this was done," said the official. Sources said, the department will also check internal files of the companies to find the whereabouts of the people who filed returns for the company.

Purti Group on its part has distanced itself from the investigations saying the companies under investigation are not part of the group. A Purti Power and Sugar Limited (PPSL) statement released by BJP said: "These companies are not part of Purti group. These companies have invested in some companies of Purti Group. Purti Group has nothing to do with the actions of IT department."

Sources in the IT department said the exercise by its investigation wing is part of the earlier searches carried out at the shell companies (entities which serve as a vehicle for business transactions without themselves having any significant assets or operations) related to Purti group in Mumbai.

Gadkari, who was asked by the Income Tax department to appear before it on Monday in connection with the probe into alleged dubious investments in Purti group of companies, had sought more time to present his case.

Gadkari is now expected to appear before I-T department on February 1.

Two authorized representatives of Gadkari had earlier met IT officials in Nagpur and submitted a 25-page document in reply to department's questions regarding his personal transactions and investments related to the Purti group and few other companies.

