In an affidavit submitted to the Supreme Court, the Kerala government asserts that it has 82 percent of the shares in the Uralungal Labour Contract Cooperative Society (ULCCS). According to the affidavit, the cooperative society has been authorized to undertake projects without financial restrictions.

The affidavit also refers to an existing rule that states that cooperative societies may receive contracts for government construction projects if their price quotation is up to 10% higher than the lowest price provided by a private contractor. The document further mentions that the government’s policy framework included providing discounts to cooperative groups in building contracts.

The state government filed the document in response to a petition objecting to the contract Uralungal was granted to build a seven-story courthouse in Kannur. Nirman Constructions, owned by AM Mohammed Ali, submitted the lowest bid for building the Kannur court. The ULCCS provided an estimate of 7.10 percent more than Nirman Constructions.

A petition against the contract cooperative society was then taken into consideration by the Supreme Court, which then issued a stay order. Even though a private business had provided a lower bid, the court had questioned how the contract was awarded to Uralungal. The affidavit from the government was submitted in answer to the court’s inquiry.

Senior counsel appearing for Nirman Constructions pointed out that the state government had taken a stand against awarding the construction contract to Uralungal in the Single Bench and Division Bench of the Kerala High Court. However, the state government favors the Uralungal Labor Society in the Supreme Court. The petitioners’ lawyers also argued that the state government cannot change its position frequently.

A bench consisting of Justice K.V. Viswanathan and Justice J.K. Maheshwari stayed the Kannur court building contract to Uralungal. Subsequently, the Supreme Court informed that the detailed argument on the petition will be heard on 7 November.

Shrouded in Mystery

Controversies have accompanied Uralungal, especially after the communists came to power. Allegedly, there are no documents to prove a government stake in Uralungal. Neither the ULCCS nor any government website mentions that it is a Kerala government undertaking.

Even local communist leaders believe that workers still own and administer the society. Thomas Isaac, former Kerala finance minister, has penned a book on ULCCS, and nowhere is it mentioned that the society is an 82% government-owned undertaking. It revealed in detail the membership structure of Uralungal. To prove that it was ‘exceptionally democratic,’ this is what it cited.

The first ten founding members of the society each owned one share. Following the addition of six additional members, further applicants were accepted, and by 2016, the society had more than 2,000 members. The society started with ten founding members, each with a single share. Six more members were added subsequently, and soon more members were admitted; by 2016, the society’s membership exceeded 2,000.

Another method it adopted was to have different “classes” of membership. The original members with share capital were designated “A Class” members. The government’s shares were designated as “B Class”. A “C Class” was added with only one share per member. The society was authorized to receive fixed deposits from the public, and these deposit holders were treated as “D Class” members. By the beginning of the 21st century, the ULCCS was compelled to employ migrant workers from northern India. This led to the formation of “C Class” members, mainly migrant workers.

ULCCS was founded in 1924, but it took a while to get its first contract, in 1927-28, which had a turnover of Rs.925. It later became a labor society and came under the control of the Communist Party of India (Marxist) (CPM). Whenever the communists came to power, they favored Uralungal.

If the state government has an 82% stake in Uralungal, it is a delight for citizens. A profit-making government undertaking in Kerala is a rarity. Kerala is a state where the government taxes liquor at a prohibitive 251% and upwards, and the Beverages Corporation (sole seller of retail liquor) incurs thousands of crores in yearly losses.

If Uralungal is a state entity, the government must inform the taxpayers where society’s profits move. Such proceeds have never been made public, and this is where doubts creep in. Allegedly, the society now has 1415 members. They are the only ones who benefit from the enormous profits that Uralungal churns out in a despotic fashion.

Uralungal’s earlier President, who managed the society continuously for 32 years, was replaced by his son in 1984 and still handles the same position. Allegations of nepotism do not end there.

The gold smuggling scandal using the diplomatic route became public in 2020. Enforcement Directorate (ED) officials then investigated Chief Minister Pinarayi Vijayan’s additional private secretary, CM Raveendran. He allegedly awarded project contracts for the ULCCS in the state and outside. Opposition parties alleged that Raveendran, a native of Orkatteri near Vadakara, is the key to helping the society land contracts flouting norms. Uralungal Society also operates out of Vadakara.

Raveendran had financial dealings with ULCCS, has investments in multiple businesses, made several foreign trips, and is an alleged Benami. He rented out JCBs (registered in his wife’s name) worth eighty lakhs and earned crores from ULCCS. The lady works in a local cooperative bank.

While renting a JCB costs between Rs.800 to 1,000/hour, Uralungal allegedly paid Raveendran Rs.2,000 per hour. Suspiciously, Uralungal has hundreds of heavy machinery and equipment and yet prefers to pay Raveendran vast sums of money. Allegedly, this is the modus operandi that Uralungal adopts to appease their political masters. Back then, the ED also raided the offices of ULCCS.

If Uralungal is 82% state-owned, the society must audit its accounts with the Comptroller and Auditor General of India (CAG). Why did ULCCS not comply with this statutory audit to date? The government should appoint the Managing Director, and the Kerala Public Service Commission must appoint staff based on merit, interviews, and tests. Why was this not done?

In May 2022, HinduPost reported that an under-construction bridge at Koolimadu near Mavoor in Kozhikode district buckled, and one overhead beam crashed into the water below. The bridge collapsed when almost 90% of the work (as per ULCCS) was completed. The Koolimadu bridge was to be inaugurated in two months.

In recent years, Uralungal rose to prominence quickly. There are allegations that ULCCS is CPM’s benami company, where many leaders have parked their ill-gotten wealth. Public works contracts are awarded to the society without inviting tenders. In other instances, Uralungal underquoted tenders and revised them after the work began. Some contractors argue that the CPM government’s autocratic help is the reason for the society’s growth.

In Kerala, most of the state-funded construction work worth several crores is being executed by ULCCS. CPM-linked Uralungal’s rise is due to the destruction of small contractors with the help of the ruling regime. This model was controversial. Meanwhile, the state government is presenting Uralungal as if it is a public sector institution.