V.S. Achuthanandan Vs R. Balakrishna Pillai & Ors.
J U D G M E N T
P. Sathasivam, J.
1. The challenge in this appeal, by special leave, is to the legality of the order dated 31.10.2003 passed by the High Court of Kerala at Ernakulam allowing Criminal Appeal Nos. 822, 823 & 824 of 1999 filed by the accused setting aside the order dated 10.11.1999 passed by the Special Judge Idamalayar Investigations, Ernakulam in C.C. No. 1 of 1991 convicting all the accused for the offences punishable under Sections 120-B and 409 of the Indian Penal Code (in short `IPC') and Sections 5(1)(c) and 5(2) of the Prevention of Corruption Act, 1947 (Act 2 of 1947) (hereinafter referred to as`the P.C. Act') and sentencing them to undergo rigorous imprisonment.
2. Brief Facts:-
a. Idamalayar Hydro Electric Power Project, a multi-purpose power project in Kerala was conceived and completed in the year 1985. The project report was approved by the Central Water and Power Commission in 1973.
b. After the completion of the Dam, the remaining construction work relating to the power tunnel and surge shaft, which are integral part of the water conductor system of the project, was awarded on contract basis to one K.P. Poulose (A4), as per the decision of the Kerala State Electricity Board (hereinafter referred to as the "Board"), on 19.11.1982. The work relating to power tunnel was awarded at 188% above the Probable Amount of Contract (PAC) and the work relating to surge shaft and allied works at 162% above the estimated amount with many special conditions, as requested by the contractor, involving heavy financial implications/advantages to him at the expense of the Board. Further, there was inordinate delay in completion of the work. 2
c. During the trial run, on 15.07.1985, several leaks and cracks were noticed in the tunnel lining which was a matter of great public concern and caused considerable anxiety and fear among the public and State as well. Discussions and debates were held in this regard in the State Legislative Assembly. There was a public outcry for a judicial probe in this matter. Extensive rectification work to remedy the defects in the tunnel lining and surge shaft was undertaken at a considerable cost which was to the tune of Rs. 1.75 crore.
d. On 02.08.1985, the Public Undertaking Committee of the State Legislature inspected the site and submitted its report recommending a judicial probe. The State Government appointed a sitting Judge of the Kerala High Court as Commissioner of Inquiry to conduct the probe. The Commission recorded its enquiry, collected considerable evidence and submitted its report in June, 1988. The Commission came to the conclusion that materials placed before it prima facie disclosed commission of offences punishable under I.P.C. and P.C Act against persons responsible for the same and recommended for investigation into these offences. The State Government accepted the recommendations and constituted a special team, headed by Superintendent of Police for Investigation. The report of the special squad was filed in the Court of Special Judge on 14.12.1990 in Crime No. C.C. No. 1 of 1991.
e. During pendency of the case, an application for withdrawal of the prosecution against accused No. 5 - G. Gopalakrishna Pillai, who was the Secretary to the Kerala Government, Irrigation and Power Department was made by the then Special Public Prosecutor on 24.08.1992 under Section 321 of the Code of Criminal Procedure (in short `Cr.P.C.') on the ground of absence of any material to sustain a successful prosecution of offences alleged against him. At this stage, the appellant herein - V.S. Achuthanandan, the then Opposition leader in the Assembly, in public interest, filed statement of objections against the move for withdrawal of the case against G. Gopalakrishna Pillai (A5). After full fledged enquiry, the application filed by the Special Public Prosecutor was dismissed by the Special Judge on 16.10.1992.
f. On 03.02.1993, Criminal Revision Petition No. 762 of 1992, filed by the State against the order of Special Judge was allowed by the High Court. On the strength of the observations made in the order of the Kerala High Court, the State Government took the decision to withdraw the criminal case against all other accused.
g. The appellant challenged the above order of the High Court in Criminal Appeal No. 122 of 1994 before this Court which set aside the order of the High Court and restored the order of the Special Judge declining consent for withdrawal [vide V.S. Achuthanandan vs. R. Balakrishna Pillai & Ors., (1994) 4 SCC 299]. Subsequently, the matter was further proceeded in the Court of Special Judge.
h. During trial, Accused No. 22, Paul Mundakkal became insane and the case against him was allowed to split, Accused No.4 - K.P. Poulose, Contractor, died, Accused nos. 11 and 14 to 21 were discharged by the Court of Special Judge in the final report holding that there was no prima facie case made against them.
i. On 14.12.1995, charges were framed against other accused for various offences under Sections 120-B, 409, 430 and 201 IPC and Section 5(2) read with Section 5(1)(c) and (d) of the P.C. Act. This order of the Special Judge was confirmed by the High Court, but found that the charge under the P.C. Act is not sustainable against A5 and A8 for want of proper sanction as per the orders passed in Criminal Revision Petitions filed by the accused in the High Court. Charge was amended accordingly and the accused were rearranged as A1 to A11. In the meantime, A7 died.
j. The Special Court, after analyzing the oral and documentary evidence on record, vide its judgment and order dated 10.11.1999 found R. Balakrishna Pillai (A1), P.K. Sajeev (A3) and Ramabhadran Nair (A6) guilty of the offences punishable under Section 120-B and 409 IPC and Sections 5(1)(c) and 5(2) of the P.C. Act read with Section 120-B of IPC. They were sentenced to undergo rigorous imprisonment for a period of five years for the offence punishable under Section 120-B of IPC and to undergo rigorous imprisonment for a period of four years each under Section 409 IPC and Section 5(2) of the P.C. Act read with Section 120-B IPC and to pay a fine of Rs.10,000/- each, in default, to undergo simple imprisonment for one year each. However, A1, A3 and A6 were acquitted of the charges under Sections 161, 201 and 430 IPC read with Section 5(1)(d) of the P.C. Act. It was also directed that the sentences shall run concurrently. Accused Nos. 2,4,5,8,9,10 and 11 were found not guilty of the offences and they were acquitted of all the offences with which they were charged.
k. Aggrieved by the order of conviction and sentence, all the three accused i.e. (A1), (A3) and (A6) filed separate appeals before the High Court of Kerala at Ernakulam. By the common impugned judgment dated 31.10.2003, the High Court set aside the conviction and sentence of all the three accused and acquitted them from all the charges levelled against them.
l. Questioning the order of acquittal, the appellant - V.S. Achuthanandan, filed special leave petition against the common impugned judgment and, this Court, by order dated 27.03.2006, granted leave to appeal.
3. Heard Mr. Shanti Bhushan, learned senior counsel for the appellant, Mr. U.U. Lalit, learned senior counsel for R.Balakrishna Pillai (A1), Mr. Amarendra Sharan, learned senior counsel for P.K. Sajeev (A3), Mr. S. Gopakumaran Nair, learned senior counsel for Ramabhadran Nair (A6) and Mr. R.S. Sodhi, learned senior counsel for the State of Kerala. Submissions:
4. Mr. Shanti Bhushan, learned senior counsel for the appellant after taking us through the entire materials relied on by the prosecution, stand taken by the defence, elaborate reasonings of the trial Court in convicting the accused and the reasonings of the High Court in acquitting them, raised the following submissions:-
i. There was enough material to show that (A1) was very much interested in favour of (A3) and with the connivance/assistance of the Board officials, more particularly through (A6) Member of the Board, made the Board to accept the tender offered by K.P. Poulose (A4) at an exorbitant rate with various special conditions.
ii. The criminal breach of trust has been committed by the accused in the following ways:-
a. By awarding both the works of Idamalayar at a very high and exorbitant rate with special conditions having heavy financial implications.
b. By reducing the retention and security amount.
c. By allowing the contractor to return only fifty per cent of the empty cement bags.
d. By accepting the special condition for the sale of T & P items (tools & plants) which could not be sold as per the general conditions of the contract
iii. Contrary to the norms and circulars/procedures of the Board, in order to favour K.P. Poulose (A4), who was a friend of (A1), the Board has accepted all the conditions just to favour (A1) and (A3).
5. Mr. U. U. Lalit, Mr. Amarendra Sharan and Mr. S. Gopakumaran Nair, learned senior counsel appearing for (A1), (A3) and (A6) respectively supporting the ultimate decision of the High Court submitted that:
i. The outcome of the contract in favour of K.P. Poulose (A4) was based on a "collective decision" by the Board and there was no external pressure from anyone including (A1).
ii. All the decisions taken were in terms of rules/norms applicable to the contract including accepting special conditions.
iii. Mere acceptance of higher rate would not amount to criminality.
iv. There is no allegation that by awarding contract in favour of K.P. Poulose (A4), (A1) was monetarily benefited.
v. No material to show that there is any wrongful loss to the Board.
vi. Inasmuch as the High Court acquitted all the accused in respect of all the charges on appreciation of oral and documentary evidence, interference by this Court is very limited. In the absence of perversity in such conclusion, normally, this Court would not interfere with the order of acquittal.
vii. In any event, inasmuch as the State has not challenged the order of acquittal, the present appellant being neither a complainant or heir nor a party to any of the proceedings is not entitled to pursue the present appeal. Accordingly, the appeal is not maintainable and on this ground liable to be dismissed without going into the merits of the claim.
6. We have carefully analysed the materials placed by the prosecution, the defence, the decision and reasonings of the trial Court and High Court and considered the rival contentions. Interference by this Court in an order of acquittal
7. Learned senior counsel for the respondents by drawing our attention to the reasoning of the High Court and in respect of all the charges leveled against acquitting them submitted that in the absence of perversity in the said decision, interference by this Court exercising extraordinary jurisdiction is not warranted. It is settled principle that an Appellate Court has full power to review, re-appreciate and reconsider the evidence upon which the order of acquittal is founded. The Code of Criminal Procedure (in short `Cr.P.C') puts no limitation, restriction or condition on exercise of such power and an Appellate Court is free to arrive at such conclusion, both on questions of fact and of law. An Appellate Court, however, must bear in mind that in case of acquittal, there is double presumption in favour of the accused.
The presumption of innocence is available to a person and in the criminal jurisprudence that every person shall be presumed to be innocent unless he is proved guilty by a competent court of law. It is also settled law that if two reasonable conclusions are possible on the basis of the evidence on record, the Appellate Court should not disturb the finding of acquittal recorded by the trial Court. Keeping the above principles in mind, let us discuss the charges leveled, materials placed by the prosecution in support of those charges, reasoning of the Special Court convicting the accused and impugned order of the High Court acquitting all the three accused in respect of the said charges. Statutory Provisions
8. The Electricity (Supply) Act, 1948 (in short `the Act') was in force at the relevant time. Section 5 of the Act mandates each State to constitute State Electricity Board for the management and supply of electricity. As per Section 78A, which was inserted by Act 101 of 1956 and came into force w.e.f. 30.12.1956, in discharge of its functions, the Board shall be guided by such directions and questions of policy as may be given to it by the State Government. As rightly pointed out by Mr. Shanti Bhushan, learned senior counsel for the appellant that except on policy matters, the State Government has no role in the affairs of the Board. In view of the charges levelled against A1 who was the Minister for Electricity, Government of Kerala, we adverted to these statutory provisions. A1's interference in the affairs of the Board:
9. It is the case of the prosecution that A1 while he was holding office of the Minister for Electricity, Government of Kerala was interfering in the day-to-day affairs of the Board including transfers, promotions, appointment of employees, granting electric connection to consumers by giving directions to the Board officers. It is also alleged that A1 used to interfere even in awarding of contracts of the Board during his period as Minister for Electricity. One of the main charges leveled against A1 and others is that he, in his capacity, as Minister for Electricity intended to settle contracts of the Board in the name of his favourites or persons of his choice at exorbitant rates with the ulterior object of making illegal profit either to himself or to his favourites. With regard to the above claim, the prosecution has produced evidence through Kuriakose Chennakkadan (PW-64), Jagannad Prasad (PW-66), Managing Partner, C.S. Company, Kottayam, Alexander Vellappally (PW-138), Managing Director, Asian Tech and Kamalasanan (PW-146), Managing Director of M/s We-Build.
According to Kamalasanan (PW-146), though he was one of the tenderers for surge shaft work, quoted acceptable rates, could not get the contract work because of the interference of A1. He deposed that, the then Chief Engineer, late Bharathan recommended his work for acceptance by the Board, but he was further told by Shri Bharathan that he should meet A6 and also to give 5% of PAC as procuring expenses and if the said amount is not given, the work could not be awarded, hence he met A6 who told him that the rate quoted by him is very low and advised him to settle whether it is workable or not. He further deposed that at the time when A1 was the Minister, A6 was a Member of the Board who was very powerful having influence over the Minister. According to him, the voice of A1 is reflected through A6 with regard to the affairs of the Board.
10. Shri Alexander Vellappally (PW-138), Managing Director of Asian Tech, in his evidence deposed that he was asked by A1 to quote for the Lower Periyar Project Headrace Power Terminal in 1980-81 when the pre-qualification system was introduced in the Board. The tender of Shri Alexander Vellappally was qualified and the lowest when it was evaluated. However, he was informed that further steps for negotiation and discussion regarding the acceptance of the tender would take place only with the concurrence of the Minister. He further deposed that he met A1 several times and also sent letters to him and one letter sent by him to A1 is marked as Ext. P-544. According to him, though he was the lowest tenderer, the work was not awarded to him, but given to HCC. He also explained that pre-qualification bid system was misused by the Board officers, more particularly, in the case of Lower Periyar Works.
11. The next witness who highlighted the above issue is Kuriakose Chennakkadan (PW-64). According to him, the Minister used to interfere in the award of contracts and when he met A6, he was asked to meet A1. He also deposed that A1 was interested for one K.P.Poulose (A4). His work was terminated and it was re-tendered and awarded to K.P.Poulose (A4).
12. Jagannad Prasad (PW-66), Managing Partner of M/s C.S. Company deposed before the Court that while he was doing the contract work of a tunnel for Kakkad Hydro Electric Project, he approached the Chief Engineer Bharathan, who told him that the work could be awarded only as per the directions of the Minister (A1). He further deposed that he had executed a promissory note for Rs.5,30,000/- in favour of one Yackochan, who acted as a middle man for the commission payment. He informed the Court that this contract was terminated by the Board.
13. It was highlighted on the side of the appellant that it was during that period, when A1 was Minister for Electricity, the tender process of Idamalayar Tunnel and its concrete lining and surge shaft work was started. It is relevant to note that R. Balakrishna Pillai (A1) was the Minister for Electricity from 27.01.1980 to 21.10.1981, 26.05.1982 to 05.06.1985 and 25.05.1986 to 25.03.1987. The tender for surge shaft was invited and awarded to one E.M. Varkey at 21% below estimated rate. The estimated rate was Rs 74 lakhs for surge shaft. However, the work was abandoned on 28.03.1981 due to labour strike. Thereafter, tenders were invited again for the surge shaft and four persons submitted their offers for tenders.
The lowest rate was quoted by M/s We-Build Pvt. Ltd. and the next lowest rate was by E.M. Varkey at 57% above PAC. It is pointed out that though the work was recommended to be awarded, the Board decided to re-tender the work. Accordingly, the tenders were invited again and E. M. Varkey alone quoted for the work. His tender was not accepted since he quoted exorbitant rate. In the meanwhile, pre-qualification bid system was introduced in the Board which is evident from Ext. P-576 dated 24.09.1981, which was made applicable to Idamalayar contract works. Thereafter, tender for both the works were invited by Shri Bharathan, the then Chief Engineer which is evident from Ext. P-46 dated 05.06.1981. However, the tender was cancelled by him which is also clear from Ext P-47 dated 22.10.1981. The Chief Engineer extended the validity of the tender upto 29.04.1982 and after his demise, the then Chief Engineer (PW-7) extended the validity upto 30.06.1982. During that time, two tenders were received, one by K.P.Poulose and other by Kuriakose Chennakkadan (PW-64), quoting special conditions. The cover containing the conditions and deviations was opened on 30.06.1982, when K.P.Poulose was present in the Board's Office. However, Kuriakose, the other tenderer was not informed and later on 09.09.1982, K.P. Poulose was pre-qualified and Kuriakose was disqualified which, according to him, was without notice. The contract for the balance power tunnel and concrete lining work of Idamalayar works was ultimately awarded to K.P.Poulose at 188% of the above estimated rate and the surge shaft work was also awarded to him at 162% above the estimated rate.
14. It is clear from the above materials that the process of tendering of Idamalayar works was interrupted on several occasions mainly by the Board by cancelling the tenders and ordering re-tender and by extending the period of validity of tenders more than once. It was on the last date of extension of the validity of the tender i.e. on 30.06.1982, K.P.Poulose appeared and submitted his tender with special conditions which was later accepted in the Board's meeting dated 19.11.1982. The Special Judge, basing reliance on Board's resolution (Ex. P550(a)), has rightly concluded that there was inordinate delay in awarding the work which reasoning was not accepted by the High Court. The materials placed clearly show that it was nearly three years to take a decision. It is also clear from the evidence of PWs 64, 66, 138 and 146 which clingingly established the circumstances under which A1 conceived the idea for fixing contract of the Board at exorbitant rate in order to derive monetary benefits. From the above, the contrary conclusion arrived by the High Court, according to us, is not in terms of the evidence led in by the prosecution. Whether Idamalayar contract was awarded at exorbitant rate causing loss to the Board
15. The basic stand of the prosecution is that A1 entered into criminal conspiracy to award the disputed contract involving heavy financial gain to K.P.Poulose (A4) and the conspiracy and abuse of power by certain officials enabled the conspirators to earn a pecuniary advantage of Rs.2,39,64,253/-, in addition to the financial loss caused to the Board. It is the specific case of the prosecution that rate awarded in both the contracts is exorbitant. It is not in dispute that the contract was awarded at 188% above PAC in the case of tunnel work and 162% above PAC for the surge shaft work. Verification of Ext. P-52(b) shows that the sanctioned estimate for the tunnel work was Rs.1,17,20,633.90. On the other hand, the accepted tender amount as per the award of contract was Rs.2,45,80,796/- which is clear from Ext P 52. It is further seen as per Ext P-68 agreement, the sanctioned estimate for surge shaft was Rs. 74 lakhs and it was awarded for Rs.1,42,94,901/- The estimate for floor concreting was Rs.479.5 per M3 and the estimated rate for sides and arches was Rs.476.20 per M3. All the above details were highlighted in the evidence by PW-151 a competent Engineer. Likewise, the rate for floor concreting awarded to K.P.Poulose was Rs.825.47 per M3. In fact, the calculations made by PW-151 were not seriously disputed by the defence.
16. In order to appreciate the stand that the estimated rate and the tender quoted by K.P.Poulose was exorbitant was demonstrated by Mr. Shanti Bhushan by taking us through the estimated cost of the work awarded to skilled workers brought from Kulamavu and Moolamattom, who were awarded the tunnel driving work on piece rate basis. It is seen that the tunnel driving work was awarded to them at the rate of Rs. 1,250/- per M3 which was enhanced later, and finally, at the time, when the workers stopped the work, the rate was Rs. 1,900/- per M3. This is clear from the settlement memorandum Ext. P-212 signed between the labourers and the Board. This fact was highlighted in the oral evidence of PW-7, Chief Engineer of the Board. In his evidence, he explained that the rate awarded to workers will be Rs. 2,500/- per M3 including cost of materials. PW-156, the Investigating Officer, also gave evidence on the basis of records collected during his investigation. Ext.P-52 agreement shows that the estimated rate for driving one meter tunnel was Rs. 4,090/-. Ext. P-19/Contract Certificate of the Power tunnel shows that the amount paid to the contractor for 24 meters tunnel driving was Rs. 2,39,961/-. It was highlighted that when the total work was done by the labourers at piece rate basis, they were given Rs. 2,500/- only per M3. The remuneration for 24 meters driving tunnel would come to only Rs.60,000/- the difference i.e. Rs.1,79,961 (2,39,961-60,000) would show that the tunnel driving work was given to K.P.Poulose (A4) at an excessive rate.
17. It is pointed out that there is enough material to show that the labourers, who did the tunnel work, were prepared to carryout the balance work of the tunnel at the estimated rate of Rs. 4,090/-. At the relevant time, the representatives of the workers made a representation to the then Minister for Electricity, namely, R Balakrishna Pillai (A1) informing him that they are prepared to do the tunnel work and allied works at the estimated rate. Divakaran Kutty (PW-24), Vadayattupara Radhakrishnan (PW-33), Sasidharan Nair (PW-34) and Muraleedharan Pillai (PW-46) have given evidence that they represented before the Minister as well as the officials of the Board and informed their preparedness to do the work at the estimated rate and also requested for absorption in the Board's service.
In this regard, Mr. Shanti Bhushan, learned senior counsel appearing for the appellant heavily relied on the evidence of PW-46 who had gone to meet A1 along with (late) N Sreekantan Nair and submitted a Memorandum Ext.P-287 dated 01.06.1982. It is relevant to note the response of the Minister (A1) for the above said request. PW-46 stated that A1 told them that there is no question of giving the works to the workers and he wants to give the work to K.P.Poulose. This instance pointed out that A1 had personal interest in K.P.Poulose and had decided to entrust the contract to him, though at that time, the said K.P.Poulose did not submit the tender for the work. We have already noted that K.P. Poulose submitted his tender only on 30.06.1982 i.e. a month after the memorandum dated 01.06.1982 submitted by PW-46. In support of the same, the evidence of PW-122, T.M. Prabha, the then President of the Kerala Construction Labour Union that he met A1 and gave representations and requested for award of work to the workers at estimated rate and also absorption of the workers in the Board's service on permanent basis is also relevant.
Here again, it is relevant to note that PW-122 was also informed that there is no question of awarding work to workers, but the work had to be given to K.P.Poulose. The evidence of PWs-46 and 122 and the statement made by A1 to both of them clearly show that K.P. Poulose was the contractor chosen in advance by A1 and other accused who were also interested in him. As rightly pointed out by Mr. Shanti Bhushan, this evidence should be connected with the conspiracy to award the work to K.P.Poulose at exorbitant rate originated even prior to the submission of tenders to the work by K.P.Poulose and other tenderers. The contrary conclusion arrived at by the High Court justifying the award at higher rate to K.P.Poulose cannot be legally sustained. The Board is empowered with the authority to award contracts and has discretion to accept and being an authority constituted under the Statute and a Pubic Undertaking is not expected to accept tenders at exorbitant rates with financial implications causing loss to the Board.
The Board is always expected to protect its financial interest while awarding contracts. The Board mainly relied on the labour problem that was prevailing at the relevant time. In this regard, it is relevant to point out that the tender for the Idamalayar work was invited in March, 1982 and four persons, namely, Kamalasanan (PW-146), Managing Director, We-Build, C.K. Verghese, E.M.Varkey and V.A. Thankachan submitted tenders vide Exts. P78 series dated 21.03.1982. It is true that the tunnel workers went on strike on 20.04.1981 and the contractors submitted their tenders when there was labour unrest. However, the reason attributed for the delay cannot be accepted.
As rightly pointed out, there were procedural irregularities and omissions by the Board authorities in the manner of dealing with tenders submitted by K.P.Poulose and Kuriakose, which ultimately eliminated Kuriakose from the scene, keeping K.P.Poulose as the sole tenderer, qualified by pre-qualification Committee of the Board and hasty steps were taken by the Board in awarding contract in favour of K.P.Poulose in the meeting held on 19.11.1982 lead to the conclusion that the award of contract in favour of K.P.Poulose was an exorbitant one. It is relevant to point out that the Special Judge, by adverting to Ext 550(a) expressed that the reasons stated by the Board in awarding contract in favour of K.P. Poulose at exorbitant rates are not acceptable. No serious discussion by the Board
18. It is pointed out and in fact taken us through evidence that there was no serious discussion in the Board meeting held on 19.11.1982 and the minutes of the Meeting were prepared as dictated by A7, the then Chairman of the Board. It is the responsibility of the members, more particularly, full time members of the Board, who were responsible for the scrutiny of the deviations and conditions suggested by the contractor which involved huge financial implications to see that all transactions are beneficial to the Board and within the permissible limit. Mr. Lalit and Mr. Sharan, learned senior counsel appearing for A1 and A3 respectively heavily contended that it was a collective decision of the Board and there was no external pressure from anyone including A1. It is relevant to point out that the decision ultimately taken for awarding the contract with special conditions, which we will discuss in the later paras, as suggested by the contractor, involved huge financial implications at the risk and loss of the Board.
Though the High Court has concluded that the part-time members who were signatory to Ex550(a) had approved the minutes, subsequently, the Special Court made a distinction between the responsibility of full-time members and that of part-time members in the matters of awarding of contract. It is true that all the members present subscribed their signature in the minutes in awarding contract to K.P.Poulose. It was highlighted that in evidence, A8, the Financial Adviser to the Board, in his report has stated that the rates awarded to the contractor are very high. The letters sent by A8 were marked as Exs. P-415 and 416. It is also relevant to point out that the then Law Secretary, Shri Viswanathan Nair also conveyed his opinion during the meeting of the Board that the rates are exorbitant. These aspects were taken note of by the Special Court while considering the culpability of the accused and the High Court was not serious about their views. In other words, the High Court has concluded that the award of contract to K.P.Poulose was a collective decision of the Members of the Board.
The High Court also pointed out which was again highlighted by the learned senior counsel appearing for the accused that majority of the Members of the Board were highly qualified and responsible officers and it cannot be said that they were only mute witnesses to the decision of the Board. In this regard, it is relevant to point out that the Special Court has rightly concluded that there was no serious discussion in the Board Meeting dated 19.11.1982 when the question of award of contract was taken up and the minutes of the meeting were prepared as dictated by A7, the then Chairman of the Board. The then Deputy Secretary of the Board, R. Sankaran was examined as PW-140, also admitted this aspect and stated that there was no serious discussion in the meeting held on 19.11.1982. He explained that Ex.550(a) minutes of the meeting is a reproduction of the dictation given by the Chairman of the Board (A7).
19. The High Court has pointed out that the prosecution has not produced any contemporaneous agreement for proving the rates prevalent during the relevant period of award of the contract. The High Court found that the contract was awarded at 188% above PAC for the tunnel work and 162% above PAC for the surge shaft work. It was pointed out from the side of the Board that the estimate rate was prepared taking into account the prevalent PWD rates for similar items of work like tunnel driving, concrete lining, earth work, cost of materials, labour charges, transportation charges of materials to worksite etc. It is not in dispute that the contractor was also given opportunity to conduct site inspection and decide other aspects connected with the execution of the works for submitting his tender rate.
Though contractor can also quote special conditions involving financial implications and other conditions in the contract, which is usually settled by negotiations, but the general conditions of contract shall not be superseded while accepting special conditions to the detriment of the Board. The Special Judge had noted that the rate quoted by N.K.Kuriakose (PW-30) for tunnel driving and surge shaft work was below 21.75% of the estimated rate and there was much difference in the rate quoted by K.P.Poulose and Kuriakose. It is further seen that the work was awarded to Kuriakose at the rate of Rs. 1,092.3 per M3 for sides and arches. The work awarded to Kuriakose was abandoned by him since the Board did not provide him with necessary materials for proceeding with the work as per the agreement. He adduced evidence for the said abandonment and also suffered loss in that regard for which Board was subsequently held liable and he was paid compensation as per the Court orders.
The work was awarded to N.K. Kuriakose in 1979. The Special Court has pointed out that even though there was an increase of 25% of the actual rate awarded to Kuriakose, still there was wide difference between the rates at which the two works were awarded and on this ground also, the Special Court held that the works for floor concreting and for sides and arches were awarded to K.P.Poulose at a higher rate. However, the High Court disagreed with the conclusion of the Special Court. In this regard, it is useful to refer Ext.P174(2), which is a report with regard to the rate of award of Idamalayar contract. It was stated in the report that the estimate was prepared with the scheduled rate of 1980 which had been enhanced by 25% on labour to obtain 1982 schedule and the work was awarded after the enhancement of the scheduled rates. It is further seen that the estimate was prepared with the scheduled rate of 1980 for the purpose of obtaining the rate of 1982 i.e. increase of 25% in the rate was given in 1980. The High Court has justified the increase of 25% by pointing out the increase mentioned in Ext.P299 which relates to contractor's profit of 10%, overhead charges of 10% and 5% for labour benefits. Though the High Court has agreed with the 25% increase in the rate of 1980-82, no acceptable evidence was adduced over-riding the documentary evidence furnished by Ext.P-299 and P174(2). Award of contract to K.P. Poulose (A4)
20. It is the argument of Mr. Shanti Bhushan, learned senior counsel for the appellant that the tendering process adopted by the Board was with a view to eliminate other tenderers and to choose the tenderer of their choice, namely, K.P.Poulose. This was elaborated by pointing out that Kuriakose was disqualified without giving him adequate opportunity to present before the pre-qualification Committee and ultimately K.P.Poulose was declared as qualified. In the said meeting, only A6 and A7 were present and A8, and another member of the pre-qualificaton Committee was not present. Pursuant to the decision that Full Board meeting should be held on 19.11.1982 to decide the question of award of Idamalayar contract, PW-7 was directed to issue notice to all the tenderers. The materials relied on by the prosecution shows that on 18.11.1982, notices were issued to HCC, E.M.Varkey, Sunny K. Peter and K.P.Poulose.
It is seen that only K.P.Poulose was present on 19.11.1982. Sunny K. Peter PW-4 sent a telegram on 19.11.1982 stating that he is not physically well. HCC conveyed their inability to the Board by their letter which was received in the office of the Chief Engineer on 22.11.1982 stating that there was no sufficient time given to attend the Board Meeting on 19.11.1982. Without verifying the fact that whether all the other tenderers were ready, a decision was taken on 19.11.1982 itself by accepting the offer of K.P.Poulose with special conditions. As rightly pointed out the Board being a statutory authority, ought to have waited for a reply from the other tenderers to ascertain whether they actually received notices and reason for their inability to attend. It was demonstrated that it was a pre-planned attempt to award the work to K.P.Poulose alone and the notices issued to other tenderers were in the form of an ultimatum. It was also pointed out that for the negotiation on 04.11.1982, i.e. prior to 19.11.1982, held by PW-7, with the tenderers, in the office of the Board only K.P.Poulose and Sunny K. Peter were present. It is further seen that E.M. Varkey and HCC were not invited.
The fact remains that PW-7 did not invite E.M.Varkey who quoted less rate and HCC, a reputed construction company for the second negotiation. Though a telegram was sent on behalf of E.M.Varkey, one of the tenderers that since he was away and request was made to fix another date, it was recorded that the tenderer had already lost his opportunity offered. This has been demonstrated by the appellant that the Board was not prepared to allow the request of E.M. Varkey for a discussion. It is useful to refer here that the pre-qualification Committee, headed by A7, gave chances to K.P.Poulose to correct the errors and mistakes in the tender form submitted by him for the impugned works, on the other hand, such concession was not afforded to the other tenderers, more particularly, E.M. Varkey. Both Sunny K. Peter and Kuriakose were examined as PWs-4 and 22 respectively. The evidence of Kuriakose shows that he was an experienced contractor, quoted 124% above PAC for the work and submitted his tender on 30.06.1982. According to him, he was not invited for any discussion.
He was disqualified on 09.09.1982 and was not invited for being present for opening his deviations and conditions in the tender. In the same way, the evidence of Sunny K. Peter PW-4 also highlighted how he was discriminated, though he has quoted only 135% above PAC, he was not given opportunity to consider the reasonableness of the rates quoted by him. According to him, he received notice only at 2.40 p.m. on 18.11.1982 and because of his illness, he could not attend the meeting on 19.11.1982. The fact remains, the Board has not considered his request and finalised the contract on 19.11.1982 in favour of K.P.Poulose.
21. Another aspect highlighted by the learned counsel for the appellant relates to the conduct of A1 with regard to settlement of labour dispute. The evidence shows that there was labour strike in the tunnel area which started in April, 1981 and continued from the time of inviting tenders on 05.06.1981 till the time of award of contract. It was highlighted that there was no effort on the part of A1 to settle the labour dispute before tendering process was initiated. We have highlighted the Memorandum submitted by the labourers to A1 on several occasions requesting for settlement of labour problems. It was not settled and the matter was kept alive till the tender was fixed in the name of K.P.Poulose on 19.11.1982. It was only after the award of the contract, A1 took initiative to settle the labour dispute, more particularly, when he came to know that K.P.Poulose cannot enter the site because of the obstruction of the workers to begin the contract work. It is relevant to point out that PW-7 informed A1 and A6 more than once that in case the labour dispute could be settled in advance, the contract could be awarded at a reasonable rate. The evidence of PW-7 clearly shows that his request was not accepted by A1 and A6.
22. The evidence discussed above show that the rate quoted by Sunny K. Peter (PW-4) vide his evidence in Court, was 135% above PAC, which was less than 188% above PAC, quoted by K.P. Poulose and approved by the Board. The High Court failed to take note of the importance of evidence of PW-4 and justified the action of the Board in not pursuing the tender submitted by Sunny K Peter (PW-4) with a lesser rate on the ground that his tender is liable to be rejected since he wanted an arbitration clause in the agreement. Further, though PW-4 has quoted lesser rate than K.P. Poulose, in his evidence, he has highlighted that he was not given an opportunity to consider the reasonableness of the rate quoted by him i.e. 135% above PAC. The High Court has not only ignored his assertion but found that the rate quoted by him for the surge shaft work is not a lesser rate when compared to one quoted by K.P. Poulose i.e., 188% above PAC. Though the Special Court has correctly found that Sunny K. Peter quoted less than the rate quoted by K.P. Poulose, the High Court, on erroneous assumption found fault with the finding of the Special Court which correctly appreciated prosecution case.Acceptance of Special Conditions & Concessions
23. With regard to allegation of the prosecution that certain Special Conditions were accepted by the Board (Ex. P588) involving huge financial commitments favourable to the contractor causing loss to the Board, it is relevant to mention that one of the special conditions, is condition No. 4 which relates to tools and plants sold to the contractor in violation of the General Conditions of the contract. These special conditions along with other conditions were accepted by the Board superseding corresponding agreement provisions. Ex P52 (c) is the general conditions of contract and instructions to the contractors issued by the Board. Among various clauses, Clause E1-091 in Ex. P52(c) deals with tools and plants issued to the contractors.
This clause provides that the Board is bound to make available to the contractors only such tools and plants listed in the Schedule attached thereto, that too subject to availability. Such items of tools and plants which are listed in Ex. P52 agreement marked as Ex. P52 (d) shows items of tools and plants which can be hired out to the contractors if requested on the specified rates. In Ex. P58, deviations and conditions submitted by the contractor as Item No 4, stated that such tools and plants listed in Ex. P52(d) shall be sold to him on outright sale at book value deducting depreciation and the cost may be recovered on prorata basis from his bills. The full Board, in its decision dated 19.11.1982, had accepted the above special condition of the contractor. It is relevant to point out that these items includes tipper wagons loco, louder, existing truck lines and pipes, items which can only be hired to the contractor as per clause E1-091 of the General Conditions of the contract.
It is the case of the prosecution that it was the decision of the Board to sell those items of tools and plants which includes very costly foreign imported materials. The official examined on the side of the prosecution pointed out that there is no provision in the general conditions of the contract enabling the Board to effect sale of those tools and plants to the contractor. However, certain materials belonging to the Board mentioned in Clause E1-093 and not covered by the list mentioned in Clause E1- 091 could be sold to the contractors if available to the Board. The evidence led in clearly shows that the sale of materials listed in Clause E1-093 supersedes the general conditions of contract. In other words, it is clear from the evidence that those materials which were not mentioned in the Special Conditions were sold to the contractor on outright sale.
In this regard, it is useful to refer the evidence of Udayabhanu Kandeth PW-136, Auditor attached to the Accountant General Office which shows that 126 items of tools and plants were sold to the contractor of which the cost of 117 items was Rs. 16.5 lakhs. The Auditor of the Board, who was examined as PW-130, also explained about the sale of tools and plants to the contractor, which was not provided in the agreement. It is clear from the evidence that the sale of tools and plants which could only be hired to the contractor as per the list in E1-091 was against the objections raised by A8, the Financial Advisor and Chief Accounts Officer of the Board during the relevant period.
In his report, A8 had noted that the financial implications involved in the sale of items of tools and plants were not considered either by the Board or by the officers of the Board at the time when the full Board decided to sanction the above special condition No. 4 of the contract. These aspects have been duly considered by the Special Court, namely, that the tools and plants which are only to be hired as per Clause E1-091 to the contractor, however, the Board permitted outright sale which is detrimental to the financial interest of the Board. These important aspects have been overlooked by the High Court while upsetting the decision of the Special Court.
24. In addition to the same, the prosecution has led in further evidence to show that the contractor was favored in several aspects. PW-128, V. Ramanarayanan, Superintending Engineer, in his evidence has stated that pental placer, an imported item not included in the list for issue on hire, was sold to the contractor, the sale value of which was Rs. 4 lakhs and according to him only lump sum recoveries were made from the CC bills of the contractor, instead of prorata recovery as provided in the agreement. This also caused loss of interest on the sale price of materials. He further deposed that 30 items of spares were issued to the contractor costing Rs. 6 40lakhs and when he calculated the total value of spares and materials issued to the contractor it came around Rs. 36 lakhs, out of which, only a portion was recovered by the Board from the contractor vide Ex P517-P519. This witness has also pointed out that there were several items sold to the contractor without obtaining sanction of the Board. Return of empty cement bags by the Contractor
25. Another special condition sanctioned by the Board in favour of the Contractor relates to the return of empty cement bags. This special condition provided that the Contractor shall return only 50% of empty cement bags in good condition. Ext. P-33, Audit Enquiry Report of Idamalayar Project Circle states that the Contractor had to return 65,100 empty cement bags, the value of which was calculated at more than Rs.1 lakh. According to the Auditor, because of the special condition, the Board had sustained a loss of Rs.1,08,879.75. The Financial Advisor and Chief Accounts Officer, who arrayed as A8, had stated in Ext. P-416 that without evaluating the exact financial implications, sanction was accorded by the Board to the special condition regarding return of empty cement bags to the advantage of the Contractor for getting financial gain. Though it is stated that the condition only provides for return of 50% empty cement bags in good condition and for the remaining, the rate provided by the general conditions of contract could be realised from the Contractor, the fact remains, the special condition which we are concerned does not provide for the realisation of value of the remaining unreturned cement bags.
26. With regard to special conditions, the High Court has held that inasmuch as there is a provision in tender to enable the Contractor to get special conditions, it cannot be said that the special conditions and deviations of the Contractor should not be accepted. Here, the High Court has missed the real issue as to whether all special conditions as requested by the Contractor can be sanctioned by the Board in violation of general conditions of contract, which is the standing order of the Board applicable to all contracts and the policy adopted by the Board. Simply because there is a provision to enable the contractor to suggest special conditions advantageous to him, it does not mean that the Contractor can suggest any special condition which involved financial implication to the detriment of the Board. As correctly found by the Special Court, the special condition No.4 relating to sale of tools and plants is a favour done by the Board to the Contractor for obtaining financial gains at the risk of Board's loss.
The Special Court has substantiated its finding on the point based on evidence furnished by the auditors. However, the High Court relying on Ext D-28 provided for recovery of balance 50% of empty cement bags not returned or returned in damaged condition and recovery will be effected as stipulated in the tender condition, erroneously concluded no loss could be sustained to the Board. It is relevant to point out that the special condition No.10 clearly states that the contractor is bound to return only 50% empty cement bags in good condition. To make it clear, this condition supersedes the corresponding general condition of the contract. Therefore, the Contractor is bound to return 50% of empty cement bags in good condition and there is no need to pay the price of balance 50%. Accordingly, the Board can act only on the basis of the special condition No.10 regarding the return of empty cement bags and is not entitled to recover the value of balance 50% of unreturned cement bags. The contrary conclusion arrived at by the High Court relating to return of empty cement bags cannot be accepted. Fixation of security and retention:
27. Yet another special condition involving financial implications sanctioned to the Contractor is with regard to the fixation of security and retention amount. Special Condition No.1 of Ext.P-588 deals with this subject. It is the prosecution case that restriction of security and retention amount is in violation of the provisions contained in the general conditions of the contract and it is a favour shown to the Contractor to make illegal gains at the expense of the Board. Clause E1-008 of Ext. P52(c) is the provision relating to security deposit of the Contractor which states that for major works where the cost of construction exceeds Rs.25 lakhs, the security deposit should be 2% of the PAC. In the case on hand, the PAC of Idamalayar contract works exceeds Rs.25 lakhs. There is no dispute for the same.
The security for both works should be fixed at 2% of the PAC. Clause E1-011 of ExtP-52 is the general conditions of contract and instruction to the tenderers dealing with retention of the money from th
