Admitting there was fraud and bungling in making payments amounting to ₹5.93 crore from the MPLAD funds of Union minister Smriti Irani to Sharda Majdoor Kamdar Sahkari Mandli, a cooperative society of BJP members, Gujarat government has informed the Gujarat high court in an affidavit that it has attached five bank accounts of the organisation containing nearly ₹86 lakh and initiated proceedings against three government officials.

The state government’s admission has come in response to a petition filed in the high court by state Congress president Amit Chavda two years ago. The government also said it is trying to recover money from a private agency hired as an implementing agency for development works.

The state government's affidavit stated it had served charge-sheet on three officers who had "bypassed" procedures and guidelines established under MPLAD scheme, resulting in "serious consequences". The three officers served charge-sheet are Anand district planning officer CR Birai, deputy executive engineer AD Rathod and deputy accountant Hina P Patel.

Petitioner’s advocate Anand Yagnik alleged that the government’s action against the district officials was aimed at whitewashing the role of Smriti Irani, the Rajya Sabha member. Smriti Irani was elected as member of Rajya Sabha from Gujarat and selected Anand district as her nodal district for implementation of works under the MPLAD Scheme.

In his petition, state Congress president Amit Chavda sought a probe against Smriti Irani for misappropriating MPLAD funds. He alleged that Irani insisted on awarding the project of developing Maghrol village to "Shri Sharda Majdoor Kamdar Sahkari Mandli Ltd."

The petition alleged that while guidelines prohibit MPs from identifying the implementing agency, this was ignored in the case of Sharda Majdoor Mandli. While appointing an implementing agency is a task of the district authority, the PIL has alleged that District Planning Officer had awarded the works to the Mandli "as per the instruction received from Irani's PA over phone.

It also says that that 59 development works were not undertaken at all and 96 works were inadequately completed. "Therefore there is fraud, embezzlement of MPLADS funds and infringement of the guidelines and hence the illegality and irregularity.

The fraud in the allocation of funds to the BJP-sponsored cooperative society was first detected by the Comptroller and Auditor General (CAG) which found bungling by Union textiles minister Smriti Irani in making payments amounting to ₹5.93 crore from her MPLAD funds to the cooperative society.

The CAG, in its report No. 4 of 2018, had exposed major bungling, fraud and misuse of public funds allocated to Smriti Irani under the Member of Parliament Local Area Development scheme.

The CAG implicated her for making payment of ₹5.93 crore without inviting tender for the execution of works under the MPLAD scheme. In addition, the CAG report also found fraudulent payment of ₹84.53 lakh to a cooperative society of BJP members for works in a village of Anand district of Gujarat adopted by her.

Initially, the MPLAD projects were being executed by Gujarat State Rural Development Co-operation (GSRDCL). Following the termination of the arrangement with the rural development co-operation was closed, the works were awarded to Sharda Majdoor Kamdar Sahkari Mandli, Kheda under instructions from the textiles minister’s secretariat. This was in violation of the MPLAD guidelines which required the district authority to select an appropriate implementing agency.

MPLAD guidelines prohibit members of parliament from selecting the implementing agencies, this being the root cause of corruption.

Sharda Majdoor Mandli was selected without following the prescribed procedure purely on instructions of the minister’s personal assistant.

CAG detected major instances of bungling in execution of works from MPLAD funds by this society. In 2016 the Sharda Majoor Kamdar Mandli claimed ₹45.20 Lakh for the renovation of the same Panchayat building for which amount was granted and released in the preceding year.

The Mandli also claimed payment for several other works in nine villages including construction of protection walls in crematoriums, schools and other buildings. It was found that not a single brick had been laid at any of these places though funds had been disbursed for them.

Payment was made to Shri Sharda Majoor Kamdar Mandali for works of which no records were made available to Gram Panchayat and Nagar Palika.

Even Anand district collector had written a letter on June 20, 2017 to the deputy secretary, general administration department of Gujarat government pointing out the irregularities and fraud being committed under the MPLAD grants received.

CAG indicted Sharda Majoor Kamdar Mandli for having been awarded 232 works without tender and for making payment worth ₹5.93 Crore including a fraudulent payment of ₹84.53 Lakh.