On January 15, the Central Bureau of Investigation (CBI) booked Adani Enterprises Limited (AEL) and three former officials of National Cooperative Consumers’ Federation of India (NCCF) alleging they unduly favoured the Adani group company in the award of a 2010 contract for supply of imported coal to the Andhra Pradesh Power Generation Corporation (APGENCO). The First Information Report (FIR) filed by the investigation agency includes charges of criminal conspiracy and cheating under the Indian Penal Code and criminal misconduct by a public servant under the Prevention of Corruption Act.
According to the FIR, that NewsClick accessed a copy of, the three NCCF officials – Virender Singh, former Chairman, G P Gupta, former Managing Director and S C Singhal, former Senior Advisor – intervened at multiple stages during the process of the award of tender and by “acts of commission and omission…manipulated the selection of bidders, thereby giving undue favour to Adani Enterprises…despite its disqualification” to award the contract to the company.
Set up in 1965, the NCCF, operating under the Department of Consumer Affairs in the Ministry of Consumer Affairs, Food & Public Distribution, is the apex organisation of India’s consumer cooperatives. The International Co-operative Alliance lists that the NCCF has 136 members including primary co-ops, stores, wholesale societies, state level consumer co-operative federations and the National Co-operative Development Corporation. The central government has a 78% stake in the NCCF.
At first, no bids invited by NCCF
According to the CBI’s FIR, on 29 June 2010, APGENCO floated a tender for supply of 6 lakh metric tonnes of imported coal on a free-on-rail destination basis (the buyer bears the cost of freight, insurance and other downstream costs from the arrival of the coal at an Indian port) to two thermal power plants in Vijayawada and Kadapa. NCCF was one of seven public sector companies that received the APGENCO tender.
The CBI’s FIR recounts the sequence of events within NCCF in close detail. The APGENCO tender enquiry that was received at the NCCF’s Hyderabad branch on June 29 was sent to S C Singhal, then the senior advisor at the NCCF head office, on July 1, 2010. The FIR alleges that in the first instance, upon receiving the tender enquiry, the NCCF Head Office did not float an open tender to call for bids from coal suppliers, instead selected a company named Maharishi Brothers Coal Limited to supply the entire quantity of 6 lakh metric tonnes, at a margin of 2.25% (that is, NCCF would receive from the supplier a profit margin of 2.25% in its sale of the coal to APGENCO).
NCCF invites bids, with multiple procedural irregularities
A week later, on July 7, 2010, the FIR alleges, the APGENCO Chief Engineer informed NCCF’s Hyderabad branch that the deadline for the submission of the NCCF bid in response to APGENCO’s tender had been extended from July 7 to July 12. Upon receiving this communication, NCCF cancelled the award to Maharishi Brothers Coal, and decided to float an open tender and call for bids. According to the FIR, the management of NCCF felt that due to the extension of the APGENCO tender deadline, they had sufficient time to call an open tender for supply of coal. The FIR notes that while the original APGENCO tender had given seven days for NCCF to submit its bid (July 1 to 7), the extended period was only five days (July 8 to 12).
On July 7, the three senior NCCF officials – Singhal, Gupta and Singh – conducted a meeting and approved a draft tender notice. It was decided at that meeting, the FIR alleges, that the Hyderabad office would receive the bids at 1 pm on July 10, 2010, tabulate the offers, and send their proposal for consideration to the head office by 4 pm on the same days.
The FIR alleges this action of the three officials constituted several irregularities. The FIR states that according to the Guidelines on Conduct of Commercial Operations of NCCF, a Head Office Committee is to be constituted by the Managing Director. No such committee was constituted, and the draft tender notice was approved by the three officials on their own discretion. Another procedural irregularity the FIR notes is that the draft tender notice was not sent to the NCCF’s Finance Division for its concurrence.
How the bid evaluation was manipulated
On July 10, 2010, the Hyderabad branch received bids from six bidders. Four were Hyderabad-based coal suppliers – Maheshwari Brothers Coal Limited, Swarana Projects Private Limited, Gupta Coal India Limited, and Kyori Oremen Limited. (The FIR uses the acronym MBCL to refer to Maharishi Brothers and Maheshwari Brothers at different junctures. According to Ministry of Corporate Affairs records, there is no company named Maharishi Brothers Coal Limited, while records for Maheshwari Brothers Coal Limited are available; it is not clear if Maharishi is a typographical error and the CBI reference is to the same company – Maheshwari Brothers Coal Limited – throughout) In addition were two more bids, one from Adani Enterprises, and another from a Gurgaon-based company named Vyom Trade Links Private Limited.
The FIR states that the tenders were opened at 1 pm on July 10, in the presence of representatives of five of the six bidding companies. Vyom was absent. After the opening of the bids, tabulated states of the bids were prepared by NCCF officials in Hyderabad, and the statements sent to the head office along with bank guarantees and other documentation submitted by the bidders.
In order the evaluate the bids, the FIR states that a committee was constituted at the head office, including Singhal, along with two other NCCF officials named P P Singh and S K Sharma. The committee evaluated the bid documents on the same day.
According to the FIR, two companies had quoted margins in their bid – Gupta Coal India had quoted 11.3%, and MBCL had quoted 2.5%. The four others had quoted no margins. The bids by four companies – Gupta Goal, Kyori Oremen and Swarana Projects were rejected by the NCCF head office as they were found not to fulfill the tender conditions. According to the FIR, the NCCF tender notice had stated that “incomplete and conditional applications” would be rejected, and that companies were required to “mention in the offer NCCF margin to be given by the bidder on these supplies.” According to this, the four bids that mentioned no margin should have been rejected.
Instead of disqualifying Adani, NCCF tipped them off
The FIR alleges that instead of cancelling Adani Enterprises’ bid, “senior management of NCCF conveyed the offer margin of NCCF to M/s Adani Enterprises Ltd. Through one of its representative, i.e. Shri Munish Sehgal, who was sitting in the NCCF Head Office on July 10, 2010 in the evening”. After receiving this information, the FIR alleges, Adani Enterprises sent a letter to the Branch Manager, NCCF Hyderabad stating that it would pay a margin of 2.5%, matching the amount of Maheshwari Brothers’ bid. The FIR states that “it is prima-facie evident that when the bids were being processed at NCCF Head Office, New Delhi, representative of M/s Adani Enterprises Ltd. Was informed regarding their imminent rejection due to non submission of NCCF margin and also that M/s MBCL, the eligible bidder has quoted 2.25% margin”.
In addition, the FIR claims that the Gurgaon company, Vyom, was an AEL proxy. The FIR alleges that AEL had given Vyom an unsecured loan of Rs 16.81 crore in 2008-09, and that the bank guarantees of AEL and Vyom had been issued by the same bank, and at the same time. The FIR states that at 7.13 pm on July 10, Vyom sent a letter to NCCF’s head office withdrawing its bid, stating that “since the working hours have already exhausted and time available is too short. Due to paucity of time, it will be difficult to offer our price for onward submission.” On these grounds, the FIR states: “[I]t is prima facie apparent the M’s Adani Enterprises Ltd. presented M/s Vyom Trade Links Ltd as a proxy company in this particular tender and M/s Vyom Trade Links Ltd withdrew its offer on a very flimsy grounds.”
In addition, the FIR also alleges that prior to 7 July, when the NCCF had awarded the contract to Maheshwari Brothers without conducting any bidding, at a meeting of the Business Committee, Gupta provided misleading information to the committee, stating that a tender notice had been published in newspapers.
Based on these details, the CBI’s FIR states “the aforesaid acts of commissions and omissions on the part of senior management namely Shri Virender Singh, the then Chairman NCCF, Neew Delhi, Shri G P Gupta, the then MD, NCCF, New Delhi, and Shri S C Singhal, the then Senior Advisor, NCCF, New Delhi disclose that during their tenure in NCCF, they had acted in a manner as unbecoming of public servants and in criminal conspiracy with other accused persons committed irregularities by the way of manipulation in the selection of the bidders, thereby giving undue favour to M/S Adani Enterprises Ltd in award of work for supply of imported coal to Andhra Pradesh Power Generation Company despite its disqualification”.
The FIR states that prima-facie cognizable offences under section 120-B read with 420 of the IPC and under section 13 (2) read with 13 (1) (d) of the Prevention of Corruption Act have been committed by the three officials, AEL and others.
Similar Maharashtra Case
It is worth noting here that in an earlier case, the CBI had begun a preliminary enquiry pertaining to a comparable case of supply by an Adani group company to a Maharashtra public sector company in the power sector, that it subsequently closed claiming to have not received permission from the Maharashtra government, according to an affidavit submitted by the CBI to the Delhi High Court. In that case, the issue was relating to supply of transmission equipment imported from South Korea and China by Adani Enterprises Limited and another Adani group company to Maharashtra State Electricity Transmission Company Limited.
Common to both the Maharashtra case and the APGENCO case is the allegation of over-invoicing of imports of coal and power generation/transmission equipment that has been raised against companies in the Adani group by the Directorate of Revenue Intelligence. A person with close knowledge of the matter, speaking to NewsClick on condition of anonymity, said that while it cannot be concluded that over-invoiced coal imported by Adani Enterprises was supplied to APGENCO by NCCF following the alleged manipulation of the tender and bidding process, as it is unknown whether this particular bid by the NCCF to APGENCO succeeded, it is a fact that over-invoiced coal (as alleged by DRI) imported by AEL has been supplied to APGENCO through NCCF.
The question arises, with the opening of a fresh case by the CBI in the case of APGENCO, will it relook at the Maharashtra case? It should be noted that while the CBI claimed that it was denied the permission to investigate by the Maharashtra government, legal experts have claimed that no such permission was required in the first place, and if it is indeed required, the possibility remains that the newly elected Maha Vikas Aghadi government in Maharashtra may be willing to consider the matter once again that had been decided upon by the predecessor BJP-Shiv Sena government.