When in early January Assistant Commissioner of Delhi Police Vijay Malik passed on information about a fake stamp racket to his counterparts in Pune little did he realise its worth. Based on the tip off, the Pune Police arrested Jai Kishan Singh in Mumbai. Nashik-based Singh sang like a canary; his disclosures led to the arrest of 20 other men. Seized from them were fake revenue stamps worth Rs 900 crore. The haul was to make yet another headline-one among many in the past year related to Abdul Karim Telgi, a.k.a. Karim Lala.

COLOSSAL SCAM: Telgi in Bangalore (above); Malik (seated) with the haul in Delhi

Arrested in Ajmer in November 2001, Telgi is currently in prison in Bangalore. According to Union Home Ministry and police estimates, Telgi may have sold bogus stamps worth over Rs 20,000 crore in the past decade. So far, about Rs 3,300 crore has been unearthed. A variety of fakes have been seized: fake revenue stamps, court fee stamps, special adhesive stamps, foreign bill stamps, share transfer stamps, postal stamps, insurance policy stamps and non-judicial stamp papers.

Telgi, a small-town lad from Khanapur in Belgaum, Karnataka, sold peanuts at railways stations in the 1980s to make a living. He got into racketeering in the 1990s by selling fake stamps that cost him the proverbial peanuts to make.

Telgi's methods were simple. His army of unscrupulous young men, many of them ambitious mbas, approached financial institutions and large private organisations and struck up deals with the clerks in charge of stamps.

The clerks were told they could avoid the hassle of running around to buy the stamps; instead the executives would deliver them to their offices. "The standard rate of commission offered to the dealing staff was 2 per cent of total sales," says Malik. Most succumbed to the temptation, bought the stamps in bulk and, of course, kept their mouths sealed. Telgi flourished, while the Government lost crores of rupees in revenue. The executives would disappear, so would the firms; later, a new set would do the rounds.

Only the state treasury is allowed to sell non-judicial stamp papers of values above Rs 500. But Telgi's vendors sold these in bulk to people who were ignorant about this rule.

Even from inside prison, Telgi has managed to keep the wheels of his business moving. The interrogation of four of his foot soldiers who were arrested in October 2002 in Delhi revealed that each sold fake stamps worth Rs 50,000 on average each day. During the subsequent seizure, Delhi Police recovered fake stamps worth Rs 216 crore. Since early 2001, fake stamp dealers, all part of Telgi's empire of deceit, have been arrested in Karnataka, Gujarat, Tamil Nadu, Andhra Pradesh, Kerala, Madhya Pradesh, Uttar Pradesh, West Bengal, Delhi, Punjab and Haryana.

If the official estimates of Telgi's sales in the past decade are mind-boggling, so are the figures for recent hauls. In June last year, Pune Police arrested three men, including a builder, near the city's railway station. All they found, initially, were fake stamps and stamp papers worth Rs 3 lakh. Three weeks later the seizures had mounted to a phenomenal Rs 2,200 crore, with police finding truckfuls of fake stamps. Pune Bund Garden police station's Senior Inspector Prakash Deshmukh, who cracked the Telgi case, has no time to talk these days; for his team the experience of unearthing such a huge scam was exhilarating. He told India Today, "Seeing the truckloads of fake stamps and stamp papers made me realise how big Telgi's empire is."

Although Telgi has been around for a while, investigating agencies are only now detecting his offences and hauling in the fakes. Maybe because Karnataka's Stamp Investigation Team (Stampit) is just a year old. Maharashtra has declared that purchases on stamp papers bought elsewhere will have to be re-registered on stamp paper bought from Government treasuries. The enormity of the problem is daunting: in Maharashtra alone that would mean scrutinising 12 lakh documents registered in 2001-2002.

The problem is compounded by the fact that detection of fake stamps is not easy. Speaking at a workshop in Hyderabad last year, an official of the Indian Security Press at Nashik said, "We can easily detect fake notes and passports. But stamps form an area where security features need to be strengthened." Maharashtra Police, for instance, were hard put to say whether the seized revenue stamps were fake. The services of two Pune-based detection experts-Anil Kale of Sankalp Enterprises and Vivek Khare of epic Consultants who use RBI-approved equipment-were used to establish that key micro-printed features were missing in the stamps (see box). That declaration helped the police consolidate its case.

TELGI'S MERCHANDISE: The Pune haul of Rs 2,200-crore worth of fake stamps and non-judicial stamp papers led to the transfer of a top police official

But police in the rest of the country are not equipped to detect fake stamps, a fact that clearly helped Telgi to have an uninterrupted run for close to a decade.

The Rs 3,300-crore worth of bogus stamps recovered may be impressive but it is only the beginning. Dinesh Bhatt, Deputy Commissioner of Police, Economic Offences Wing, Delhi Police, who oversaw the Rs 220-crore seizure operation last year, says: "What is being recovered today is only the tip of a giant iceberg. Telgi's empire is really big."

That seems obvious from the success Telgi has had. Helped by two of his brothers, he has managed to sell millions of bogus stamps to over 50 banks and insurance firms-many of them multinational-more than 60 private firms and an equal number of builders. Says Additional Director-General of Police R. Srikumar, who also heads Karnataka's Stampit, "One of the outlets we raided in Bangalore had a client list of 250."

Among Telgi's clientele have been United India Insurance Co., Life Insurance Corporation, New India Assurance, National Insurance, Oriental Insurance, Max New York Life Insurance, Reliance Insurance, Tokyo General Insurance, IFFCO, Development Credit Bank, Bank of Baroda, State Bank of Bikaner and Jaipur, Oriental Bank of Commerce, Bharat Overseas Bank Ltd, Bank of Maharashtra, Global Trust Bank and Union Bank of India.

When he set out to be the king of fake stamps in the mid-1990s, Telgi realised that he had to eventually start his own printing unit. He contacted Singh from Nashik, who led him to officials at the India Security Press (ISP). Singh bought about a dozen machines auctioned by the ISP in 1995-96 on Telgi's behalf. Then the machines were taken to Mumbai where Telgi launched his racket.

To make his operation appear genuine, the non-judicial stamp papers, sheets, chemicals, ink and stamp paper rolls used to make the stamps were purchased from a firm in Gujarat that is a regular supplier to the Security Press at Nashik. The perforating machines had original dyes, and their duplicates were quickly churned out. Nashik officials who colluded with Telgi-and are now under surveillance-provided him with the negative plates of the stamps.

Police has recovered all the equipment purchased at the Nashik auctions, including those for perforation, printing and water marks. Besides, a Danish-made plate machine bought by Telgi from Delhi has been recovered, as have thousands of non-judicial stamp paper sheets, stamp paper rolls with adhesive and negative plates.

As business boomed in the mid- and late 1990s, so did investments. Investigators say Telgi has 35 properties in Maharashtra and Karnataka and many more should come to light. Investments were liberally made in film financing in Bollywood-it turns out that Sana Film Financial Corporation, named after Telgi's daughter, had generously pumped money into the industry.

The Union Home Ministry is also investigating Telgi's links with underworld don Dawood Ibrahim's D-Company. Telgi was a frequent visitor to the UAE, where, officials claim, he met those who were very close to the don. So far, there has been no scrutiny of his international bank accounts, nor of the possible money transfers through hawala that are a part of this kind of business.

Arresting Telgi wasn't easy. In August 2000, Bangalore's Chickpet police seized fake stamps and papers with a face value of Rs 12 crore, besides embossing and franking equipment. The men arrested said they worked for Karim Lala. That's when Operation Telgi was launched.

But having got Telgi behind bars, prosecutors find, much to their dismay, that they are fighting a losing battle. Telgi has 31 cases registered against him in various parts of the country, has been arrested by several state police, but has never been convicted.

Some say he never will be because he has a file on all the top politicians and bureaucrats who have travelled abroad on his expense and have never hesitated to turn to him for funds. In fact, a huge controversy broke out last year when S. Mushriff, the additional commissioner of police of Pune who was investigating the case, was suddenly transferred. Then followed much mudslinging, with policemen saying Mushriff was transferred because he was trying to protect Telgi and his family and he, in turn, accusing other policemen of doing the same. Maharashtra's Deputy Chief Minister Chhagan Bhujbal conceded then that there were reasons to believe top officials were involved.

That's probably one reason why despite a strong recommendation from the police, the Karnataka Government has not handed over investigation of the scam-which is spread across the country-to the CBI. It seems it will be a while before the sun sets on the Telgi empire.

-with Stephen David