The Central Investigation Bureau (CIB) of Nepal Police on Friday claimed that the series of events leading to the transfer of ownership of the 10 ropani (0.5 hectares) land from the then Bansbari Leather and Shoe Factory to CG Chandbagh Residency was orchestrated with the intent of grabbing the land for its real estate value.

The CIB on Thursday arrested Arun Chaudhary, the chairman and managing director of CG Holdings, and two others associated with the 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 of public land belonging to the government-owned shoe factory into private property.

Along with Arun Chaudhary, the CIB also arrested Ajit Narayan Singh Thapa, former executive chairman of the leather and shoe factory and Sanjaya Thakur, director of CG Chandbagh Residency and Champion Footwear Company, which was established by the Chaudhary family under whose name the 10 ropani land was first registered.

“First of all, the land belonging to Bansbari Leather Factory was transferred in the name of Champion Footwear Limited without any government decision,” said Senior Superintendent of Police at CIB Dinesh Acharya at a press meet on Friday. “Without the government’s decision, the board of the Bansbari Leather and Shoe Factory had no authority to sell its land.”

But on August 26, 1986, the factory’s board headed by then executive chair Thapa transferred the ownership of the Bansbari Leather and Shoe Factory in the name of Champion Footwear Limited, the CIB said in a statement.

Based on an agreement signed between Thapa and the late Lunkaran Das Chaudhary (father of Binod Chaudhary, Arun Chaudhary and Basanta Chaudhary), the Champion Footwear Limited was established where the Chaudhary family would have 51 percent, Bansbari Leather and Shoe Factory 25 percent, and the rest of the stake would go to the general public.

Instead of paying cash for the 25 percent stake in Champion Footwear, the government-owned factory agreed to transfer the ownership of a portion of its land in the name of the Champion Footwear Factory, the police said.

On August 31, 1987, Bansbari Leather Factory handed over its 6 ropani of land in the name of the new footwear company and on December 4 of the same year, an additional four ropani was transferred to the new shoe company controlled by the Chaudhary family.

According to the police, the land was valued at Rs250,000 per ropani and the value of the total transferred land was assessed at Rs2.6 million.

“As the paid-up capital of the new company was just Rs5 million, there should have been an investment equivalent to Rs1.25 million for the 25 percent of shares by the Bansbari Leather and Shoe Factory,” the CIB said in its press statement. “But by overinvesting, Bansbari officials caused harm to the government for personal gains.”

After the Bansbari Leather and Shoe Factory provided land valued at Rs2.6 million to the Champion Footwear Limited, the latter’s paid-up capital was increased to Rs10 million. But the Chaudhary family members never invested an amount equivalent to 51 percent of shares they controlled, according to the police.

SSP Acharya said Chaudhary family members invested only Rs800,000 though they were required to invest as much as Rs7.4 million to secure the 51 percent stake.

Champion Footwear also never issued shares to the public. Three years after bringing the land under the new footwear company’s name, the factory ceased production, according to police.

Later, in July 1992, the finance ministry decided to privatise the loss-making Bansbari Leather and Shoe Factory. Then the Chaudhary family proposed to buy Bansbari’s 25 percent stake in the defunct Champion Footwear Limited, police said.

Eventually, Arun Chaudhary bought that 25 percent stake of Bansbari Leather Factory at Champion Footwear Company on July 27, 1995 for Rs3.6 million through auction, according to SSP Acharya.

Following privatisation, the public enterprise was converted into a private limited company, and later the 10 ropani Bansbari land was brought under CG Chandbagh Residency Private Limited where CG Chandbagh School is currently in operation.

The owners of the property include Arun and his wife, Shila Chaudhary, according to a CIB official.

“The question here is why the Champion Footwear Company didn’t issue public shares as stated in the agreement, which a genuine company is supposed to do,” said SSP Acharya. “Why did the Chaudhary family in 1995 purchase 25 percent Champion shares owned by Bansbari shoe factory although Champion had not been in operation for the past several years.”

Amid complaints about government’s land being registered in the name of private individuals, the CIB had been investigating the matter for the past few months. “It took more than three months for us to conclude that the government-owned land had been transferred illegally,” said SSP Acharya.

Then, three people including Arun Chaudhary were arrested on Thursday. District Court Kathmandu has remanded them for four days, according to the police. “We will record their statements,” said SSP Acharya.

According to police, those arrested are being investigated for fraud and forgery as per sections 249 and 276 of the National Penal (Code) Act 2017.

As per Section 249, a person found guilty of cheating, especially the government of Nepal or any entity under government ownership, is subject to imprisonment for a maximum of 10 years and a fine up to Rs100,000.

In the case of forgery of a government or public document other than one authenticated by the President or court order, a sentence of imprisonment for a term not exceeding seven years and a fine not exceeding Rs70,000 is imposed as per the section 276 of the same Act.