The Central Investigation Bureau of Nepal Police on Thursday arrested Arun Chaudhary, the chairman and managing director of CG Holdings, and two others associated with the Bansbari Leather and Shoe Factory land scam. Arun is a brother of Nepal’s only dollar billionaire, Binod Chaudhary, who is also a member of the federal parliament.

Arun has been accused of involvement in illegally converting 10 ropani [0.5 hectares] of public land belonging to the Bansbari Leather and Shoe Factory into private property. Along with Chaudhary, the CIB also arrested Ajit Narayan Singh Thapa, former executive chairman of the shoe factory.

The police bureau said it carried out an investigation into the land scam over the past four months and finally decided to arrest Chaudhary, Thapa and Chairman of the CG Chandbagh School, Sanjay Thakur, for further inquiry.

Later in the evening, all three accused were produced at the Kathmandu District Court. The court has permitted the CIB to carry out the investigation on Chaudary, Thapa and Thakur for the next four days, said Superintendent of Police Nawaraj Adhikari, the CIB spokesman.

“We are planning to hold a press conference on Friday where we will reveal the details of the investigation,” said Adhikari. The CIB has claimed that it arrested Chaudary, Thapa and Thakur in the case of forgery and cheating. Both Chaudhary and Thapa were admitted to Chirayu Hospital on Thursday evening.

Chaudhary is suffering from hypertension and diabetes and Thapa has an issue of high blood pressure, said sources at the CIB.

The school is built on the same property where the government-owned Bansbari Leather and Shoe Factory once stood. The land was transferred to Chaudhary Group’s Champion Shoe Factory and later to the CG Chandbagh School.

The factory was established as a public enterprise with support of the Chinese government in the 1960s. But, in 1992, the factory, which was operating at a loss for years, was sold to a private company citing regular losses incurred by the public enterprise.

When the factory was about to close, the 10 ropani plot of land was illegally transferred to Champion Shoe Factory which was owned by the Chaudhary family. Later the Chaudary family built the CG Chandbagh School on the property.

The land is registered as CG Chandbagh Residency Private Limited whose owners are Arun and his wife, Shila Chaudhary, according to a CIB official.

After a Nepali-language news website Ukaalo.com published an investigative report on the land scam some 15 months ago, the Commission for the Investigation of Abuse of Authority started an investigation into the scam, but it was soon shelved, apparently under political pressure. Then the CIB took over, said the police official.

The company was established in 1964 with Chinese financial and technical assistance. After the company struggled to make profit, out of its 83 ropani [4.22 hectares], the factory decided to sell 10 ropani.

According to the Ukaalo report, a meeting of the shoe factory on August 29, 1986 decided to sell the 10 ropani of land at Rs250,000 per ropani to the Champion Footwear Limited owned by Chaudhary Group.

Chaudhary Group is the largest conglomerate in Nepal.

While registering Champion Footwear at the Office of the Company Registrar, the owners of the company were named as Binod Chaudhary, Arun Chaudhary, Basanta Chaudhary, their father Lunkaran Das Chaudhary, their mother Ganga Devi Chaudhary, Mahesh Kumar Agrawal, and Bansbari Leather and Shoe Factory, according to records at the office.

The objective of selling the land was to make up for the loss incurred by Bansbari Leather and Shoe Factory, but the factory never received cash, Ukaalo investigation report says. Instead, the shoe factory was given 1,500 shares of Champion Footwear Limited at the rate of Rs 1,000 a share.

“The valuation of the land that Champion Footwear received from Bansbari Leather and Shoe Factory was too low compared to the government’s valuation. As per an independent evaluator, the total cost of 83 ropani of land owned by Bansbari Leather and Shoe Factory on April 2, 1992 was around Rs70.42 million. So a ropani of land would cost Rs849,000 and based on this rate, 10 ropani would cost around Rs8.5 million. But Chaudhary Group only paid Rs2.5 million to capture the 10 ropanis of land,” said the investigative story.

Later, Chaudhary Group acquired all shares owned by Champion Footwear, thus bringing the 10 ropani of land under private ownership.

Meanwhile, following Thursday’s arrest, the country's business community has come to Chaudhary’s defence.

The Federation of Nepal Chamber of Commerce, the umbrella body of the Nepali private sector, has asked the government not to arrest businessmen without proper investigation and substantial evidence.

“The arrest has been made at a time when the country’s economy is confronting different challenges,” said the FNCCI in a statement. “The tendency of arresting first and investigating later further discourages the business community that is already struggling in a fragile economy.”

At a time when the government is planning to organise an investment summit, the arrest of businessmen will affect the investment climate in and outside the county, the FNCCI said.

Another private sector body, the Confederation of Nepali Industries (CNI), has also expressed its concerns over the arrests and urged the government to release Chaudhary and two others.

President of Confederation of Nepali Industries Rajesh Agrawal said that the government can take statements of the businessmen and only after that consider arresting them. A section of the business community held a press conference on Thursday evening after Chaudary’s arrest.

“The government can make arrests, but before arresting anyone, it should record their statements. Whether someone is guilty or not should be ascertained only after recording the statement. The way businessmen are arrested abruptly without informing them in advance will demoralise the business community. We have our reservations as the arrests were made without proper investigation,” said Agrawal.

He also demanded an immediate release of Chaudhary stating that he is a noted industrialist of the country and is not leaving Nepal.

“With this incident, the government has instilled fear in the private sector and undermined its contribution,” said Agrawal, adding, “The government should carry out the investigation without keeping him in judicial custody.”

Ganesh Karki, chairman of the Independent Power Producers’ Association Nepal, said that if the government has any issues with the private sector, it can talk to them.

“I was really scared when I learnt about Arun Chaudary’s arrest. How can the private sector work in an environment of fear?” said Karki.