Delhi High Court
Dr. Y.R. Midha vs Union Of India (Uoi) And Ors. on 6 March, 2002
Author: Mukundakam Sharma
Bench: Mukundakam Sharma
JUDGMENT Anil Dev Singh, J.
1. The unsavoury controversy presented in the writ petition results from a challenge inter alia to the action of the fourth respondent in awarding the contract to carry out physical verification of the stocks and inventories of the Food Corporation of India to M/s. SGS Ltd, a Mumbai based firm of surveyors in which the fourth respondent's son works as Executive marketing.
2. The petitioner, a member of the Indian Audit and Accounts Service, was working as Principal Director (Commerce and Audit) and Ex-officio Member, Audit Board, New Delhi. The first respondent is the Union of India which has been represented through the Ministry of Food and Consumer Affairs, Department of Food and Civil Supplies, New Delhi; second respondent is also the Union of India represented through the Ministry of Finance, New Delhi; third respondent is the Office of the Comptroller and Auditor General of India, New Delhi; fourth respondent is the Comptroller and Auditor General of India, New Delhi (for short 'the CAG'); the fifth to ninth respondents are/were the officers of the third respondent; tenth respondent is the Food Corporation of India (for short 'the FCI'), and the eleventh respondent is a company, namely, SGS India Limited.
3. The facts giving rise to this petition are as follows:-
4. On June 30, 1997, the Secretary to the Government of India, Ministry of Food and Consumer Affairs, Department of Food and Civil Supplies, wrote a letter to the CAG requesting a special audit of the inventories/stocks of rice held by the FCI in the States of Punjab, Uttar Pradesh, Haryana, Madhya Pradesh, Andhra Pradesh, Tamil Nadu and Orissa within one month. This request was made in view of the discrepancies between the figures of stock of rice available with the Government of India and the FCI. The letter reads as follows:-
"As a result of the discrepancies between the figures of stock of rice available with the Government of India and the FCI, the Cabinet Committee on Prices viewed this discrepancy with grave concern and have directed that a 'special audit' be carried out for the years 1995-96 and 1996-97 about the stocks of rice maintained with the FCI as well as stock procured for Central Pool by different agencies of the States of Punjab, Uttar Pradesh, Haryana, Madhya Pradesh, Andhra Pradesh, Tamil Nadu and Orissa.
2. The Ministry is of the view that a 'special audit' involving inventories/stocks with FCI and the concerned State should be carried out by the Comptroller and Auditor General of India and are requested to submit a report, preferably within one month.
3. A line in confirmation will be highly appreciated."
5. In response to the aforesaid letter, the Chairman, Audit Board & Deputy Comptroller and Auditor General, by his letter dated July 1, 1977, apprised the Secretary, Ministry of Food & Consumer Affairs, Department of Food & Civil Supplies, that it will not be possible to physically verify the stocks within one month. It was also pointed out that a plan was being developed for doing the needful and the same was expected to be ready by July 15, 1977.
6. On July 4, 1997, the Cabinet Secretary wrote a letter to the fourth respondent requesting the latter to depute an appropriate team to carry out special audit in respect of inventories/stocks held for the Central Pool by the F.C.I. and the concerned state agencies. The letter reads as follows:-
"Please refer to D.O. Letter No. 5-26/97-BP.I/S(FC&CS)/143/97 dated 30th June 1997 addressed by Shri B.K. Taimini, Secretary, Department of Food and Civil Supplies regarding carrying out of a special audit in respect of inventories/stock held for the Central pool by FCI and the concerned State agencies.
As intimated to you, government has viewed the discrepancies between figures of stock maintained in Government of India and that reported by FCI seriously. It has been directed that a special audit should be carried out in respect of the stocks so as to arrive at the correct position.
I will be grateful if you could kindly arrange to depute an appropriate team to carry out the special audit and let us have a report within a month, if possible. I am asking the Secretary, Department of Food and Civil Supplies to render full assistance to the audit team to enable them to complete the work expeditiously."
7. Accepting the request of the Government of India for carrying out the special audit of the inventories/stocks of the food grants held for the central pool by the F.C.I. and the concerned agencies of the State Governments, it was decided that the audit of the book balances of the F.C.I. be conducted by M/s. Thakur Vaidyanath Aiyar & Co., New Delhi, M/s. Suri & Co., Chennai, M/s. Price Waterhouse & Co., Calcutta, M/s. S.B. Billimoria & Co., Mumbai.
8. For the purpose of physical verification of the stocks and inventories of the F.C.I., SGS India Ltd., a Mumbai based firm of surveyors, was engaged by means of letter dated August 13, 1997. At this stage it will be convenient to set out relevant part of the letter:-
"I am directed to state that the Comptroller and Auditor General of India has been pleased to appoint your firm, SGS (India) Limited, as Surveyors to carry out physical verification of ground balances of stocks of wheat, rice and paddy of Food Corporation of India (FCI) as well as the stocks of wheat, rice and paddy held by the agencies of the State Governments for the central pool of Government of India, and report on the results of such physical verification. The above work of physical verification is to be carried out in accordance with the following terms and conditions:
* Complete physical verification of ground balances of wheat, rice and paddy held by FCI as well as by the State Agencies for the Central Pool will be carried out by your firm in association with the following firms of Chartered Accountants, appointed by the Comptroller and Auditor General of India for the respective zone of FCI:
-------------------------------------
Region Firm's Name
Northern Thakur Vaidyanath Aiyar & Co
Region New Delhi.
Southern Suri & Co., Chennai. Region.
Eastern and Price Waterhouse, Calcutta
North Eastern
Region.
Western Region S.B. Billimoria and Co.
Mumbai.
* The physical verification will include hundred percent counting of the bags with appropriate weighing of the bags.
xx xx xx"
On August 19, 1997, a meeting was held in the Chamber of the CAG with the representatives of respondent No. 11-SGS with regard to the difficulties encountered by them in conducting 100% physical verification of ground balances of the food grains of the F.C.I. On the same date, viz., 19th August, 1997, the representatives of respondent No. 11 met Sh. I.P. Singh (ADA)(I) when AC(C) was also present. Again a meeting was held on August 21, 1997 by the ADA(I) of the office of the Comptroller and Auditor General with the representatives of SGS. It was inter alia decided that physical verification of the stocks of FCI will be carried out by volume density method. Thus the condition of 100% counting of bags with proper weighing of the same was substituted by bulk density method which is also referred to as weight volume ratio on storage factor method. The latter involves drawing out sample bags from stacks of wheat, rice and other commodities on random basis and the measurement of its volume after forming a separate sample stack and weighment to work out a weight volume ratio on storage factor.
9. The grievance of the petitioner, as expounded by Shri D.N. Goburdhan, learned counsel is that the work could have been undertaken by the employees of the office of the Comptroller and Auditor General as it has a cadre of almost 50,000 employees, and respondent No. 11-SGS was given the work without calling tenders or resorting to any other method whereby other private agencies could quote their price for undertaking the job. It is argued that work of verification of the ground balance of stock of wheat, rice and paddy held by the Food Corporation of India as well as the stocks of wheat, rice and paddy held by the agencies of the State Government for the Central pool of the Government of India, was allotted to respondent No. 11 because son of the CAG was working with it.
10. In order to appreciate the above submissions it will be necessary to refer to the background in which the work was undertaken by the CAG, even at the cost of some repetition auditors of the FCI in respect of year 1992-93 reported that physical verification of stocks of the food grains, sugar and other commodities was conducted at the end of the year and it was not possible to express a opinion on the authenticity of the value of stocks and the extent of shortages of food grains, sugar and other commodities as reflected in the balance sheet as on March 31, 1993. In respect of the year 1995-96 the auditors found it necessary that the determination of quality of stock and physical verification thereof should be entrusted to a well equipped and reputed outside agency. At this stage, it will be apposite to quote the relevant portion of the report of auditors:-
"It is necessary that the determination of quality of stocks and physical verification thereof should be entrusted to well equipped and reputed outside agency."
As already noted, the Government of India through the Secretary, Ministry of Food and Consumer Affairs, requested the CAG to carry out special audit for the years 1995-96 and 1996-97 of the stocks of rice maintained with the FCI and the stocks procured for central pool by different agencies of the States of Punjab, Uttar Pradesh, Haryana, Madhya Pradesh, Andhra Pradesh, Tamil Nadu and Orissa. The Ministry was of the view that the special audit involving inventories/stocks of the FCI and the concerned States should be carried out by the CAG and a report be submitted within one month. The request was made as the Government of India found discrepancies between the figures of stocks of rice available with the Government of India and the FCI. The request of the Government of India was acceded to by the CAG and the same was conveyed to it by the Chairman, Audit Board and Deputy CAG, by his letter dated July 1, 1997. In this letter it was pointed out that it will not be possible to physically verify stocks within one month. It was also pointed out that the plan for verifying the stocks was being developed and would be ready by 15th of July, 1997. Soon after the dispatch of the aforesaid letter, the Cabinet Secretary, on July 4, 1997, while referring to the letter of the Secretary, Ministry of Food and Consumer Affairs, dated June 30, 1997 pointed out that the Government had viewed the discrepancies between the figures of stocks maintained by the Government of India and that reported by the FCI seriously. The CAG was requested to arrange an appropriate team to carry out the special audit in respect of the stocks so as to arrive at correct position. This letter along with the letter of the Secretary, Ministry of Food and Consumer Affairs, dated June 30, 1997 was marked to the Assistant Comptroller and Auditor General (Commercial) [for short 'the AC(C)']. Pursuant thereto the AC(C) recorded a note dated July 8, 1997 wherein it was brought out that while the letter from the Secretary, Ministry of Food and Consumer Affairs, specified that stocks of rice maintained in the FCI as well as the stocks of rice procured for the central pool by different agencies of the States were required to be audited, the letter of the Cabinet Secretary did not mention the name of the stocks of food grains or the States in which they are lying with the FCI which required to be audited. It was suggested that special audit should be conducted to cover stocks of wheat and rice in 1547 godowns covering the entire country instead of only the States mentioned specifically by the Secretary, Ministry of Food and Consumer Affairs. As per the note, the work of special audit was required to have three components - viz., (1) auditing the book balances of the FCI; (2) physical verification of the ground balances and inventories of the FCI; and (3) comparing the actual ground balances with the book balances of the FCI and the reported balances of food stocks in the books of the government. It was pointed out that the book balances of the FCI as on March 31, 1997 were to be verified by taking into account the following:-
(a) Opening balance of foodgrains as on April 1, 1995;
(b) Procurement and acquisition of food grains during the year 1995-96 and 1996-97;
(c) Issue of foodgrains during the aforesaid years; and
(d) Closing balance of foodgrains as on March 31, 1997.
It is important to note that AC(C) in the aforesaid note proposed that the work should be entrusted to reputed firms of Chartered Accountants, and since the work would involve complete verification of stocks and inventories, reputed firms of certified surveyors/valuers may be engaged to check the ground balances of the stocks of food grains as neither the third respondent, office of the CAG, nor the Chartered Accountants were possessed of the requisite technical expertise for such type of work. Reference was made to Section 34(5)(b) of the Food Corporations Act, 1964 (for short 'the FC Act'), in support of the view that the CAG is entitled to conduct supplementary or test audit of the FCI by such person or persons as the CAG may by general or specific order direct. In view of the aforesaid provisions it was felt that the work could be entrusted to the firm of chartered accountants and surveyors/valuers. It was pointed out that by way of ground work, to begin with SGS India Limited, a member of International Institute of Surveyors and based in Mumbai, and specialising in stock management, warehousing services, etc., was approached for furnishing of work plan with quotations of its fees. Besides, it was pointed out that the antecedents & capabilities of other reputed firms were being ascertained. A reference was also made to the letter of the Chairman, Audit Board and Deputy CAG, dated July 1, 1997 addressed to the Secretary, Ministry of Food and Consumer Affairs, whereby the Government of India was informed that three months' time starting from August 1, 1997 would be required to complete the audit and for preparation of the report. The Chairman, Audit Board and Deputy CAG, marked the note of the AC(C) to the CAG with his comments for seeking approval to the following proposal of the AC(C):-
It is proposed that this work may be entrusted to reputed C.A. firms. Besides, as the work will involve complete physical verification of stocks/inventories, it is also proposed that for verifying the ground balances reputed firms of certified Surveyors/Valuers may be engaged as neither our Department nor the Chartered Accountants have the requisite technical expertise."
It appears that the proposal was seen and approved by the CAG on July 8, 1997. Since the CAG approved the proposal of AC(C), inter alia, to audit the book balances of the FCI, a list of firm of chartered accountants with points of 40 and above as per the panel prepared in 1986 in respect of Delhi, Bombay, Calcutta and Madras was taken into consideration and the following firms in terms of professional standing and repute as well as scores allotted to them were considered for the purpose of conducting audit of the book balances in various FCI zones:-
1. M/s. Thakur Vaidyanath Aiyer Northern Region.
& Co., New Delhi.
2. M/s. S.B. Billimoria and Co. Western Region.
3. M/s. Price Waterhouse, Calcutta. Eastern and North Eastern Region.
4. M/s. Fraser & Ross, Madras. Southern Region.
Accordingly these firms were recommended for entrustment of the audit of the book balances. This was approved by the Chairman, Audit Board and Deputy Comptroller and Auditor General [DAT(C)] on July 10, 1997. It appears from the note of AC(C) dated July 21, 1997 that subsequently M/s. Fraser & Ross declined to work on the ground that it was already engaged in statutory audit of several companies. It was decided by DAI(C) to engage M/s. Suri & Co., Madras, in place of M/s. Fraser & Ross.
11. On July 24, 1997, a tripartite meeting of the aforesaid four firms of chartered accountants, the firm of surveyors M/s. SGS India Limited, and the DAI(C), was held. In this meeting the following decisions were taken:-
(a) In view of shortage of time and the national importance of the project the work must start by 1st August'97.
(b) The physical verification of ground balances will be carried out by the surveyors in association with the C.A. firms in the respective FCI regions.
(c) Audit teams from this department will be simultaneously deployed with the teams of C.A. firms and the surveyors at the godowns. The audit teams will carry out the system checks as part of the sectoral review already under way in respect of FCI. They will also facilitate the other teams.
(d) To finalise the detailed work-programmes and movement schedules for each region, meetings will be held at Calcutta, Mumbai, Delhi and Chennai before end of July'97, between the respective C.A. firms, the surveyors and officers of this department.
(e) Immediately on completion of these details, the C.A. firms and the surveyors will quote their fees along with the detailed calculation for the same."
[see note of the AC(C) dated July 25, 1997]
12. Pursuant to the aforesaid decisions, the aforesaid firms of Chartered Accountants intimated their professional fees for the work in question as per the following details:-
Region Firm's Name Professional fees (Rs. In lakhs Revised Fees (Rs. in lakhs) Northern Region Thakur Vaidyanath Aiyar & Co, New Delhi.
134.19 90.87 Southern Region Suri & Co., Chennai 94.30 66.73 Eastern and North Eastern Region, Price Waterhouse & Co., Calcutta.
170.50 148.00 Western Region S. Billimoria & Co, Mumbai.
107.60 M/s SGS India Ltd., by its letter dated August 5, 1997, (for short 'the quotation') not only quoted the rates but also specified the modus operandi for verification of the stocks as per below:-
"This is in continuation to our discussions regarding above subject.
We have formulated the action plan for all the godowns of FCI covering the country for physical verification of the stocks. Our modus-operandi for the same, is as below:-
1. Quantity Quantity will be assessed on weight/volume ratio i.e. determination of density by physically determining bulk density/stowage factor.
SUCH STOWAGE FACtor will be uniformly applied in all centres for assessment of stocks. Alternatively the tonnage will be calculated on the basis of accessible portions of stacks.
2. Quantity Samples will be drawn from all accessible stacks, analysed and disposed off after spot analysis. Parameters for determining of quality of various commodities will be determined as below:-
(I) Rice: A composite sample of stacks will be analysed for following refractions:
(i) LB ratio
(ii) damaged
(iii) discoloured
(iv) discoloured
(v) chalky (II) Wheat : Wheat will be checked for weeviled bored kernels.
(III) Paddy: Paddy will be checked for weeviled damaged.
Based on above refractions of three commodities, we will be declaring class and category.
Damaged stacks Damaged cargo will be classified on the following parameters and will be assessed & analysed separately and report of the same will be submitted via our lab in due course and not at the spot.
(i) Sound grains
(ii) Broken of sound grains
(iii) Slightly damaged grains
(iv) Touched/discoloured & chalky grains.
(v) Completely damaged grains (vi) Weeviled grains
3. Rates :
We have worked out our rates on the basis of approximate data available with us for quantities available to be covered for physical verification which are as follows:-
(a) up to 10 million tonnes :
Rs.6.00 per metric tonne
(b) Above 10 and less than : 15 million tonnes Rs.5.25per metric tonne
(c) Above 15 and less than : 20 million tonnes.
Rs.4.75 per metric tonne These rates are all inclusive except for photography charges which will be additional at cost.
4. Reporting:
In order to facilitate coordinating with your good office, centralised reporting will be intimated to your office on every Wednesday for the previous week from our Delhi office. The name of contact person is MRS. IPSITA PATEL, alternative names are Mr. Kamal Poplai and Capt. Y.N. Pushkarna and the fac nos. are as below:
011-682 4182 011-692 9675
- Number of godowns covered
- Quantity assessed per godown and which will be sent in the format as per Annexure-I. To ensure smooth functioning of the operations, we have to prevail upon your good office to instruct FCI to extend full co-operation, provide adequate labour, ladders, calibrated scales, etc. etc. Enclosed is the format as per Annexure-II, which if presented to our team prior to commencement of assessment of individual godown will facilitate the process of assessment. Godown in charge are requested to keep this information ready in advance.
FCI to kindly ensure that all stacking in the godowns is done in regular geometric shapes and no stacks are presented in collapsed stage.
Cargo stacked in the open storage will be construed as a godown, subject to a maximum ceiling of 5000 tonnes.
No stack should be under fumigation at the time of inspection. Tentative programme of individual region/zone will be submitted in advance, however any changes in the scheduled program, if any, will be informed one week ahead of such changes.
No receipts/dispatches should be undertaken during the inspection of godowns.
We hope you will find our offer competitive, in case any query, pl. feel free to contact us and we look forward in associating with you and awaiting work order for the same.
xx xx xx"
On receipt of the rates, the AC(C) on July 25, 1997 recorded a note in which the rates quoted by SGS India Ltd. were described to be within the limits prescribed by the Wealth Tax Rules, 1957. The terms and conditions under which the work was proposed to be entrusted to the surveyors M/s. SGS India Ltd. were quoted in para 16 thereof which reads as follows:-
"* Complete physical verification of ground balances of wheat, rice and paddy held by Food Corporation of India as well as by the State Agencies for the Central Pool will be carried out by the firm of Surveyors in association with the firms of Chartered Accountants for the respective zone of FCI.
* The physical verification will include hundred percent counting of the bags with appropriate weighing of the bags.
* The firm of Surveyors will carry out quality testing of the food stocks as per established international norms and will report on the same.
* The firm of Surveyors will furnish reports of physical verification in the formats prescribed by this office.
* The firms of Chartered Accountants will verify the book balances of foodgrains as on 31st March 1997 in the respective Zones. Certification will take into account opening balance as on 1st April 1995, transactions relating to procurement/acquisitions during 1995-96 and 1996-97 and issues during these years.
* On completion of the verification of book balances and ground balances, discrepancy statements will be jointly authenticated by the authorised representatives of the firms of Surveyors and that of the Chartered Accountants as per prescribed forma.
* The verification of book balances will also be authenticated by the firm with confirmation by the authorised representative of FCI.
* The work will be completed within 30th September 1997. Any spill-over beyond this date, due to factors beyond the control of the firm, will be considered.
* The verification certificates of the firm are to be sent to MAB-IV, New Delhi, with copy to the office of the CAG.
* The firm will be paid for the verification work on completion of the same, and on the basis of actual quantity verified.
In para 17 of the aforesaid office note, it was proposed that the work of physical verification of stocks be entrusted to M/s. SGS India Ltd., Mumbai. This para reads as under:-
"17. In view of para 15 above, it is proposed that the work of physical verification of the stocks of wheat, rice and paddy of FCI and agencies of State Governments may be entrusted to M/s. SGS India Limited, Mumbai, subject to the terms and conditions stipulated in para 16 above and at the rate quoted by the firm.
The requisite approval to the proposals was sought in para 18 of the office note, which states as follows:-
18. CAG's kind approval is solicited for the proposals contained in paras 13 and 17 above."
The proposal was recommended to be accepted by the DAI(C). Accordingly on August 11, 1997, the CAG accepted the proposal.
13. The above facts which have been culled out from the official record of the CAG particularly the office nothings show that the proposal to appoint SGS originated from AC(C) Shri D.J. Bhadra and not from the SGS. The reason for appointment of SGS as surveyor based upon the magnitude of the work involved and the time constraint within which it was required to be completed. Keeping in view the two factors it was considered that the work needed to be executed by firms specialising in stock management, warehousing services, etc. From a conjoint reading of the office nothings dated July 25, 1997 and August 11, 1997 of ACC(C) Shri Bhadra it is apparent that SGS was selected to undertake physical verification of stocks of food grains of the FCI all over India in view of its experience, expertise and size. Even the petitioner in his report dated March 20, 1998 relating to "Special Audit of Food Corporation of India" described SGS as well known and reputed firm of stock verifiers. At this stage it will be necessary to quote the relevant part of the report, which is as follows:-
"Following Government of India's request vide D.O. letter No. 5-26/97-BP I/S (FaC-S)/143/97 dated June 30, 1997 Shri B.K. Taimni, Secretary, Ministry of Food & Consumer Affairs, (Department of Food & Civil Supplies), New Delhi, to the Comptroller & Auditor General of India, CAG had got the total stocks of wheat, rice and paddy of Food Corporation of India physically verified. For the purpose, CAG had appointed a well-known and reputed firm of stock verifiers for determination of such stock in all Depots of FCI and also a panel of reputed firms of Chartered Accountants, who had to work out the stock balances as on 13.3.1997 with reference to the stock verification report of the verifiers...."
It may be pointed out that the petitioner had taken over as the Principal Director of Commercial Audit and Ex-Officio Member, Audit Board-IV, New Delhi, (for short 'MAB-IV') on December 4, 1997 and the report rendered by him was in that capacity. We hasten to add that the aforesaid remarks made by the petitioner relate to the reputation of the firm and we are not referring to these remarks to convey that the petitioner was satisfied with the execution of the work by SGS. In the circumstances, it appears that AC(C) Shri Bhadra had proposed the name of SGS on relevant considerations. This is also borne out from the affidavit of Shri R. Srinivasan, Deputy Director (Legal) of the third respondent in the office of the CAG dated May 8, 2000, in which it is stated that respondent No. 11-SGS was selected after carefully ascertaining the credential of the firm and its suitability for the work. It was also averred that the respondent No. 11 was engaged as no other firm possessed the technical skill and the coverage required to undertake the work of physical verification on all India basis. The affidavit refers to the fact that the firm has all India reach having at its command 26 labs, 40 officers and over 1700 employees and considerable experience of over 40 years of inspection of all kinds of cereals as also verification and supervision of goods discharged and loaded at various ports in India, determination of weight of such goods by mechanical as well as volumetric methods, drawing appropriate samples, quality inspection and analysis, and the extensive experience of working with major central public sector undertakings like SAIL, BPCL, ONGC, BHEL, MMTC as well as various other State Government organisations like Electricity Boards and Municipal Bodes, Public Health Engineering Departments. In the private sector, the firm had been working for Hindustan Lever, Essar Steel, Nestle India, Indian Tobacco Company, Ranbaxy Lab, Tata Exports, TISCO etc. It is also stated that it was ensured that the rates quoted by respondent No. 11 were reasonable and were compared with the sale of fees charged by registered valuers, and the rates were found to be within the limits prescribed by the Wealth Tax Rules. It is asserted that the fact that son of respondent No. 4 was working in respondent No. 11-SGS did not influence the decision to award the work to respondent No. 11. According to the affidavit, the decision was an institutional decision and not of any individual.
14. In the affidavit of Mr. Iain L. Webster, CEO and Managing Director of respondent No. 11, dated November 19, 2001 it is stated that respondent No. 11 is the larger inspection, testing and verification organization headquartered in Geneva, Switzerland; that SGS operates in 140 countries through out the world from 850 offices and 340 laboratories; that SGS in India had been operating for almost 50 years and has under its umbrella extensive network of 35 offices and 27 laboratories; that respondent No. 11 offers a wide range of independent services to most industries and has a specialised work force of around 2000 employees; that respondent No. 11 deals with agricultural products/commodities, food grains, textiles, minerals and mines, machineries, oil and petroleum products etc; and that respondent No. 11 is an ISO 9002 certified company having well documented practiced system for its branches across the country. The affidavit also brings out the fact that respondent No. 11 has undertaken work of various government departments and undertakings either through commercial negotiations or through empanelment or otherwise. It is claimed that respondent NO. 11 has worked for 130 companies including public sector organisations. Names of some of the government departments and organisations have been referred to in the affidavit. These are-
(i) Ministry of External Affairs.
(ii) World Food Programme.
(iii) Bharat Petroleum Corporation Ltd.
(iv) Project & Equipment Corporation.
(v) Punjab State Electricity Board.
(vi) Petroleum Conservation Research Association.
(vii) Delhi Vidyut Board.
(viii) UNICEF.
(ix) Food Corporation of India.
(x) NAFED.
It is also asserted that respondent No. 11 in the last five years has undertaken work of inspection testing and verification entrusted to it by the following organisations against the fee mentioned against each of them:-
(1) MMTC Rs. 3.77 crores.
(2) Indian PetroChemical Rs. 1.64 crores.
Company.
(3) Steel Authority of India Rs. 1.13 crores.
(4) India Sugar & General Rs. 0.44 crores.
Industry.
(5) Karnataka Power Rs. 0.48 crores.
Corporation.
(6) Indian Aluminium Co. Rs. 0.44 crores.
(7) Hindustan PetroChemical Rs. 0.16 crores.
Corpn. (8) S.T.C. Rs. 0.49 crores.
(9) Cotton Corporation of India Rs. 0.32 crores.
15. It appears that though the office note dated July 8, 1997 recorded by AC(C) Bhadra speaks of the endeavor to ascertain the antecedents and capabilities of other reputed firms besides SGS for the purpose of obtaining quotations, noting has ben brought on record which could show that any such endeavor was made. Even the office file No. CA-III/259-97 of MAB-IV of respondent No. 3 relating to special audit of inventory/stocks held by Food Corporation of India, which has been numbered as Vol-I, doe snot contain any document to show that any such exercise was undertaken. The file at pages 5/C to 8/C has details with regard to the functioning of the SGS in India. There are no papers with regard to other firms of surveyors. It appears to us from the office note recorded by AC(C) dated August 11, 1997 that quest for surveyors ended as SGS was approached for a viable work plan in respect of the physical verification of the stocks as according to the enquiry it was revealed that SGS had the requisite size and expertise necessary for undertaking physical verification of stocks of food grains all over India. It will be too much to assume that the proposal was made to entrust the work of physical verification of stocks of wheat, rice and paddy pertaining to the FCI to M/s. SGS India Ltd. because the son of respondent No. 4 was working in that company. The proposal mooted by the office of the SGS was approved by respondent No. 4 Respondent No. 4 under Section 21 of the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971 (for short 'the CAG Act') had the power to delegate the functions/powers to a subordinate authority to consider the question of bestowing approval to the proposal. This fact was not disputed by the learned Solicitor General as also Mr. Shakdher appearing for the respondents. The unsavoury controversy would not have arisen in case respondent No. 4 utilising the power under Section 21 would have delegated the function of considering the proposal to a subordinate authority. This position in the first instance was not disputed by the learned Solicitor General as also Mr. Shakdher appearing for the respondents. Subsequently, however, they modified their stand and submitted that the overall responsibility was that of respondent No. 4. Assuming that Section 21 of the CAG Act was not applicable or the physical verification of stocks of food grains did not attract the provisions of the CAG Act, in that event there would be no statutory impedient in entrusting the matter of finalising the contract and matters connected therewith to a senior and responsible officer of the CAG. But it should not be lost sight of the fact that SGS is a vast company which has presence in 40 countries. In India alone it has a large work force in which Shri Ajay Shunglu, son of respondent No. 4, is one of the employees. He is neither the CEO nor holding a position next to the CEO. As per the affidavit filed by the SGS dated August 22, 2000, Shri Ajay Shunglu was appointed on November 15, 1995 as management trainee on probation for a period of six months with basic salary of Rs. 7,000/- per month. He was selected being M.A. Economics from New School, New York and was also having work experience of five years in different organisations. On June 1, 1997 Shri Ajay Shunglu was confirmed as Executive Marketing. On April 5, 1999, Mr. Ajay Shunglu was promoted to the post of Assistant Manager. As per the affidavit, no undue privilege or extraordinary benefit was ever given to him by the company and he got the promotions and increments in normal course of the business of the company in consonance with is qualifications and experience along with other employees of the company. The affidavit further goes on to clarify that no special favor or out of turn promotion was given to him. Besides, it is pointed out that he was never associated with the contract in question. It will be a sad day if a high constitutional authority gives a contract to a firm just because his son happens to be one of its employees out of a work force of 2000.
16. It is a salutary principle of jurisprudence that no one can be a judge in his own cause. The principle applies to both judicial as well as administrative decisions. Wether the judicial authority or the administrative authority is actually biased is not the test for the action to survive. The real test is whether the circumstances are such as to create a reasonable apprehension in the mind of others that there is a real likelihood of bias penetrating the decision. In case there is a real likelihood of bias entering the determination of the authority, whether judicial or administrative, the same will stand vitiated. Under our constitutional system where rule of law had been given primacy, justice must not only be done but also appear to have been done. For this the decision making process must not be polluted by considerations of pecuniary or personal interest. The decision must be just, fair and reasonable and in keeping with rule of law. In the instant case in approving the proposal of the AC(C) and the DAI(C) to entrust the work of physical verification to respondent No. 11, whether there was a real likelihood of respondent No. 4 being biased. In this regard, it needs to be considered whether a right minded person would think that in the circumstances there was a real likelihood of a bias on the part of the person who has to take a decision. Considering the facts that the proposal did not emanate from respondent No. 4 and the same was based upon the reputation, expertise, experience and size of SGS, it does not appear to us that there was any bias on the part of the respondent No. 4 in approving the proposal of AC(C) Bhadra. Besides, the work was of an urgent nature and keeping the time constraint in view and having regard to the consideration that there was no other company having an all India presence, experience and expertise as was possessed by SGS, the work was entrusted to SGS without inviting tenders. It is pointed out in the affidavit of respondent No. 11 dated November 19, 2001 that it has not only provided services to different organisations through various contractual arrangements, but it was also called upon to perform inspection of various organisations through empanelment.
17. We may note that when the work of audit is entrusted to chartered accountants or legal work is assigned to attorneys no tenders are called. Similarly, when the work of survey or inspections is to be executed, on parity of reasoning it may not be necessary in every case to call for tenders. In any event, in exceptional circumstances, the action of the respondents in not calling the tenders and assigning the work of SGS cannot be interfered with.
18. Learned counsel for the petitioner relied upon the decision of the Supreme Court in Ashok Kumar Yadav v. State of Haryana , , wherein it was held as under:-
"...There can be no doubt that if a Selection Committee is constituted for the purpose of selecting candidates on merits and one of the members of the Selection Committee is closely related to a candidate appearing for the selection, it would not be enough for such member merely to withdraw from participation in the interview of the candidate related to him but he must withdraw altogether from the entire selection process and ask the authorities to nominate another person in his place on the Selection Committee, because otherwise all the selections made would be vitiated on account of reasonable likelihood of bias affecting the process of selection. But the situation here is a little different because the selection of candidates to the Haryana Civil Service (Executive) and Allied Services is being made not by any Selection Committee constituted for that purpose but it is being done by the Haryana Public Service Commission which is a Commission set up under Article 316 of the Constitution. It is a Commission which consists of a Chairman and a specified number of members and is a constitutional authority. We do not think that the principle which requires that a member of a Selection Committee whose close relative is appearing for selection should decline to become a member of the Selection Committee or withdraw from it leaving it to the appointing authority to nominate another person in his place, need be applied in case of a constitutional authority like the Public Service Commission, whether Central or State..."
The Supreme Court in the aforesaid case was dealing with a situation where the selection of individual candidates to Haryana Civil Service was challenged. This was not a case where a contract was awarded to a company in which several hundred employees were working and one of the employees of the company happened to be related to the authority reasonable for awarding the contract.
19. In Tata Cellular v. Union of India , involvement of one of the members of the Tender Evaluation Committee, being Director General of Telecommunication and Telecom Authority, in the decision making process was considered to be necessary though his son was an employee of BPL Systems and Projects which had over 5,500 employees in 27 offices all over India and there were 89 officers of his rank. It was pointed out by the Department of Telecommunication, Government of India, that the involvement of Mr. B.R. Nayar as Director General of Communication as well as Telecom Authority, in the approval and selection of tender was indispensable. BPL Systems and Projects was one of the successful parties and it was claimed that BPL was selected pursuant to normal course of selection on merit. It was held that the involvement of Mr. B.R. Nayar, Member of the Tender Evaluation Committee, did not vitiate the selection on ground of bias.
20. Learned counsel for the petitioner relied upon a decision of the Queen's Bench Division in The King v. Sussex Justices , [1924] 1 K.B. 256. This case has no application to the case in hand. In that case a collision took place between a motor cycle belonging to the applicant and a motor cycle and side-car driven by one Whitworth. As a result of the accident Whitworth and his wife sustained injuries. In respect of those injuries a claim was made on behalf of the Whitworth against the applicant for damages. The police after making enquiries into the circumstances of the accident obtained summons against the applicant in driving his motor cycle in a manner dangerous to the public. The claim on behalf of he injured was made by a firm of solicitors in which one F.G. Langham was a partner. F.G. Langham was also a clerk to Justices trying the applicant. At the conclusion of the evidence the Justices retired to consider their decision. On return to the court the Justice informed the parties that they had decided to convict the applicant and they imposed a fine of $10 and costs. The applicant's solicitor brought to the notice of the Justices the fact that the deputy clerk of the court who had retired with the Justices was brother of F.G. Langham and was himself a partner of the same firm of solicitors in which F.G. Langham was also a partner. The conviction was quashed by the King's Bench Division. It found the presence of deputy clerk to be objectionable at the time the Justices retired to consider their decision. It seems to us that there is nothing common between the present case and Sussex Justices case (supra). In the peculiar circumstances of the case, the decision of Sussex Justices case was held to be vitiated in view of he deputy clerk's relationship to the case.
21. In R. v. Barnsley Licensing Justices, ex p Barnsley and District Licensed Victuallers' Assn. (1960) 2 QB 167 = (1960) 2 All ER 703, it was held by Justice Devlin, L.J., that the question of bias must be inferred from the circumstances. In this regard it was stated as follows:-
"We have not to inquire what impression might be left on the minds of the present applicants or on the minds of the public generally. We have to satisfy ourselves that there was a real likelihood of bias, and not merely satisfy ourselves that was the sort of impression that might reasonably get abroad. The term 'real likelihood of bias' is not used, in my opinion, to import the principle in R. v. Sussex Justices [(1924) 1 KB 256, to which Salmon, J. referred. It is used to show that it is not necessary that actual bias should be proved. It is unnecessary and, indeed, might be most undesirable to investigate the state of mind of each individual justice. 'Real likelihood' depends on the impression which the court gets from the circumstances in which the justices were sitting. Do they give rise to a real likelihood that the justices might be biased? The court might come to the conclusion that there was such a likelihood without impugning the affidavit of a justice that he was not in fact biased. Bias is or may be an unconscious thing and a man may honestly say that he was not actually biased and did not allow his interest to affect his mind, although, nevertheless, he may have allowed it unconsciously to do so. The matter must be determined on the probabilities to be inferred from the circumstances in which the justice sit."
22. Thus, the court is to determine from the circumstances whether or not there was a real likelihood of bias entering the determination of the authority. In R. v. Liverpool City Justices, ex p Topping , [1983] 1 All E.R. 490, the Division Court held that in such cases, the correct test to determine whether there is an appearance of bias, rather than whether is actual bias, and that as to the way in which the test is to be applied is to ask whether a reasonable and fair minded person sitting in court and knowing all the relevant facts has a reasonable suspicion that a fir trail for the applicant was not possible.
23. In case the work was entrusted to respondent No. 11-SGS on extraneous considerations there was no reason why the petitioner should have waited to file the instant writ petition. The writ petition has been filed admittedly after the work has been executed. The petitioner ought to have filed the writ petition immediately on entrustment of the work to SGS India Ltd. It is not the case of the petitioner that since he did not come to know of the entrustment of the work to SGS in August 1997, it was not possible to file the writ petition earlier than the date on which it was actually filed. In fat on December 4, 1997, as already pointed out, when the petitioner took over as Principal Director of Commercial Audit and Ex-Officio Member, Audit Board-IV, New Delhi, he recorded in his report dated March 20, 1998 that the CAG had appointed a well known and reputed firm of stock verifiers for determination of such stock in all the depots of FCI. At that point of time he was not troubled by the close relationship of respondent No. 4 with one of the employees of the SGS. Rather he used laudatory words for SGS. In case respondent No. 4 had not acted impartially objectively and without bias, the petitioner could have given an indication to that effect in the report or could have filed the writ petition much earlier than the did, challenging the action of respondent No. 4 in approving the proposal to appoint respondent No. 11 to verify the stocks of food grains in the godowns of the FCI. The petition has been filed at a stage when the petitioner felt threatened by a departmental action in respect of a case of sexual harassment. We will revert to this aspect of the matter and deal with it, a little more, in detail at a later stage.
24. While we think that respondent NO. 4 would have been well advised if it had left the matter of selection of a stock verifier for the work in question to a serious and responsible officer, at the same time we do not find any material to hold that there was real likelihood of bias entering the decision of respondent No. 4 in according approval to the appointment of respondent No. 11 for carrying out the physical verification of the stocks of food grains in the godowns of the FCI. It is significant t note that the fourth respondents' son was one of the employees of SGS out of its work force of 1700 employees. No one else, apart from the petitioner, has challenged the appointment of respondent No. 11 to undertake the aforementioned survey. None of the firms of surveyors felt aggrieved by the appointment of respondent No. 11. Not even a single firm of surveyors has come up before us to alleged bias in selection of respondent No. 11 as the stock verifier for carrying out physical verification of stocks in the depots of the FCI. Even if the contention of the petitioner was to prevail it is too late in the day to cancel the contract in regard to which work has been executed. Therefore, for all these reasons the plea of bias falls and is hereby rejected.
25. It was also urged by Mr. D.N. Goburdhan that respondent No. 4 against whom allegations of bias have been made has not filed an affidavit controverting them and the allegations should be deemed to have been accepted by him. It may be noted that the allegations are of a general nature as opposed to specific ones and are based on the assumption that since the son of respondent No. 4 is working with SGS, the former must have favored the latter. The allegations are in the realm of conjectures and surmises and need not be answered by respondent No. 4 on affidavit. The Supreme Court in Hem Lal Bhandari v. State of Sikkim and Ors. , , where allegations of mala fides were levelled against the Chief Minister of Sikkim in relation to a detention matter, held as follows:-
"7. The petitioner has made various allegations of mala fides against the Chief Minister of Sikkim. These allegations are not supported by any acceptable evidence. Therefore, we do not propose to consider them. Much was made of the fact the Chief Minister has not filed a counter-affidavit himself denying the allegations. According to us it is not necessary since the allegations are wide in nature and are bereft of details. We do not think it necessary in all cases to call upon persons placed in high positions to controvert allegations made against them by filing affidavits unless the allegations are specific, pointed and necessary to be controverter..."
Following the principle laid down by the Supreme Court in the above decision, we see no force in the submission of the learned counsel and reject the same. In so far as the submission of the learned counsel for the petitioner that the work could have been undertaken by the employees of the office of the CAG as it has a large work force of almost 50,000 employees is concerned, it appears from the affidavit and the office nothings that the work of physical verification of the stocks was a specialised type of work and they did not have the requisite expertise for the same.
26. Mr. Goburdhan next contended that despite the fact that the scope of the work was reduced, respondent No. 11 was paid full amount without any consequential reduction. He also submitted that the work performed by respondent No. 11 was not up to the mark and there were several deficiencies in it. According to him, at least on this score deduction should have been made from the amounts paid to it. We have given our deep consideration to the submission. We may recall that from the office note of the AC(C) dated July 8, 1997 it appears that special audit in respect of stocks of food grains in respect of 1547 godowns was contemplated. On that basis respondent No. 11 was approached for a viable work plan in respect of physical verification of the ground balances of the stocks and inventories of the FCI. On August 5, 1997 SGS gave its action plan for physical verification of stocks and indicated its modus operandi for the same as per below:-
"Quantity will be assessed on weight/volume ratio i.e. determination of density by physically determining bulk density/stowage factor.
xx xx xx"
Besides, it also quoted the following rates for undertaking physical verification of stocks:-
"a) up to 10 million tonnes :Rs. 6.00 per metric
tonne
b) Above 10 and less than :Rs. 5.25 per metric tonne
15 million tonnes
c) Above 15 and less than :Rs.4.75 per metric tonne
20 million tonnes.
These rates are all inclusive except for photography charges which will be additional at cost."
On August 12, 1987, SGS quoted the following revised rates:-
"a) up to 10 million tonnes :Rs.6.00 per metric tonne.
b) Above 10 and less than 15 million tonnes .
:Rs.5.00 per metric tonne.
c) Above 15 million tonnes :Rs.4.00 per metric tonne..
These rates are all inclusive of photography and development charges."
The work of physical verification of stocks was entrusted to respondent No. 11 vide letter of the AC(C) dated August 13, 1997. The letter postulated physical verification of stocks which was to include 100% counting of bags with appropriate weighing of the same. It needs to be emphasised that the letter of the AC(C) was not in consonance with the quotation submitted by respondent No. 11. While respondent No. 11 by its letter dated August 5, 1997 had specified use of volume density method for determining the stocks, the letter of the AC(C) dated August 13, 1997 talked of physical verification of the stocks including 100 percent counting of bags with appropriate weighing thereof.
27. It appears from the office note dated August 22, 1997 that the representatives of respondent No. 11 met Shri I.P. Singh, ADA(I) in his Chamber on August 19, 1997. At the meeting, the AC(C) was also present. They pointed out that respondent No. 11 was facing difficulties with some of the terms specified in the work order placed on it. It was emphasised that 100 percent counting of bags in each of the godowns will take a long time as each stack would have to be broken and counted. Besides, each bag will have to be weighed as the bags may not be of standard weight. It was suggested that respondent No. 11 should be permitted to adopt system of determination of total weight of stocks by volume-weight ratio taking into account the all India average of density factory of the stacks. It also needs to be noticed that in the meeting it was pointed out that the counting of bags is to take place in 2492 godowns. The difficulties were also discussed on August 19, 1997 with the CAG. The note dated August 22, 1997 of the AC(C) records as follows:-
"Captain Y.N. Pushkarna, Area Manager and Shri Kamal Poplai, Manager Operations of M/s. SGS India Ltd. met Shri I.P. Singh, A.D.A.I. in his chamber on 19 August 1997. The undersigned was also present. The officials of M/s. SGS India pointed out that the Firm was facing difficulties with some of the terms specified in the Work Order placed on them.
(a) They submitted that if 100% counting of the bags in each of the 2492 Godowns was carried out, the physical verification of ground balances would take a long time and will have to be extended way beyond 30.9.97, as each stack would have to be "broken" and counted, as well as weighed in as much as the bags may not always be of a standard weight. They suggested that they be permitted to adopt the system of determination of total weight of a stack by volume-weight ratio, taking into account the all-India average of density factor of the stacks, determined by them by averaging such density factors found by them in the four Zones of the FCI, in the pilot studies conducted by them earlier. They also pointed out that as per their quotation, quantity is to be assessed on weight volume ratio.
b) Secondly, they pointed out that the adoption of a "cut-off date" by the physical verification teams, was not feasible and it was for the Chartered Accountant Firms to work out the ground balances as on 31.3.97, from the figure furnished by the Surveyors on the date of physical verification.
c) Thirdly, they sought changes in the format of certificates to be furnished by the teams conducting the physical verification.
The above submissions were thereafter discussed by the C&AG on 19th August 1997, with the officials of M/s. SGS India Ltd. Shri I.P. Singh, A.D.A.I., Shri Abhijit Das, Secretary to C&AG and the undersigned, were present.
The following decisions were taken:-
1. A sample of 16 (sixteen) bags or 1% of the stacks, whichever is higher, should be taken from each stack in each godown. These bags would be weighed and shortages worked out based on this sample. Also, the density factor for assessment of quantity on volume/weight ratio, specific to that godown only, would be determined.
2. The sample bags should be weighed 100%.
3. In addition 500 stacks at random are required to be "broken" and completely counted and weighed on all All-India basis.
4. This apart, the method of determination of quantity by volume-weight ratio would be applied to all the stacks in the Godown concerned, taking into account the density factor described above. Based on this method, the number of standard bags would also be worked out.
5. The verification would be conducted only in respect of the Godowns owned/hired/leased by the Food Corporation of India.
6. The C&AG directed that the determination of the ground balances as on 31.3.97, by taking into account the receipts and issues between the date of physical verification and 31.3.1997, is to be carried out by the Firms of Chartered Accountants. Therefore, no cut-off date need be specified by the physical verification teams.
7. The C&AG also desired that the format for certificates required to be furnished by the Surveyors, be re-examined by Shri IP Singh, A.D.A.I. and the Surveyors.
Accordingly, a Meeting was held by Shri I.P. Singh, A.D.A.I. on 21 August 1997 with Captain Y.N. Pushkarna and Shri Kamal Poplai, representatives of M/s. SGS India Ltd. Shri D.J. Bhadra, A.C.(C) Ms. Vijaya Moorthy, MAB-IV, New Delhi, Shri Preman Dinaraj, Director, O/O MAB-IV, New Delhi were also present.
After detailed discussions, taking into account the relevant factors, the following were agreed to:
1. M/s. SGS India Ltd. will carry out the physical verification of ground balances, in accordance with the procedure as detailed in Chapter 10 to be read with Appendix-10 of Internal Audit Manual (Volume-I) of the Food Corporation of India.
2. A minimum of 16 Bags or 1%, whichever is higher, of the foodgrains from each stack, from each Godown, is to be selected for Random sampling as prescribed in the Paragraph 1 above. The average density as also the average weight per bag is to be worked out from the stack of sample bags. With this, the Weight-Volume Density Analysis of each stack in the concerned godown is to be carried out for arriving at the total weight of that stack and the number of bags per stack in the concerned Godown. Further one normal stack, per Godown subject to a minimum of 500 stacks all over India, is required to be fully counted and weighed and the results obtained, be compared with the sample figures already arrived at. This will help in determining the corrective factor wherever necessary to be adopted in the Weight Volume Density Analysis.
3. In addition, wherever there are abnormal shortages, such Godowns will be subjected to detailed physical verification. If any stack arouses suspicion, such stacks will be subjected to 100% counting and weighment. Besides, 100% weighment shall be conducted in respect of Baby Stacks (defined as stacks where the number of bags is less than 20% of the total number of bags received right from the creation of the stack).
4. The verification would be conducted only in respect of the Godowns owned/hired/leased by the Food Corporation of India.
5. The Surveyors will only declare stocks available in various godowns as on the date of start of physical verification of the Godown.
6. The Certificate of Physical Verification required to be furnished by the Surveyors as already enclosed with the Work Order will remain as it represents the ground balances of the Godown as a whole. The formats of Certificates now proposed by M/s. SGS India Ltd. can be attached along with the prescribed certificate. The responsibility for accuracy and veracity of the certificates so furnished would rest with M/s. SGS India Ltd.
7. With a view to ensuring the authenticity and acceptability of the findings and conclusions thereof, and to avoid any disputes at a subsequent stage, M/s. SGS India Ltd. may get the same duly signed by the Authorised Representative of the concerned Godown/Warehouse/Depot. A copy of the same may also be handed over to the Authorised Representative of the FCI and acknowledgement obtained for record. Wherever FCI representative refuses to sign the report of SGS (India), they will record this fact and proceed further for the verification of other godowns.
8. On intimation regarding completion of 10% of the Physical Verification of Ground Balances, and on receipt of the prescribed requisite Reports from the Surveyors, a review would be undertaken at the Office of the C&AG, to be attended by the Auditee (FCI), the Surveyors, and the Chartered Accountant Firms."
28. Thus, it is apparent from the reading of the office note that the physical verification of stocks was to be undertaken by following volume-density method. This was necessitated in view of the peculiar circumstances which are also apparent from the office note recorded by the DAI(RC) on February 3, 1998:-
"From the previous notes, it is apparent that SGS has followed a method of determination density not strictly in accordance with the method suggested by us. The methodology followed by them has been explained in their note dated 31.1.98 which according to them was necessitated because of ground realities and other problems encountered (like resistance byC FCI staff itself, labour problems, non-availability of weighment facilities, logistic constraints) during verification of stock of more than 20,000 godowns.
The proposal of the DAI(C) that we ask SGS to do the verification exercise again for each godown strictly as per our guidelines will have its own problems as it transpires now that the number of godowns may be in the vicinity of 15,000 to 20,000 (I have requested AC(C) to find out the exact number of godowns). It will be a phenomenal exercise and many of the problems encountered earlier may still persist. Moreover from April onwards, fresh wheat stocks will start arriving in large quantities, it is doubtful whether FCI will be in a position to assist/cooperate in the exercise of reverification. The Case will have to work out everything afresh because after last verification, fresh procurement of Kharif and Rabi crops would completely change the stock position.
Therefore, the matter needs to be discussed in detail as suggested by DAI(C) in para 10 of his note dated 27.1.98.
Sd/- 3/2/98 DAI(RC)"
29. From the aforesaid office note it appears that number of godowns in which the food grains were stored were between 15,000 to 20,000 and not 1,547 or 2,492 as estimated earlier. Respondent No. 11 in its counter-affidavit, affirmed on July 25, 2000, underlined the magnitude of work. The relevant part of the counter affidavit reads as follows:-
xx xx xx It is also submitted that 11 million tons spread in 15000 godown represent approximate 70,000 stacks, each stack normally being about 150 MT. It also represents a total number of bags (on basis of 96 Kg/bag) amounting to 115,789,474. To weigh a stack means performing several operations which requires time and manpower as well as equipment - dismantling of the stack, loading of bags on trucks, weighing the trucks on weigh-bridge, discharging the trucks, restacking the bags. One stack would require abut 12 hours (one day) and around 30 labour/truck drivers, weighing bridge operator) as well as the constant presence of at least 3 Inspectors of the answering Respondent. Hence even working on 10 Godowns per day in each area i.e. 40 Godowns per day, the operation would require 1750 days in the event there are no interruptions and no stock moves during the period. It would also require the presence of 1200 persons constantly on the job for the period as well as 120 Inspectors of the answering Respondent Company permanently present for the same period.
xx xx xx"
30. In case 100 percent bags would have been counted and weighed, it would not have been possible to complete the work within few months keeping in view the number of godowns which had to be covered and also having regard to the large stocks of food grains. Therefore, volume-density method was agreed to be employed for the purposes of verification of the stocks. If we go by the original understanding between the parties, it was not in the contemplation of the parties that the stocks in 15,000 to 20,000 godowns of the FCI will have to be verified. When the first note was recorded by the AC(C) on July 8, 1997 he had visualised the work to be undertaken in 1547 godowns. Subsequently, it was perceived that there were 2492 godowns. Even this figure was not correct. As is apparent from the office note dated February 3, 1998 recorded by the DAI(RC) and the affidavit of respondent No. 11, it was ultimately realised that 15,000 to 20,000 godowns were required to be checked by the SGS. Thus this was not the original understanding of the parties and surely not what respondent No. 11 had bargained for. Enormous task of physical verification of stocks of food grains kept in 15,000 to 20,000 godowns located in different parts of the country required deployment of large infrastructure and manpower Despite the fact that the work had to be undertaken in 15,000 or 20,000 godowns, respondent No. 11 was paid in accordance with the rates quoted by it at a point of time when it was thought that work is required to be undertaken in 1547 godowns only. We should not be understood to convey that respondent No. 11 was paid less. Respondent No. 11 was paid according to the actual quantity verified. It may also be mentioned that though the work order dated August 13, 1997 provides for 100 percent counting of bags, it does not provide for 100 percent weighment of bags. Therefore, to expect that each bag should have been weighed is even beyond the scope of the work order. According to the stand of respondents 1 to 9, as referred to in their affidavit dated 8th May, 2000, complete extent of the work could not be visualised in the first instance in view of its uniqueness and vastness of the operation involved an the decisions taken on August 21, 1997 were in the nature of expounding, clarifying and streamlining the scope of the work. There is no material on record to fault the stand taken by the said respondents.
31. Learned counsel for the petitioner pointed out that the work executed by respondent No. 11 was not satisfactory. We have gone through the record. We find that on January 27, 1998 A.C.(C) recorded a note in which deficiencies were pointed out in the physical verification of the stocks of food grains by the SGS. The said office note inter alia pertains to the analysis of 100 certificates submitted by the SGS relating to physical verification of stocks of the FCI (for short 'the certificates'). Summing up the deficiencies in the certificates, the office note records as follows:-
" xx xx xx From the foregoing, it emerges that (I) in most of the cases SGS (India) does not appear to have applied the agreed upon methodology in letter and spirit; (2) there is difference in methodology adopted in respect of North-West-South and of East Zone; (3) there are some calculation errors/clerical errors; (4) Whereas in the South, FCI representatives appear to have signed the working sheets without protest in Karnataka, Kerala and Tamil Nadu (In Andhra Pradesh there is some), in the North the incidence of such protests is much higher.
Another important point is whether the methodology prescribed envisaged the repetition of the procedure of creating a sample stack in each godown or that the experience of one godown was to be used in the depot in which the godown was.
It is further submitted that it may kindly be decided whether and to what extent SGS (India) is to be asked to re-do the verification and what is the exact methodology. If with reference to the final interpretation of the methodology, some or a large number of depots are to be reverified, then a list of such depots will have to be prepared. Preparation of this list can be completed only after all the certificates have been checked.
We may also need to ascertain as to (1) why the staff of MAB attached to the verification team of SGS could not intimate the failure of SGS to follow the approved methodology and (2) why the certificates received from SGS were not verified as and when these were received so as to detect well in time the deviation from the methodology.
Sd/- 27.1.98 (D.J. BHADRA) A.C.(C)"
Again in office note recorded by the DAI(C) on January 27, 1998 it was recorded that on scrutiny of about 100 certificates out of a total of 1511 certificates it was found that most of them were deficient and the figures of stocks mentioned therein contained errors and omissions. The deficiencies were attributed in the note to the failure of the SGS to educate the manpower employed by SGS to follow the correct methodology or to evolve the system of supervision and monitoring to ensure that proper methodology was followed and errors/omissions were detected and rectified soon after their scrutiny. Besides, it was pointed out that if the certificates had been checked by the staff of the MAB the deficiencies in the certificates could have been detected much earlier. It was also suggested that in case the certificates were accepted with deficiencies, it could be reported to the Government of India that SGS was appointed in view of its reputation and past experience, and after verification it has certified a certain stock balance but it will not be possible to certify that the methodology adopted by the SGS was correct or appropriate and the certificates after scrutinisation were found to be acceptable. An apprehension was also expressed that the Government would not be satisfied with the certificates and in case question was raised on merits of the certificates it would be difficult to answer the same. The note referred to the fact that already the report has been delayed and if the SGS was asked to repeat the exercise it will take at least another four to five months to complete the task since the godowns will have to be visited again. It was suggested that since the certificates submitted by the SGS were found to be not acceptable it was not prudent to make any payment to them even on percentage basis or in respect of godowns for which certificates were found to be correct. It was pointed out that once the SGS received part payment it would lose motivation for repeating the verification work and the entire payment would be infructuous as new verifier would like to repeat the entire exercise. It was also suggested that since the matter was quite serious the CAG may like to call a meeting for reviewing the matter and taking final decision.
32. On February 3, 1998, the DAI(RC) recorded his comments and it was pointed out that the SGS had followed a method for determining density not strictly in accordance with the method suggested to it. It was also pointed out that the methodology followed by SGS had been explained in its note dated January 31, 1998 which according to the SGS was necessitated because of ground realities including resistance by the FCI staff, labour problems, non-availability of weighment facilities, logistic constraints and the fact that stock of more than 20,000 godowns had to be verified. In connection with the proposal of the DAI(C) that SGS should be asked to undertake the verification of the stocks again in respect of each godown the DAI(RC) was of the opinion that it will have its own problems as it transpired that the number of godowns to be in the vicinity of 15,000 to 20,000 and it would be a massive exercise and many of the problems encountered earlier would still persist. Besides, from April onward fresh wheat stocks would start arriving in large quantities. A doubt was expressed whether the FCI will be in a position to assist in the exercise of reverification and the Chartered Accountants would have to repeat the exercise again as after verification fresh procurement of kharif and rabi crops would completely change the stock position.
33. It appears that keeping in view the aforesaid office notes a meeting of the concerned officers were held as per the direction of the CAG dated February 4, 1998. In this meeting it was noted as follows:-
" xx xx xx
2. The committee noted that the following two options were identified in the note dated 27.1.1998 by DAI (Commercial).
(i) That verification certificates as given by SGS by acted upon.
(ii) That SGS be asked to undertake the verification of stocks again.
[Reference: paras 5 & 6 of page 6/N-F.No.CA.III/259-97 (Vol.III)].
The Committee did not go into award and management of the contract etc. It considered the question whether a report could be issued to the Government on the basis of the verification as done by SGS or whether the verification be redone.
3. The Committee felt that in the instant case the work had to be got done by specialised outside agency. Nevertheless in the opinion of the Committee, it would be desirable if the CAG is to be associated to ensure that the methodology followed is cleared by CAG, that the laid down methodology has been actually followed in field and that the sample chosen for verification has CAG's clearance.
4. In this case, the Committee noted that there have been significant gaps in these areas. No doubt in a meeting taken on 21.8.1997 (pages 265-264/c-F.No.CA.III/259-97 Vo.I), the sample and also the methodology was discussed with the firm of verifiers. It was also decided that after 10% of the work was done, the position would be reviewed. However,the fact remains that though MAB staff were attached with the SGS teams visiting the depots, these aspects apparently were not overseen as the work went along. In fact, it is evident from sub-para (c) of page 8/n of F.No.CA.III/259-97-Vol.1) that the task entrusted to the audit teams was to 'carry out the system checks as part of the sectoral review already under way in respect of FCI.' They were also to 'facilitate the other teams.' The review after conclusion of 10% of work also did not take place, notwithstanding the fact that the local problems being encountered by SGS were getting thrown up. Reportedly some of these local problems compelled SGS to follow different methods in different places. In other words, these MAB teams, in so far as SGS and Chartered Accountants were concerned, were merely trying to smoothen the working of both SGS and the firms of CAs. Once the overseeing role was forgone, it would naturally be impossible to inject this element ex-post facto. The only alternative would be to do the whole exercise again. This is not condoning any deficiency that may be there in SGS working, but it merely acknowledges that if IAAD intends to oversee any activity, that needs to be done at the appropriate moment.
5. It is true that SGS followed somewhat varying methodologies/sampling methods from place to place. Some of the instances, inter alia are:-
(i) The meeting dated 21.8.1997 referred to in para 4 above talked of drawing samples from each godown. The Committee however was advised that the discussions with SGS all through were with reference to a number of around 1600 which, as matter of fact, is the number of the depots and not godowns. In fact, the total number of godowns is still not known.
(ii) Even for drawal of specific samples, SGS has not followed any uniform practice.
(iii) While SGS has generally followed the volumetric method, in the Eastern Region they have followed the peripheral counting method to a large extent, due reportedly to local problems.
6. The findings of the Committee of three officers {PD(AEC), AC(C) and Director (DT)}, after detailed scrutiny of 50 cases, concluded that the departure/deficiencies, inter-alia, were as below:
(i) In 14 cases the density factor adopted for a depot related to another depot. This was stated to be due to lack of weighment facility in the depot.
(ii) In as many as 35 cases either samples were not drawn from the requisite number of stacks or sufficient number of bags were not drawn and so on.
(iii) In 3 cases the density factor was not worked out for the 3 different commodities (wheat, rice and paddy) separately.
7. In an exercise as voluminous and wide-spread as this, there may be compulsions due to local conditions leading to varied practice to some extent. SGS too have apparently functioned under difficult local conditions. The point in that situation would be to judge whether the process consequently got vitiated to a point that the findings would become completely unreliable. The Committee, however, did not find any quick way to assess the degree/extent to which the departures in the sampling procedure and the methodology could have affected the final outcome. In this context, the Committee felt that one had to take note of the fact that the firm was selected on the basis of its standing in the field.
8. The Committee noted that Govt.'s request to CAG had come as early as in July 1997 and the request was to complete the verification within a month. That was obviously impossible and more than 6 months have already gone. If the exercise has to be redone, normally it would take another 4-5 months, quite apart from other consequential difficulties. With the General Election on, no exercise would be possible till the first week of March in any case. Shortly thereafter, the Rabi procurement would start in April and is likely to go on till June. When this procurement is on, all the depots would be in turmoil making any exercise of physical verification by an outside agency impossible. Therefore, in practical terms, the Committee noted, any re-verification would have to start only after June and would not be complete before September/October 1998. The Committee appreciated that this time-parameter, quite apart from any other factor, may not be acceptable having regard to the commitment given by CAG. Redoing the exercise would thus appear impracticable.
9. Under the circumstances, the Committee felt that subject to having the calculation errors corrected, there is perhaps no alternative but to proceed on the basis of the verification report as worked out by SGS. It was felt that a report on the following lines could be sent:
"Following Government of India's request vide DO letter No. 5-26/97-BP. I/S(FaC-S)/143/97 dated June 30, 1997 from Shri B.K. Taimni, Secretary, Ministry of Food & Consumer Affairs, (Department of Food & Civil Supplies), New Delhi, to the Comptroller and Auditor General of India, CAG had got the total stocks of wheat, rice and paddy of Food Corporation of India physically verified. For the purpose, CAG had appointed a well-known and reputed firm of stock verifiers for determination of such stock in all Depots of FCI and also a panel of reputed firms of Chartered Accountant, who had to work out the stock balances as on 31.3.1997 with reference to the stock verification report of the verifiers. Accordingly to the report given by the Chartered Accountant firms the ground balance of FCI as on 31.3.1997 was _____ MTs against the book balance of _____ MTs as per the records of FCI. The ground balance amounts to _____ MTs, representing _____ percent."
10. While coming to the above conclusion, the Committee was aware that there could be queries seeking elucidation etc. in regard, inter-alia, to the sampling procedure, the methodology of verification etc. Such cases, if any, would have to be handled as one gets along."
34. As is seen from above, the Committee noted the methodology employed by the SGS for physical verification of the stocks of food grains stored in the godowns of the FCI. It was also noted that generally SGS had followed volumetric method to assess the stocks of food grains lying in the godowns of the FCI except in the eastern region where it had followed peripheral counting method due to local problems. It was also recognised that in the discussions with SGS reference was made to around 1,600 godowns in which work was to be executed, but as a matter of fact the total number of godowns was not know, and actually the number of depots were around 1,600. The Committee also noted the deficiencies in the verification process of stocks pointed out by the committee of three officers based on scrutiny of fifty cases. The Committee was of the view that subject to having the calculation errors corrected, there was no alternative but to proceed on the basis of the verification report of stocks submitted by the SGS. This view was based on the following consideration:-
1. The exercise undertaken by the SGS was spread over in different parts of the country and was a voluminous one.
2. SGS had functioned under difficult local conditions which led to employment of varied practice for physical verification of the stocks.
3. Re-doing the exercise for verification of foodgrains in the depots of the FCI would present difficulties such as :-
(a) Fresh exercise had to be undertaken. It would take another four to five months.
(b) In view of the ensuing general election no exercise would be possible till the first week of March.
(c) Rabi procurement would start in April and was likely to go on till June.
(d) Physical verification by an outside agency would be impossible during the procurement season.
(e) The MAB teams did not oversee the execution of the work.
35. It is significant to note that the committee comprised of seven officers out of which three held a rank equivalent to that of a Secretary to the Government of India. It is difficult to hold without positive evidence that the view of the Committee report was vitiated by mala fides and was meant to favor SGS as son of the fourth respondent was working with it.
36. We cannot assume that the officers were not having their independent thinking in the matter and their decisions were based on extraneous considerations, or they were dancing to the tune of respondent No. 4. While it is true that there were calculation errors in the report of the SGS, but this view was based on sample study made after scrutiny of fifty cases. Due to the magnitude of work and various other factors as pointed out above, it was not feasible to re-check the stocks. Since there is no material on record to show that view of the officers was not a bonafide one, it is not possible to castigate them. In fact the committee did not make any attempt to whitewash the mistakes of SGS. But in view of the impracticability to undertake fresh exercise to carry out physical verification of the stocks of the FCI the Committee recommended acceptance of the report of the SGS, subject to having the calculation errors corrected. Pursuant to the report of the Committee, the respondent No. 4 on February 10, 1998 recorded the following note:-
" Let us pursue it and send the report to Government before the close of next week namely 20 February 1998.
I believe the work done has a significant potential for data base in relation to location and storage facilities of FCI. This must be put on the machine and organized in a manner where access by alphabet and regions is simple. While doing so the whole point about depot and godown should also be resolved.
Sd/ (V.K. SHUNGLU) 10.2.98"
Thereafter the report was sent to the Government of India. According to para 7 of the counter-affidavit of respondents 1 to 9, verification of the stocks of the FCI conducted by the SGS showed a shortage of 4.74 lakh metric tonnes of food grains valued at about Rs. 500 crores. The Minister of State in the Ministry of Consumer Affairs and Public Distribution, in answer to a parliamentary question on March 10, 2000, gave a statement in the Rajya Sabha that a shortage of about 4.74 lakh metric tonnes of food grains was found on physical verification of stocks held by the FCI. According to the affidavit, the Government accepted the report and decided to take the following action :-
"(i) To initiate action against officials responsible for the discrepancy where the shortages are more than 20%.
(ii) To devise a new methodology for physical verification with the assistance of Indian Statistical Institute, Calcutta and National Sample Survey and in consultation with C&AG of India.
(iii) To request CAG to undertake food stock verification of State Agencies.
37. Reverting to the question of payment to the SGS for the work carried out by it, we may refer to the note of the AC(C) dated March 20, 1998 in which the following two question were raised for consideration :-
1. Whether full payment to SGS as per work order ignoring deviations, omissions, etc. should be made,
2. Whether some deductions be made from the amount payable to SGS.
It appears that the aforesaid office note was placed before the respondent No. 4 who recorded the following note of his own:-
" In another file we have accepted the work of the surveyor and the chartered accountants and have decided to forward the certificate to Government. That being the case we may make payment agreed to and the extra amount already settled with Thakur Vaidyanath Ayer & Company for consolidation. Price Waterhouse have preferred an additional claim, that may be looked into by DAI(C) and we can take a decision on that separately.
Sd/-
(V.K. SHUNGLU) 20.3.98"
Once the Committee took a decision to accept the report subject to correction of errors and did not arrive at a conclusion that the deviations in the work assigned to SGS had vitiated the report, perhaps it was concluded that the payment to the SGS be made as per the rates quoted by it.
38. On March 26, 1998, the petitioner, being MAB and dealing with the question of payment to SGS and Chartered Accountants, made the following properties :-
" The quantity claimed to have been physically verified in the bill presented by M/s SGS will be restricted to the quantity reflected in physical verification certificates for each unit furnished by them and received in this office.
2. A proportionate deduction will be made from the bills of C.As for depots which have not been visited before the finalisation of reports or the result of which have not been included in the report, presuming that expenditure on visiting of all depots in a particular region is uniform. This has been so clarified now in your letter under reference.
3. No additional amount shall be paid to any of the C.A./Surveyor unless a communication to this effect is received from Headquarters office."
By a letter dated March 27, 1998, the AC(C) communicated the approval of the concerned authority to the aforesaid proposal Nos. 1 and 2. Thus, it appears that the bills were paid keeping in view the quantities physically verified by SGS. Having observed thus, we at the same time note that at one stage the deputy Comptroller and Auditor General, While clarifying that payment as per work done should be made and proportionate deductions could be made from the bills of the Chartered Accountants by taking into account the number of depots which they did not cover, also threatened disciplinary action against the petitioner in case orders of the fourth respondent in that behalf were not carried out. This is reflected from the communication of the Deputy Comptroller & Auditor General-cum-Chairman, Audit Board, dated March 26, 1998 to the petitioner. When an officer who is to make payment of the bills is threatened in this manner it is likely to affect his judgment and condition his mind. We do not approve of this. However, the warning was not given with regard to the payment of the bills of the SGS.
39. It was canvassed by Mr. Goburdhan that the work of physical verification under taken by the fourth respondent was beyond the scope of the powers of the CAG. Learned counsel for the respondents took the stand that the work assigned to SGS being work of physical verification of the food stocks of the FCI, it cannot be construed as an audit of accounts and was not an exercise conducted within the purview of Section 19 of the CAG Act and Section 34 of the FC Act. It was submitted on behalf of the respondents that since the exercise was not barred by any statutory provisions, the CAG accepted to undertake the work as requested by the Government of India. We have considered the submissions of learned counsel for the parties. It is difficult for us to accept the view that the exercise relating to verification of stocks did not fall within the purview of the CAG Act or the FC Act. The CAG is a constitutional authority and the duties, powers and obligations of the CAG are governed by the Constitution and the statute. It is not supposed to undertake an extra constitutional or extra statutory work. In case it takes up any assignment which does not fall within the purview of the statutory provisions, the staff of the CAG will not be bound to execute the same. According to Section 34(5)(b) of the FC Act, the CAG is entitled to conduct supplementary or test audit of the FCI either itself or by a person or person as he may direct. Section 34(5)(b) of the FC Act reads as follows:-
"Accounts and Audit:
34. (1) .....
(2) .....
(3) .....
(4) .....
(5) The Comptroller and Auditor-General of India shall have power -
(a) .....
(b) to conduct a supplementary or test audit of the accounts of a Food Corporation by such person or persons as he may authorise in this behalf; and for the purpose of such audit, to require information or additional information to be furnished to any person or persons so authorised, on such matters, by such person or persons, and in such form as the Comptroller and Auditor-General may, by general or special order, direct.
xx xx xx"
Thus, it is obvious that the work of supplementary audit of the FCI could be conducted by the CAG itself or any agency authorised by it. Thus, it cannot be said that appointment of SGS along with the Chartered Accountants to undertake physical verification of the stocks of FCI was outside the province of the fourth respondent. It seems to us that the word "audit" used in Section 34 cannot be construed in a limited sense. Audit of accounts of the FCI may require physical verification of the stocks held by it in order to ascertain whether the stocks reflected in the books of accounts match with the stocks actually held by it. Unless the physical verification of stocks is undertaken, going through accounts may not be sufficient. In this regard we may refer to "Statement of MAOCARO" 1988 which was issued under Section 227 of the Companies Act. MAOCARO 1988 applies to certain companies including companies providing services. Undoubtedly, the FCI will fall in the category of a company providing services. MAOCARO refers to matters to be included in auditors report. It while dealing with the subject of inventories provides as follows:-
xx xx xx " (iii) Inventories
* Ensure that physical verification is conducted at reasonable intervals of :
(a) finished goods:
(b) stores and spare parts:
(c) raw materials.
* See that the procedure followed for physical verification is adequate, having regard to size of the company and nature of its business.
* Ensure that cut off procedures have been followed.
* Further ensure that procedure for identifying damaged and obsolete items of inventory is proper and adequate.
* Also ensure that the discrepancy, if any, noticed on physical verification as compared to book records have been properly dealt with in the accounts.
* Compare the raw material consumption ratio for the current year with previous year.
* Ensure that method of valuation of ratio is appropriate and properly discharged in the accounts. * Further ensure that the method of valuation of stocks is same as that followed in the previous year.
* If there is change in the method of valuation, then the effect of such change in accounts should be separately disclosed and quantified."
40. Thus, the idea of physical verification of stocks is not foreign to the concept of audit. Rather it is part and parcel of the same. In a given case verification of stocks may become necessary for the purpose of audit of the accounts. It appears to us that even under Section 19 of the CAG Act, the CAG is empowered to audit the accounts of Corporations established by or under law made by Parliament. Section 19(2) of the said Act reads as follows:-
Audit of Government companies and corporations.
19(1) .....
(2) The duties and powers of the Comptroller and Auditor-General in relation to the audit of the accounts of corporations (not being companies) established by or under law made by Parliament shall be performed and exercised by him in accordance with the provisions of the respective legislations.
xx xx xx"
41. On the same principle, which we have employed for construing Section 34(5)(b) of the FC Act, we are of the view that the CAG was empowered to undertake the audit of accounts of the FCI and audit would also mean the verification of the stocks held by the latter. There is nothing in the CAG Act or the Constitution which debars the CAG from ordering physical verification of the stocks of food grains of the FCI. There is no force in the contention of the appellant and the same is accordingly rejected.
42. Mr. Goburdhan submitted that since it was a case of single tender contract exceeding Rs. One crore in value the previous consent of the Finance Ministry should have been obtained before disbursing the amount to the SGS. It was argued on behalf of the respondents that the Delegation of Financial Powers Rules on the basis of which this submission was made by the counsel for the petitioner does not apply to the CAG as it is not a department of the Government of India. It is not necessary to go into this question as we find that in response to the letter of the Deputy Comptroller and Auditor General of India dated August 13, 1997 requesting for funds to the tune of Rs. 17 crores in regard to the exercise to be undertaken for the purpose of physical verification of the ground balances of stocks of wheat, rice and paddy of the Food Corporation of India, the Government of India accorded approval vide letter of the Additional Secretary (Budget) to the Government of India, Ministry of Finance, Department of Economic Affairs, dated September 2, 1997, which reads as follows:-
"Kindly refer to your d.o. letter No. 2453-BRS/132-97(I) dated August 13, 1997, regarding verification of stocks of wheat, rice and paddy with the Food Corporation of India, by IA&AD.
2. We agree to an additional expenditure not exceeding Rs. 17 crore being incurred on the exercise in the current year. As this is not on a New Service, the Department may go ahead with the expenditure which may for the present be met by temporary reappropriation within Grant No. '33 - Audit'. Supplementary grant will in any case be necessary for expenditure arising out of Government decision on the Pay Commission's recommendations. This item can also be included in the Proposals at that stage.
Secretary (E) has seen.
xx xx xx"
43. Thus, it is apparent that expenditure not exceeding Rs. 17 crores was allowed by the Government of India. Once the expenditure of Rs. 17 crores was allowed to be incurred by the CAG on the aforesaid exercise, it cannot be argued that there was no sanction by the Government of India to incur the expenditure. Accordingly, the contention of the learned counsel that the CAG did not have the sanction to spend the amount for undertaking the exercise is rejected.
44. Mr. Goburdhan urged that honesty and integrity of SGS is in question and it was accused of bribing the ex-Prime Minister of Pakistan and others for securing a contract of pre-shipment inspection in Pakistan. It was stated that Ehtesab Bench of Lahore High Court, Rawalpindi Bench, Rawalpindi, by its order dated April 14/15, 1999 convicted the accused and sentenced them to various terms of imprisonment. It was pointed out that against the order of the Ehtesab Bench of Lahore High Court, an appeal was filed before the Supreme Court of Pakistan. The appeals were accepted and convictions recorded against and the sentences awarded to the appellants were set aside and the case was remitted to the court of competent jurisdiction for fresh trial in accordance with law. We are not concerned with what happened in Pakistan. The petitioner has not placed any evidence on record to show that any bribe was paid by SGS to secure the contract. In the instant case no inference of dishonesty or favoritism on the part of the SGS can be drawn on the basis of what is alleged to have happened in Pakistan.
45. Learned counsel for the petitioner submitted that the CAG was required to place the report regarding the physical verification/audit of the stocks of food grains conducted by respondent No. 11 and the Chartered Accountants before the Parliament. On the other hand, learned counsel for the respondents submitted that only physical verification of food grains was conducted and the report of physical verification of stocks was not required to be placed before the Parliament by the CAG. This submission of the learned counsel for the respondents proceeds on the basis that none of the provisions including Section 19 of the CAG Act and Section 34(5)(b) of the F.C. Act envisages verification of the stocks of food grains of the FCI. According to the learned counsel, the provisions of Section 19 of the CAG Act read with Section 34(5)(b) of the FC Act confer a power on the CAG to conduct an audit of accounts as distinct from physical verification of stocks of the FCI. As a sequitur it was urged that there is no obligation on the CAG to place the accounts of the FCI along with a report of auditors before the Parliament in terms of Section 19A of the CAG Act and Sub-section (7) of Section 34 of the FC Act. We have given our thoughtful consideration to the submissions advanced on behalf of the parties. We have already taken a view that physical verification is not foreign to the concept of audit. Rather it is part and parcel of the same exercise and in a given case verification of stocks may become necessary for purpose of audit of accounts. We have also found that the CAG is empowered to direct verification of the stocks of food grains of the FCI under Section 34(5)(b) of the FC Act and under Section 19 of the CAG Act. Under Clause (d) of Sub-section (6) of Section 34 of the FC Act, the auditors are required to send a copy of their report together with audited copy of accounts to the CAG of India who is empowered to comment upon or supplement the audit report in such manner as he may think fit. Under Sub-section (7) of Section 34 of the FC Act, any comments upon, or supplement to, the audit report made by the CAG under Clause (d) of Sub-section (6) thereof is required to be placed by the FCI before the Central Government. Again under Section 19A(1) of the CAG Act, the report of the CAG in relation to the accounts of a government company or a corporation referred to in Section 19 thereof is required to be submitted to the concerned government. Under Sub-section (2) of Section 19A of the CAG Act, the Central Government in turn is required to cause every report received there under to be laid as soon as may be after it is received before each house of Parliament. Therefore, under the aforesaid provisions of the FC Act and the CAG Act, the CAG is required to send the report to the Central Government and it is the duty and obligation of the Central Government to place it before the Parliament.
46. Before parting with the matter we would also like to consider the question whether or not this petition, which has been filed under the category of public interest litigation, is maintainable. In order to determine the question, it will be necessary to mention chronology of events :-
1. On 30 June 1997 the Secretary to the Government of India, Ministry of Food and Consumer Affairs, requested the CAG to conduct a special audit of inventories/stocks of rice held by the FCI.
2. On July 4, 1997, the Cabinet Secretary repeated the request for special audit in respect of inventories and stocks held by the FCI.
3. On December 4, 1997 the petitioner took over charge as Member Audit Board-IV.
4. On December 22, 1997 the petitioner noted certain deficiencies in the working of the SAG (see letter of the petitioner dated December 22, 1997 to the seventh respondent.
5. In March 1998 the FCI submitted report to the Government of India.
6. On March 20, 1998 the petitioner in his capacity as Member, Audit Board-IV, recorded a report with regard to Audit of Food Corporation of India in which it was inter alia stated that the CAG had appointed a well - known and reputed firm of stock verifies for determination of stock of food grains in the Depots of FCI and also a panel of reputed firms of Chartered Accountants to work out the stock balances as on 31.3.1997.
7. In June 1998 one thousand five hundred and sixty one certificates issued by SGS relating to verification of stocks were sent to the Government of India by the CAG.
8. On 18/23 August, 1999, a lady made a complaint of sexual harassment against the petitioner.
9. On November 19, 1999, fact finding committee submitted its report with regard to the aforesaid complaint of sexual harassment.
10. On November 29, 1999 the petitioner was placed under suspension pending enquiry.
11. On December 8, 1999 the petitioner filed the instant writ petition.
47. From the aforesaid chronology of events it is obvious that the petitioner filed the writ petition only after being charge sheeted in connection with the case of sexual harassment. In case the petitioner had any genuine grievance with regard to the appointment of SGS to verify the stocks of food grains of the FCI on the ground of the fourth respondent's son being an employee of the SGS or on the ground that the fourth respondent had shown a favorable bias towards the SGS in entrusting the work to it, a question arises why did the petitioner wait for so long for filing the writ petition after he took over the charge as MAB-IV. It is not claimed that the petitioner did not know about the employment of fourth respondent's son with the SGS and as soon as he came to know about the relationship he filed the writ petition. Rather, it appears that till March 20, 1998 the petitioner was of view that SGS was appointed as it was a well-known and reputed firm of stock verifiers. The change in the attitude appears to have taken place after the petitioner was charge sheeted even though he was not satisfied with the execution of the work by the SGS as is apparent from the letter of the petitioner dated December 22, 1997 to the seventh respondent (which is at page 74 of the paper book).
48. In In K.R. Srinivas v. R.M. Premchand and Ors. , , the Supreme Court held that a writ petitioner who comes to the court for relief in public interest petition must come not only with clean hands, like any other writ petitioner, but must further come with clean heart, clean mind and clean objective. In the instant case since the petitioner has come up only after he was charge sheeted it is difficult to accept the theory that the petitioner filed the instant petition because he was driven by public interest. The petition, therefore, does not fulfill the criteria for filing the public interest litigation as laid down in Srinivas 's case (supra). It is hard to believe that the petitioner filed the instant public interest petition bona fide for the purpose only of serving the public interest.
49. In a public interest petition court in order to check and prevent misuse of the remedy ought to examine the motive, if any, of the petitioner and ask itself the question: "Is there anything more than what meets the eye?" That was exactly what was laid down by the Supreme Court in Sachindanand Pandey and Anr. v. State of West Bengal and Ors. , .
50. The motive for filing public interest writ must be explored by the court with care and caution. In case the High Court finds the filing of the public interest litigation to be motivated by self interest of the petitioner for wreaking vengeance, it will not entertain the same.
51. In Chhetriya Pradushan Mukti Sangharsh Samiti v. State of U.P. and Ors. , , the Supreme Court held that public interest litigation cannot be initiated to settle private scores. It was also held that where it appears that the PIL is only a cloak to feed any grudge or enmity, the same should not only be refused but also strongly discouraged.
52. In Janta Dal v. H.S. Chowdhary and Ors. , , it has been held that the dominant object of public interest litigation is to ensure observance of the provisions of the Constitution or the law, which can be best achieved to advance the cause of community or disadvantaged groups and individuals or public interest by permitting any person, acting bona fide and having sufficient interest in maintaining an action for judicial redress for public injury or to put the judicial machinery in motion like actio popularis of Roman Law whereby any citizen could bring such an action in respect of a public delict.
53. Again in Malik Brothers v. Narendra Dadhich and Ors. , , the Supreme Court held that a public interest litigation is usually entertained for the purpose of redressing public injury, enforcing public duty, protecting social rights and vindicating public interest. The real purpose of entertaining such litigation lies in the vindication of the rule of law, effective access to justice to the economically weaker class and meaningful realisation of fundamental rights. In case a court finds that in the grab of a public interest litigation actually an individual's own interest is sought to be advanced or protected, it would be the bounden duty of the court not to entertain such petition as otherwise the very purpose of innovation of public interest litigation will be frustrated. Public interest litigation is in fact a litigation in which a person is not aggrieved personally but brings an action on behalf of the downtrodden or suffering masses for the redressal of their grievances. Applying the principles laid down by the Supreme Court it cannot be said that the instant petition has been filed by a person who is not aggrieved personally or who has no axe of his own to grind. Obviously, the petitioner has a personal interest in the litigation because of the disciplinary action initiated against him.
54. In the light of the aforesaid discussion, we consider it appropriate to dismiss the writ petition with the aforesaid observations and in terms of the conclusions reached by us.