Palmolein Oil Import Scam

Oommen Chandy

K Karunakaran

Palm Olein Import Scam (Palm Olein Case, Palm Olein Corruption Case, 1991–92) are the alleged irregularities in the import of palm olein by K. Karunakaran lead United Democratic FrontGovernment of the state of Kerala, India through the Power and Energy Limited Company. The Kerala State Government selected Power and Energy Limited arbitrarily without inviting tenders and supposedly at an inflated price and at an excessive service charge and in violation of Central and State government norms existing in India.

In March 1992, the Palm Olein Import Scam had taken the Kerala State Assembly by storm, with the then Opposition Leader, V.S. Achuthanandan, leading the Left Democratic Front campaign. Palm Olein Import Scam was first brought to light officially by a report of the Accountant General, Kerala, in July 1993, a Comptroller and Auditor General report in February 1994, and subsequently by a report of the Public Undertakings Committee of the Kerala Legislative Assembly in March 1996. After an Left government came to power in May 1996, a vigilance case was registered against Karunakaran and six others on March 21, 1997. Following a vigilance inquiry, a charge sheet was submitted to the Court of the Inquiry Commissioner and Special Judge, Trivandrum, on March 23, 2001. However, the Palm Olein Case dragged on endlessly, with Karunakaran filing writ petitions and appeals before the Kerala High Court and the Supreme Court of India, raising the plea of bad faiths (mala fides) and eventually obtaining a stay order from the Supreme Court of India in August 2007 on further proceedings before the trial court. The appeal remained pending before the Supreme Court of Indiauntil Karunakaran's death in December 2010.

The Case

Kerala government decided to import palm oil from a Malaysian company in Singapore named "Power and Energy Ltd" above the international price which was approved by the Kerala Cabinet. The price of import was fixed to $405.0 per ton which was higher than the international price of $392.25 per ton. The import order was signed by Thomas, who was then Kerala's Food Secretary. The investigation agency's charge sheet in the case says that this order caused a loss of more than 2.32 cores to the exchequer. The decision was to import 15,000 tonnes of palm oil.

The opposition cried foul in the import. A vigilance case was filed against K. Karunakaran and seven others including Thomas. Thomas was bailed in 2003. A Special Leave Petition by the late K. Karunakaran made the Supreme Court stay the proceedings. The court closed the proceedings against K. Karunakaran after his death in December 2010.

The case was reopened in March 2011. In August 2011, Oommen Chandy, as the then Finance Minister in Karunakaran's Cabinet and the Chief Minister of Kerala, was also added to the re investigation. The court asked the vigilance and anti-corruption bureau to submit its investigation report of the palmolein case by November 10, 2011. Oommen Chandy was only the “23rd witness” in the case and had been well known as the leader of the inner-party campaign launched by the A.K. Antony group within the State Congress against Karunakaran, especially on the palmolein issue during the early 1990s, when the import deal first became a controversy.

Those accused in the Palm Olein Case

• K. Karunakaran
• Former Food and Civil Supplies Minister T.H. Musthafa (a close associate of Karunakaran)
• Former Chief Secretary S. Padmakumar (who, along with Karunakaran, allegedly met the Singapore-based company representative in New Delhi and agreed informally on the deal as early as October 1991)
• Former Additional Chief Secretary Zacharia Mathew
• Former Managing Director of the Kerala State Civil Supplies Corporation Jiji Thomson
• Director of Mala Export Corporation V. Sadasivan
• Director of P&E Pvt. Ltd Sivaramakrishnan
•  P.J.Thomas. 

Expulsion of Chief Vigilance Commissioner

A debate raged against Thomas heading the position as CVC and being accused in the Palm Oil case. On February 3, 2011, he was finally asked to quit by the Supreme Court on the grounds that he had a corruption case pending against him. Chief Vigilance Commissioner P J Thomas, the Secretary of Food & Civil Supplies at that time, was the unlikely first victim in the Palmolein Oil Import Scam. Thomas was shunted from the Chief Vigilance Commissioner's post by the Supreme Court of India in March 2011 because the court found that "Mr. Thomas was accused No. 8 in the Kerala palmolein case pending in the Court of the Special Judge, Thiruvananthapuram, for offences under Section 13(2) read with 13(1) (d) of the Prevention of Corruption Act, 1988 and under Section 120B (conspiracy) of the Indian Penal Code".