Jharkhand High Court
The Court On Its Own Motion vs The Union Of India Through Its Secretary ... on 14 November, 2017
Author: Aparesh Kumar Singh
Bench: Aparesh Kumar Singh, B. B. Mangalmurti
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IN THE HIGH COURT OF JHARKHAND AT RANCHI
W.P.(PIL) No. 3503 of 2014
The Court on its Own Motion Vrs. The Union of India & others
with
W.P.(PIL) No. 2470 of 2015
The Court on its Own Motion Vrs. The State of Jharkhand & others
.......
CORAM: HON'BLE MR. JUSTICE APARESH KUMAR SINGH
HON'BLE MR. JUSTICE B. B. MANGALMURTI
For the Petitioner : M/s Delip Jerath, Amritansh Vats
For the Resp.- State : M/s R.R. Mishra, G.P.II, Rishikesh Giri
For the Resp. NHAI : M/s Anil Kumar Sinha, Sweety Topno
For the Resp. -Agency : M/s Anoop Kumar Mehta, Ravi Shankar
For the Resp.-Bank : M/s Jai Prakash, PAS Pati
50/14.11.2017Pursuant to our previous order dated 01.11.2017, Mr. Vijay Srivastav, Regional Officer, NHAI, Ranchi, Mr. Devendra Kumar Gupta, Project Director, NHAI, Ranchi, Mr. Anand Kumar Singh, Member(Project) NHAI are present on behalf of NHAI. Mr. Lalu Oraon, Executive Engineer, Road Construction Department, Road Division, Ranchi (Gramin), Mr. Yogendra Baraik, Assistant Mining Officer, Ranchi are present on behalf of the State. Mr. K.Srinivasa Rao, Managing Director of the Respondent Agency and Mr. B.Ramachandra, Authorized Signatory cum Project Manager, REL are also present.
2. Learned A.S.G.I on instructions of the Ministry of Corporate Affairs and Directorate of Serious Fraud Investigation Office(SFIO) submits that the SFIO cannot investigate any company on its own and the Central Government allocates investigation on the basis of nature of fraud. Further non-execution of work falls within the ambit of Contract Act, in relation to which, the parties have enough remedy to enforce the contract. The SFIO do not investigate such failure in execution of any contract.
3. The National Highways Authority of India(NHAI) has filed an affidavit on 10.11.2017 inter alia stating that the overall cumulative physical progress achieved up to 07.11.2017 is 45.98% but for the 1 st week of November 2017 is 0.00%. Details of the monthly target vrs. achievement are furnished by way of a chart at para 5 of the affidavit. The monthly target of November 2017 is Rs.53.411 Crores and corresponding target for 01.11.2017 to 07.11.2017 is Rs.12.463 Crores.
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Details of monthly Target - Vrs. Achievement
Sl. No. Month Target Achievement Shortfall
(Rs. in Cr.) (Rs. in Cr.) (Rs. in Cr.)
1. Aug'17 7.913 3.520 4.393
2. Sep'17 21.936 3.492 18.445
3. Oct'17 40.281 5.829 34.452
4. Nov'17 12.463 - 12.463
The NHAI has deployed three agencies to maintain the existing road at the risk and cost of the Concessionaire from Km 139+ 380 to Km 277 + 500. The maintenance work has already been started and as on 08.11.2017, the completed length is 16.260 Km including diversion. The balance length of existing road to be maintained is 41.950 Km.
4. The District Mining Officer, Jamshedpur has filed an affidavit on 13.11.2017 stating therein that one application was filed by M/s Madhucon Project Ltd., for grant of stone mining lease of Rakba 4.90 acres at Mauza Barahdih, Khata no. 177, Plot no. 212 in Jamshedpur under District East Singhbhum. In above described mining area lease was permitted by the Deputy Commissioner, East Singhbhum in favour of M/s Madhucon Project Ltd. After the submission of all the legal documents by the Company, the execution of mining lease was done on 30.01.2017 and lease holder had already registered the mining lease. There is no case pending for application of mining lease in favour of M/s Madhucon Project Ltd. in East Singhbhum.
5. An affidavit has also been filed by the Assistant Mining Officer, Seraikella Kharsawan on 13.11.2017 inter alia stating that M/s Madhucon Projects Ltd. was allotted lease for mineral stones and renewed thereof for the period 16.03.2016 till 15.03.2017 with respect to plot no.10 measuring 8 acres of Mouza Serengdih under Ichagarh Anchal in the District of Seraikella Kharsawan. The lessee in teeth of the provisions of the Jharkhand Minor Mineral Concession Rules, 2004 as amended in 2017 had filed a renewal application only 8 days before expiry of the lease contrary to the statutory requirement of making an application for renewal prior to 90 days(minimum) from the expiry date(15.3.2017) of the respective lease. Petitioner Company has also filed a petition for condonation of delay on medical grounds. But there is no such provision to condone any delay for applying for such renewal. Learned G.P.II, Mr. R.R. Mishra, submits that pursuant to order dated 18.8.2017 passed by the learned Mines Commissioner in the Revision Case No. 68 of 2017 preferred by the lessee, the lessee has filed a petition for renewal of lease on 30.8.2017 on the extension of period of 90 days. The Deputy Commissioner has allowed the 3 petition on 07.09.2017 and petitioner was informed through letter dated 08.09.2017 directing it to file the lease agreement on specific e form with non judicial stamp paper, which he did not comply. Even after reminder letter dated 19.09.2017 and 10.10.2017, petitioner has not complied the directions.
6. An affidavit has been filed on behalf of Director General of Police, Jharkhand pursuant to our previous order giving details of number of accidents reported between 01.01.2011 to 01.01.2017 in the stretch of road on NH33 being executed through NHAI. By way of a chart at page 11 of the affidavit the detail of number of accidents reported in the 3 districts, number of persons died and number of persons injured has been furnished. The chart is also extracted herein below:-
Sl. No. District Total reported Number of Number of
accident Cases Person Died person Injured
1. Ranchi 808 434 655
2. Seraikela 280 153 241
Kharsawan
3. East 00 00 00
Singhbhum
1088 587 896
As is evident, 1088 cases of accident have been reported in this period in which 587 persons have reportedly died and 896 have been injured. The detail of the cases are also enclosed to the affidavits.
7. Another affidavit has been filed by the Executive Engineer, Road Construction Department, Ranchi(Gramin), which is more or less reiteration of the statement made in the previous affidavit. The proposal for diversion of forest land in mouza Badam and Kewali is still under formulation by NHAI.
8. Counter affidavit has been filed by the Respondent Canara Bank also. As per the instant affidavit Canara Bank is the consortium leader of the lenders which has financed the loan to Ranchi Expressway Ltd. The consortium comprises 15 banks and financial institution namely Allahabad Bank, Canara Bank, Corporation Bank, Dena Bank, Federal Bank, ICICI, IDBI, IIFCL, Oriental Bank of Commerce, Punjab & Sindh Bank, South Indian Bank Ltd., State Bank of Bikaner & Jaipur, State Bank of Patiala, State Bank of Travancore and Vijaya Bank. However later on State Bank of Travancore has opted out of the consortium. The total limit sanctioned by various lenders was Rs.1191.60 Crores. The common loan agreement was entered into between the parties on 31.10.2011. A sponsor support agreement with Madhucon Projects Limited and Madhucon Infra Limited as sponsors was also executed on 31.10.2011. The Excrow agreement dated 28.2.2012 and substitution agreement was entered on 4 28.2.2012 and enclosed as Annexure-C series. The amended common loan agreement was again executed on 27.6.2015. Due to opting out of State Bank of Travancore the limit of loan was lowered down to Rs. 1151.60 Crores. As per the answering Respondents, the terms of completion of project has been extended up to 01.04.2018. The Ranchi Expressway Ltd. , company in question was granted certificate of incorporation on 29.03.2011. The certificate of commencement of business has been granted on 07.04.2011. The Memorandum of Association as well as the Articles of association enclosed as Annexure-E reveals the details of the subscribers. The details of the subscribers of Ranchi Expressway Ltd. at the time of its incorporation are furnished by way of chart at para 19 of the affidavit, which are Madhucon Projects Limited, Madhucon Infra Limited, Nama Seethaiah, Nama Krishnajah, Kamna Srinivasa Rao, Nama Prithvi Teja and Mallampati Madhu having a total share of 50,000/-. Madhucon Infra Limited is a 100% subsidiary of Madhucon Projects Limited. The answering Respondents have also enclosed tabular chart showing the details of shareholders of the company i.e. Ranchi Expressway Ltd. The details of the Directors of the company is available on the website of the Ministry of Corporate Affairs enclosed as Annexure-G. The Respondent Bank has also given details of security obtained as against the credit facility granted to the Ranchi Expressway Ltd., which inter alia are :-
(a) 1st charge over the movable and immovable properties of the borrower.
1st charge over the Escrow Account of Ranchi Expressway Ltd. 1 st charge over the intangible assets. A pledge of 51% of the issued, paid and voting share capital of the borrower till the final settlement date. The details of the same are stated in Article -III of the common loan agreement.
(b) Equitable Mortgage of all that piece or parcel of freehold non- agricultural land measuring 195.00 square meters forming part of the said property known as private plot no.35 or thereabouts forming part of survey number plot holder together 36A of mauza Pali of Sudhagad Taluka District Raigad.
9. Annexure-H is the mortgage deed dated 19.01.2012. The personal guarantee of Sri Nama Nageswara Rao has been obtained on 08.11.2014. The net worth as per the certificate dated 25.08.2014 and 16.12.2016 are Rs.17,456.71 lakhs and Rs.20,769.01 Lakhs (Annexure-I). The additional collateral security on pari-passu basis has been obtained by pledge of shares. The details of the same furnished by the Pledger Madhucon Projects Ltd. , Madhucon Granites Ltd. and Madhucon Toll Highways Ltd. are also furnished at para 23. As per the 9th annual report of the Madhucon Toll Highways Limited, 5 the net worth is Rs. 355,14,84,867.00 as on 31.3.2017. The Respondent Bank at para 26 has made a categorical statement that advance on account of mobilization and material advances having been made at the request of the Ranchi Expressway Ltd. as per the stipulation contained in Engineering Procurement & Construction ( EPC) Contract. The interest during construction (IDC) is to be levied in view of the clause 2.8.1 read with clause 2 of the common loan agreement. The Bank has never agreed to waive the said IDC as submitted by the company. The submission to the contrary was wrongly made on the previous date. The Bank has been taking positive steps to support the project of expressway and the joint lender meeting has been held on 16.9.2017, 25.10.2017, 07.11.2017 and finally on 10.11.2017. According to the deliberation made in the joint lender meeting funds from the TRA account are to be released towards the project expenses only on infusion of proportionate equity by the promoters and after recovery of critical overdue to maintain the account as standard and avoid of slippage to N.P.A. Based on the borrower's undertaking to infuse Rs.8 Crores, lenders issued LCN No. 28 on 26.10.2017 and many lenders released their share after recovering their interest dues. However, the company could not infuse the equity funds and lenders could not release the funds towards project. Again on 7.1.2017 the promoters were advised to infuse fund immediately. They have not released it by 10.11.2017. The matter of options of funding through restructuring of debt equity ratio was discussed. However, in terms of the present regulatory guidelines, the restructured advance is to be classified as Non Performing Assets and may impact the future funding affecting the project progress.
10. In view of the above the lenders have opted not to restructure the debt equity ratio and advised the company to explore other options. The promoters claimed to have invested Rs.98 Crores on the maintenance of the existing road and in view of the constraints in infusing equity into the project they proposed to treat the amount as unsecured loans extended to Ranchi Expressway Ltd. to enable the Company to achieve 50% progress within 2 months, which could enable one time funding from NHAI. In the meeting held on 10.11.2017 the following action plan was proposed:-
"1.The member banks would examine on company's request for conversion of amount spent on maintenance cost into unsecured loans and recognize the same as margin for release of debt for project progress up to achieving 50% so as to enable them to avail OTF from NHAI. Company is to provide all relevant details and clarifications to member banks immediately so that decision can be taken by 25.11.2017 6
2. Company to covert minimum of Rs.105 Crore from unsecured loans to equity on or before 31.3.2018 and the progress in this regard shall be monitored and reviewed by 31.12.2017.
3. Company shall provide fresh undertaking and shall ensure infusion of committed funds to the tune of Rs.8 Crore towards margin contribution of LCN28 on or before 30.11.2017.
4. Against such undertaking the lenders will release funds under LCN 28 towards project expenses".
11. The lenders have released Rs. 27,500,000.00 on 10.11.2017 in view of the undertaking dated 10.11.2017. At para 30 of the affidavit, categorical statement has been made that the amount has been disbursed after obtaining the report from the lenders' independent engineer as well as the Chartered Accountants. The money has always been advanced after the withdrawal notice is given supported by the engineer and chartered accountant's report. As per the bimonthly progress report for August and September 2017, the total fund available as on 30.9.2017 was 1384.20 Crores which include debt component of Rs. 963.42 Crores out of which 826.82 Crores was spent towards project. Further Rs. 361.28 crores was adjusted towards IDC . Learned counsel representing the Bank has defended the action of the Bank in advancing the amount of loan to that extent on the plea that they are made after certification of the actual physical progress by the Engineer and the Chartered Accountant.
12. Despite our earlier orders dated 20.9.2017 and 01.11.2017, specifically directing the Concessionaire to disclose the entire assets of the principal holding company and its promotors, Directors, Managing Director and security that have been created while entering into the agreement with the lender Canara Bank, the agency has not filed any affidavit to that effect today. The Respondent Agency is prima facie in contempt of the orders of this Court. We may also point out here that there has been breach of undertaking on the part of the Agency submitted before this Court on affidavit indicating its revised work programme and monthly milestone to be achieved for completion of the work on 128.8. KM of the available work front of NH33 by July, 2018. The progress report submitted there after for the months of September, October and till date show abysmal progress of work or rather no progress. The progress report are also reflected in our previous order dated 20.9.2017 and 1.11.2017 and the present affidavit of the NHAI referred above. We accordingly issue notice to the Managing Director, Mr. K.Srinivasa Rao to explain as to why proceedings for contempt be not initiated against him and why should he not be punished for the same.
713. It is not necessary to repeat the state of execution of the work as reflected through the affidavits of the respective parties and the observations made by us on the previous dates. It would however be proper to point out again that it is undisputed that against the execution of work up to 44% till July 2017, the lender Bank had advanced a sum of Rs. 919.73 Crores to the Agency while the expenditure made towards the achievement of work was only Rs.408.14 Crores. The present affidavit of the lender bank shows that about Rs.1384.20 Crores have been made available till 30.9.2017 to the Concessionaire which include the debt component of Rs. 963.42 Crores. As per the Bank, Rs. 826.82 Crores was spent towards the project. Further Rs. 361.28 Crores was adjusted towards the interest during construction (IDC). As a matter of fact, the stipulated date of completion of the project was 04.06.2015 i.e. 30 months from the date of commencement dated 04.12.2012. About 2 years and 5 months have elapsed after stipulated date of commencement of work. Huge amount of public money has been advanced through the lender bank to the Concessionaire without commensurate physical progress of the work. The minutes of the meeting held under the Member(Projects) NHAI on 13.09.2017 taken note of in our order dated 20.09.2017 show that withdrawal from Escrow Bank like mobilization and material advances of Rs.286.20 Crores and Rs.71.55 Crores were disbursed to EPC Contractor without any Bank Guarantee. The bank is avoiding the decision to restructure the advances as it would lead to classification of the account of the company as N.P.A., as per the statement made at para 28 .
14. The NHAI, the premier agency of Government of India functioning under the Ministry of Surface Transport and Highways is the authority under which this project is being executed. It cannot be accepted that the state of affairs that has now reached in the matter of execution of the project and advances made much beyond the actual physical progress was not within the knowledge of the instrumentalities of the State, specially the NHAI. We may also point out here that deliberation were made earlier in the presence of the Member(Project) on 13.9.2017 with the Senior Lenders and the Concessionaire. It has been referred to in the order dated 20.9.2017. We may also refer here that the NHAI also approved the revised work programme submitted by the Concessionaire and conveyed to the Court that on the infusion of equity, fund should be sufficient up to January 2018 as per the given programme. It was also stated on behalf of NHAI that the Senior Lenders have been asked as to why disbursement of fund was also made more than the physical progress. In summary it was conveyed to us that there are no hindrance in execution of the work at least till January 2018.
15. We proceeded on the basis of this solemn statements with the hope that 8 the project which had till then been seriously languishing would be completed in near future as projected. Least to say, we have been disappointed in that regard. We cannot shut our eyes to the fate of the public at large for whose benefit the project is under execution. The project relates to a very important National Highway also commonly known as the commercial lifeline of the State. The matter therefore does not confine to the execution of a work under a contract. The instrumentality of the State, such as NHAI and the lenders Banks are required to discharge their statutory responsibilities in right earnest in order to see that public money lying with the lender Banks are not misappropriated or misutilized. In our view, therefore, the submission made by learned ASGI on instruction of the Directorate of SFIO that the instant matter would be a case of simple non-execution of the work falling within the ambit of Contract Act would not be worth acceptance. Learned A.S.G.I. has also contended that the SFIO investigates a company only if the Central Government directs it to do so on the basis of nature of fraud. This however cannot take away or restrict the power of the Judiciary under Article 32 and 226 of the Constitution of India to direct the SFIO to enquire into the cases of serious fraud. Power of the High Court under Article 226 of the Constitution of India to direct the C.B.I to investigate the cognizable offence in a State without consent of the State Government was substantially the issue in the case of State of West Bengal and others Vrs. Committee for protection of democratic rights, West Bengal and others reported in (2010) 3 SCC 571, decided by the constitution Bench of the Hon'ble Supreme Court. The Hon'ble Apex Court at para 57 of the report dealt with the powers of judicial review conferred on the High Court and held that the High Courts are authorized under Article 226 of the Constitution, to issue directions, orders or writs to any person or authority, including any Government to enforce fundamental rights and, " for any other purpose". It was also observed that powers of judicial review conferred on the High Court undoubtedly are in a way wider in scope. At para 68(v) the Apex court has also observed as follows:-
"Para 68(v) Restriction on Parliament by the Constitution and restriction on the executive by Parliament under an enactment, do not amount to restriction on the power of the Judiciary under Article 32 and 226 of the Constitution".
We are therefore of the opinion that in an appropriate case direction can be issued on the SFIO under Article 226 of the Constitution of India to enquire whether the case involves serious fraud or not into the affairs of the Company.
At this stage we refrain from expressing any opinion whether it is case of serious fraud in the misuse and misappropriation of public money by the 9 Agency or any other body or individuals with the aid of the authorities of Lender Bank and NHAI? It is to be enquired whether there has been a deliberate failure on the part of the authorities and the lender Banks in discharge of their public duties with an intention to favour the Agency?
16. The stand of NHAI today also creates an impression of indecisiveness on their part given the state of affairs that has been prevailing. Their indecisiveness is at peril of the public at large who continue to suffer while the project remains languishing. 1088 accidents have been reported during the period 01.01.2011 to 01.01.2017 where 587 persons have died and 896 persons have been injured in this stretch of NH33. Many of it could be attributable to the pathetic conditions of the road and the works, diversions etc. on it.
17. The Concessionaire Ranchi Expressway Ltd., a Company was incorporated on 29.3.2011. The certificate for commencement of business has been granted on 07.04.2011. As per the details of the Ranchi Expressway Ltd. furnished by the Respondent Bank, Madhucon Project Limited, Madhucon Infra Limited and other individual named therein are its subscribers. Madhucon Infra Limited is the 100% subsidiary of Madhucon Private Limited. The details of the Directors of the company is available on the website of the Ministry of Corporate Affairs enclosed as Annexure-G. The Respondent Bank is also one of the lender banking companies. The SFIO has been established by the Central Government under Section 211 of the Companies Act,2013 to investigate into the affairs of the company in terms of section 212 of the Act of 2013 (a) on the receipt of a report of the Registrar or Inspector under Section 208;(b) on intimation of a special resolution passed by a Company that the affairs of the company ought to be investigated; or (c) in public interest; (d) or any request of a department of the Central Government or a State Government. The SFIO is a multidisciplinary body comprised of experts of different fields appointed by the Central Government from amongst persons of ability, integrity and experience in banking; corporate affairs; taxation; forensic audit; capital market; information technology; law; or such other fields as may be prescribed. The SFIO has a mandate under the Act of 2013 and the notification under which it is created to investigate serious cases of fraud in relation to a company in the public interest under Section 212 of the Act of 2013. The present matter relates to involvement of the Concessionaire Company incorporated under the Companies Act and also the instrumentalities of the State i.e. the authorities of the consortium of Banks led by Canara Bank, NHAI and also the State Government. The conspectus of facts and circumstances that have emerged in the matter of execution of such large project with an outlay of Rs.1654 crores approximately and the manner in 10 which huge advances have been made by the lending bank out of the public exchequer without any commensurate progress of work over a period of about 5 years since it commenced in December 2012, requires an inquiry as to whether its a case of serious fraud which needs to be investigated.
18. We, therefore consider it appropriate to direct the Director of Serious Fraud Investigation Office(SFIO) to inquire into the matter to ascertain whether the present matter involves a serious case of fraud which requires to be investigated. Let a preliminary report be submitted by Director, SFIO in a sealed cover within a period of 4 weeks . Needless to say all the parties shall cooperate in the inquiry as and when called upon by the Directorate of SFIO.
19. We, however, reiterate our observations made on the previous dates that the order passed today should in no way intend to mean that the execution of work be retarded or put in abeyance in the meantime. Progress report be also submitted as ordered earlier.
20. The matter is posted for 27.11.2017 by which time the contemnor, Managing Director Mr. K.Srinivasa Rao shall submit his show cause. Except the Contemnor no other official Respondents are required to be present on the next date.
(Aparesh Kumar Singh, J.) (B.B.Mangalmurti, J.) A.Mohanty