Delhi District Court
Cbi vs 1 P.S. Gupta (A-1) on 12 March, 2018
IN THE COURT OF MANOJ JAIN
SPECIAL JUDGE (PC ACT) (CBI)-04: CENTRAL DISTRICT
TIS HAZARI COURTS: DELHI
(i) CNR No. DLCT01-000947-2011
CC No. 08/2016
RC 5(A) 1995/CBI/ACU-I/ND
U/s 120-B, 420, 471 IPC & 13 (2) r/w 13 (1) (d) PC Act
CBI Versus 1 P.S. Gupta (A-1)
Former CMD,
Bharat Heavy Electrical Ltd.
New Delhi.
Resident of F-16,
Sector-39, Noida.
2 R.N. Mahendru (A-2)
Former Executive Director,
Bharat Heavy Electrical Ltd.
New Delhi.
Resident of 401,
Pumba Housing Society,
Sector 29, Vashi,
New Mumbai.
3 R.L. Verma (A-3)
Former General Manager,
Bharat Heavy Electrical Ltd.
Hardwar.
Resident of 210, Dugri Colony,
Phase-II, Ludhiana.
(Proceedings stand abated
vide order dated 31.10.08)
4 Dhirendra Krishna (A-4)
General Manager (I),
Bharat Heavy Electrical Ltd.
New Delhi
(Charge-sheeted again)
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 1 of 87
5 Harish Chandra (A-5)
Former DGM (E),
Bharat Heavy Electrical Ltd.
Hardwar.
Resident of Rai Vila,
Govind Puri, Hardwar.
(Proceedings stand abated
vide order dated 06.10.04)
6 J.L. Jain (A-6)
Former DGM (Purchase),
Bharat Heavy Electrical Ltd.
Hardwar.
Resident of Kesar Chhaya,
150, Sri Nagar Extension,
Indore.
7 V.P. Kulshrestha (A-7)
Senior Manager (P)
Bharat Heavy Electrical Ltd.
New Delhi
(Charge-sheeted again)
8 J.M. Sharma (A-8)
Vice President,
M/s Empire Machine Tools,
6-D, Vandana Building,
Tolstoy Marg, New Delhi.
(Proceedings stand abated
vide order dated 30.06.10)
9 Walter Smachtin, Proprietor (A-9)
M/s Smachtin Machine Tools,
6670 St. Ingbert, Hassel,
Germany.
(Declared proclaimed offender)
Date of Institution : 14.07.1998
Date of conclusion of Final Arguments : 07.03.2018
Date of Judgment : 12.03.2018
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 2 of 87
(ii) CNR No. DLCT01-000945-2011
CC No. 07/2016
RC 5(A)/1995/CBI/ACU-I/ND
U/s 120-B, 420, 471 IPC & 13 (2) r/w 13 (1) (d) PC Act
CBI Versus 1 Dhirendra Krishna (A-4)
General Manager (I),
Bharat Heavy Electrical Ltd.
New Delhi
2 V.P. Kulshrestha (A-7)
Senior Manager (P)
Bharat Heavy Electrical Ltd.
New Delhi
(Proceedings stand abated
vide order dated 15.12.05)
Date of Institution : 11.08.1999
Date of conclusion of Final Arguments : 07.03.2018
Date of Judgment : 12.03.2018
Memo of Appearance
Sh. A.K. Rao, learned Sr. P.P. for CBI.
Ms. Rebecca M. John, learned senior counsel, Sh. Vishal Gosain & Ms. Rudrani Tyagi,
learned counsels for A-1 P.S. Gupta
Sh. Ankit Mishra, learned defence counsel for A-2 R.N. Mahendru
Sh. M.S. Khan and Sh. Anish Kaushik, learned defence counsel for A-5 J.L. Jain
Sh. Brijendra Kulshrestha, learned defence counsel for accused Dhirendra Krishna
JUDGMENT
PROSECUTION STORY 1.0 Bharat Heavy Electricals Ltd. (hereinafter called as BHEL) is a Government of India undertaking. Employees of BHEL are public servants. Out of the 9 cited CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 3 of 87 accused, 7 were posted in BHEL. At the relevant time, their designation was as under:-
Sr. No. Name Designation
1. P. S. Gupta Chief Managing Director
2. R. N. Mahendru Executive Director
3. R. L. Verma General Manager
4. Dhirendra Krishna General Manager (I)
5. Harish Chandra Dy. General Manager (F)
6. J. L. Jain Dy. General Manager (Purchase)
7. V. P. Kulshrestha Senior Manager (F)
1.1 BHEL was having its CFFP (Central Foundry Forge Plant) in Hardwar. The
task of CFFP was to manufacture large-size castings and forging of various types of steels. Said plant was reportedly running in losses and according to CBI, instead of taking necessary remedial steps to make it profitable, accused persons, in terms of conspiracy, incurred unwarranted large investment by importing a "second-hand junk forge press" at an exorbitant rate while also flouting the prescribed procedure.
1.2 Any capital investment, including acquisition of asset, was to be made as per "Capital Budget Manual". Offer, in this regard, used to originate either from some unit of BHEL or by the Planning & Development Wing of BHEL. Thereafter, matter used to be examined and a feasibility report used to be prepared. Once such feasibility report was approved by the Competent Authority of BHEL, procurement used to be made as per prescribed procedure.
1.3 The Board of BHEL, during 1989-90, was competent to approve capital investment upto Rs. 20 Crores. Approval of PIB (Project Investment Board) of Government of India was required in case the investment account exceeded said limit.
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 4 of 871.4 Proposal regarding sale of second hand forge press of 7500/9000 MT capacity was received from M/s Empire Machine Tools, New Delhi through Sh. J.M. Sharma (A-8) who happened to be Vice President of the said Company working as Indian Agent for M/s Walter Smachtin Machine Tools of Germany. The offer was directly received by Sh. P.S. Gupta (A-1) who at that time was CMD of BHEL. He had a meeting with Mr. Walter Smachtin (A-9) of M/s Smachtin Machine Tools along with J.M. Sharma. As per offer, the forge press machine was to be sold with all accessories including manipulator. Capacity of forge press was 7500 MT which could be raised to 9000 MT with the help of "intensifier".
1.5 A-1 did not follow the procedure stipulated in the Capital Budget Manual and such 'sole offer' was referred to General Manager (I), CFFP, BHEL for examination and necessary action. In order to ascertain the suitability of such machine, a team of BHEL officials including R.N. Mahendru (A-2) and Dhirendra Krishna (A-4) visited Germany in July, 1989. They submitted a 'tour report' claiming therein that the forge press was having capacity of 9000 MT. The correct capacity of the press was 'purposely' not disclosed in the tour report. Feasibility report was prepared under the overall guidance of A-2. In such report also, capacity of machine was mentioned as 9000 MT and that of its two cranes as 200 tonnes each whereas actual capacity of two cranes was 140 tonnes each. Thus, feasibility report described false facts as regards the capacity of press and of the cranes and it depicted a rosy but false picture about the project. It was also mentioned in such report that import would result in cutting down import of BHEL and would result in saving of foreign exchange. As per such 'feasibility report', purchase cost was stated as Rs. 1955 lacs.
1.6 The matter regarding import of said forge press was discussed in the Board meeting of BHEL. It was opposed by Director (Finance), BHEL, i.e. Sh. K.N. Khanna (PW-1). He countered the proposal on the ground of its commercial non- viability as CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 5 of 87 BHEL was already running huge losses and also because such proposal did not take into account other necessary expenditure required for implementation of the project and that the cost had been purposely kept within Rs. 20 Crores so that matter did not go to PIB.
1.7 The project was eventually approved by the Board in its meeting dated 12.1.1990 at a cost of Rs. 1957.50 lacs.
1.8 Import licence was, accordingly, obtained and purchase order was issued by Sh. J.L. Jain (A-6) for supply of said forge press with all accessories including cranes of 200 tons each as well as erection and commissioning at Hardwar.
1.9 A-9 was, however, not comfortable with the terms and conditions of purchase order as he wanted deletion of penalty clauses. Since all the accused persons of BHEL had already entered into criminal conspiracy with other co-accused and had made up their mind to go for an unproductive investment, penalty clause from the purchase order was deleted.
1.10 The forge press, which was eventually imported into India, was found below specifications as it could run at the maximum capacity of 6000 MT which could be increased to 7500 MT with "intensifier". Cranes were also found of 140 tonnes each instead of 200 tonnes. Moreover, the supplier refused to supply "manipulator" without which forge press remained totally idle. Such manipulator had to be, later on, procured by BHEL from other sources at excessive cost. The supplier also refused to undertake erection and commissioning of the equipment despite the fact that such execution was also part of the order.
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 6 of 871.11 It will be also important to mention that A-1 had also formed a Committee consisting of Sh. J.C. Marwah (since deceased), K. Ramakrishna (PW26) and accused R.N. Mahendru to examine project and to ascertain the deficiency in the feasibility report to assess the actual cost. Committee recommended that the 'crane girders' required for movement of the cranes be fabricated locally and a sum of Rs. 72.2 lacs was envisaged as fabrication cost. However, when Mr. Walter Smachtin (A-9) visited BHEL office in January, 1991, he offered 'second hand crane girders' at a landing cost of Rs. 190 lacs (DM 1.80 Lacs). On the basis of such offer, a proposal was prepared by A-2 and A-4 recommending such 'crane girders' at such offered rate which was hastily approved by A-1 on 15.1.1991. Such approval was unauthorized because 'crane girder' was also capital asset and, therefore, decision could have been taken by the Board only. In the same offer (Mr. Walter Smachtin A-9) had also offered an equipment known as 'Quality Improvement Equipment' (QIE) at the cost of DM 13.50 Lacs which was also approved by A-1 against the procedure laid down in Capital Budget Manual.
1.12 Though the offer of A-9 was approved on 15.1.1991 for crane girders and QIE, fact remains that application for import of 'crane girders' had been filed in the office of DGFT (Director General of Foreign Trade) much prior, i.e. on 26.7.1990. Initially, DGFT refused to issue import licence for said secondhand crane girders and suggested to procure the same from local manufacturers. But he, too, was misguided and false information was given to him and accordingly import licence was issued on 3.5.1991. As far as QIE is concerned, it was imported without any import licence. Technology of QIE was not available in India and BHEL had no technical know-how about said technical equipment. Manipulator, a main accessory in operation of forge press, was not even supplied. The pumps of the forge press were also not supplied by the supplier on account of its alleged non-availability. Therefore, it was not possible to run the said forge press at stated capacity of 9000 MT.
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 7 of 871.13 Eventually, the forge press and related equipments were installed at a total cost of Rs. 3549 lacs. It comprised many components which were not intentionally included in the feasibility report to avoid the attention of PIB. Lack of orders also compelled BHEL not to use such forge press at the optimum level compelling other units of BHEL to go for import. Despite there being huge investment on forge press, the manner in which Mr. Walter was obliged clearly indicated that all the public servants knew about the dubious character of the supplier and deliberately worked against the interest of BHEL. Due to non-supply of manipulator, an amount of DM 0.62 million was adjusted from the bill whereas the same manipulator was eventually purchased as per recommendation of A-4 and others from other sources at the cost of DM 0.86 million.
1.14 The Indian Agent was paid 1% commission despite the fact that erection and commissioning of the forge press was got done by BHEL through its own experts. All in all, a junk machine was stated to be imported by BHEL which could not be operationalized due to said reasons causing further loss to BHEL.
1.15 Accused R.L. Verma (A-3) had camped in West Germany for supervising the dismantling of the equipment and he had given a false certificate regarding capacity of the crane as well as about the pumps.
1.16 Sh. Harish Chandra (A-5) had advised the bank to open Letter of Credit (L/C) for bigger amount and also opened L/C in respect of the purchase order No. 9032 without any stipulation with a view to cause favour to Mr. Walter. He also was instrumental in getting L/C amended in connection with import of crane girders and QIE despite the fact that there was no import licence for those equipments.
1.17 Sh. J.M. Sharma (A-8) had falsely mentioned about the capacity of the cranes. He caused pecuniary loss to BHEL and consequent gain to his company by CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 8 of 87 claiming 1% commission without rendering any assistance in erection and commission of the press.
1.18 Sh. J.L. Jain (A-6) was also party to conspiracy in the matter of import of said forge machine and its equipments.
1.19 Thus, all the aforesaid public servants of BHEL along with A-8 and A-9 entered into criminal conspiracy and cheated BHEL to the tune of Rs. 10.24 Crores (equivalent to DM 8.6 million) resulting in procurement of an unproductive equipment.
1.20 It is in these circumstances that the present FIR, which had been registered on the basis of source information, culminated into filing of a charge sheet against all said nine accused persons for commission of offences under Section 120-B, 420 IPC and Section 13(2) read with Section 13(1)(d) of Prevention of Corruption Act, 1988 besides commission of offences under Section 420, 471 IPC against A-9.
1.21 At the time of filing the charge sheet, A-1, A-2, A-3, A-5 and A-6 had already retired from BHEL and, therefore, there was no requirement for obtaining sanction for their prosecution. However, sanction for prosecution of A-4 and A-7 was obtained and charge sheet was, accordingly, submitted in the court.
COGNIZANCE & CHARGES 2.0 It will be worthwhile to mention here that sanction for prosecution of A-4 Dhirendra Krishna and A-7 V.P. Kulshrestha had been given by Sh. R.K.D. Shah who later became Chief Managing Director of BHEL. Charge-sheet was submitted on 14.07.1998. Cognizance was taken vide order dated 05.08.1998 and summons were CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 9 of 87 directed to be issued to all the accused persons.
2.1 Accused Dhirendra Krishna (A-4) and accused V.P. Kulshrestha (A-7) filed separate Writ Petitions in Hon'ble High Court of Delhi and vide order dated 26.05.1999 passed by High Court of Delhi in Criminal Writ Petition No. 655/98 and Criminal Writ Petition No. 751/98, sanction given by Sh. Shah was quashed and it was left open to the concerned authority to consider the matter afresh and to take a decision - whether or not - sanction should be granted to prosecute them or not. It was observed that in view of the circumstances placed on record, Sh. Shah was disqualified from according sanction as at one point of time, he was Head of Planning & Development, BHEL and had recommended the purchase of the equipment in question.
2.2 Matter was re-considered by CBI and fresh sanction of prosecution was obtained which was granted by Sh. K.G. Ramachandran on 14.07.1999.
2.3 Supplementary charge-sheet was submitted before the Court on 11.08.1999 and cognizance was accordingly taken on 17.08.1999 and both the said accused were also re-directed to be summoned.
2.4 An application under Section 311 Cr.P.C. was moved by A-4 Dhirendra Krishna which was allowed vide order dated 16.11.2000 and the sanctioning authority i.e. Sh. K.G. Ramachandran was summoned for the purposes of recording of his evidence at the pre-charge stage itself. He appeared before the Court and his deposition was recorded on 23.03.2001 and 18.04.2001.
2.5 As far as A-9 Walter Smachtin is concerned, as per order dated 07.02.2002 passed by then learned Presiding Officer, it had been observed that since he was a German National and procurement of his presence before the Court was likely to cause CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 10 of 87 delay in the matter, request of the prosecution was acceded to and it was directed that proceedings qua Mr. Walter (A-9) be separated and prosecution was asked to proceed in accordance with law against him. Various subsequent order-sheets would show that Mr. Walter had been declared a 'proclaimed offender' though fact remains that CBI did not seem to have taken any step to secure his presence before the Court.
2.6 Accused Harish Chandra (A-5) died on 30.05.2004 and proceedings qua him stood abated vide order dated 06.10.2004.
2.7 As far as A-7 V.P. Kulshrestha is concerned, he also died on 12.10.05 during the pendency of the matter and vide order dated 15.12.2005, proceedings qua him stood abated.
2.8 Accused R.L. Verma (A-3) reportedly died in a road accident and his death verification report was submitted before the Court which indicated that he died on 25.05.2008. Proceedings against him stood abated vide order dated 31.10.2008.
2.9 Accused J.M. Sharma (A-8) expired on 12.04.2010 and proceedings qua him stood abated vide order dated 03.06.2010.
2.10 It will be worthwhile mention here that since both the charge-sheets relate to same matter and supplementary charge-sheet had been filed on the basis of the fresh sanction only, both the cases were ordered to be taken up together and vide order dated 22.01.2010, it was ordered that cases be consolidated and the old charge-sheet i.e. CC No. 08/2016 be treated as main case.
2.11 Charges were directed to be framed vide order dated 14.08.2014 whereby the Court came to the opinion that there existed prima facie sufficient material for CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 11 of 87 framing charges against all the accused for committing offences under Section 120B IPC, Section 120B IPC r/w 420 IPC and also individual substantive offence under Section 13 (1) (d) punishable under Section 13 (2) of Prevention of Corruption Act against the public servants.
2.12 Charges were accordingly framed and all the accused pleaded not guilty and claimed trial.
2.13 As per order dated 26.08.2014, it was ordered that since evidence, to be recorded in both the cases would be common, evidence be maintained in such old charge-sheet file and the file pertaining to supplementary charge-sheet was directed to be tagged with said case.
PROSECUTION EVIDENCE 3.0 Prosecution was directed to adduce evidence.
3.1 It examined thirty six witnesses. Witnesses can be categorized as under:
Witnesses from BHEL
(i) CW1 K.M. Ramchandran (Sanctioning Authority qua A-4 & A-7)
(ii) CW1 Amit Shrivastav, AGM, Commercial, CFFP, Haridwar
(iii) PW1 K.N. Khanna, Director (Finance), BHEL
(iv) PW2 Tahir Ali, General Manager (Co-ordination), BHEL
(v) PW3 Harish Chandra, Sr. Dy. General Manager, BHEL
(vi) PW5 A. Bhattacharya, Executive Director, BHEL
(vii) PW6 Pritam Singh, GM, Regional Offices Department (HQ), BHEL
(viii) PW7 Ishan Shanker, Addl. General Manager, Corporate Office, BHEL
(ix) PW8 V.P. Singh, Corporate P&D Department, BHEL
(x) PW9 A.K. Chakrarvarty, Executive Director (Finance)
(xi) PW10 S.C. Jain, General Manager (Industry Sector), BHEL
(xii) PW12 Hari Om, General Manager (Production) CFFP, BHEL Haridwar CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 12 of 87
(xiii) PW14 Akash Deepak, DGM, HEEP, BHEL, Haridwar
(xiv) PW15 Narender Kr. Kohli, Dy. Manager (Foreign Payment Section, BHEL), Haridwar
(xv) PW18 S.L. Gupta, CFFP, BHEL, Haridwar (xvi) PW19 B.C. Gupta, Assistant General Manager, CFFP, BHEL, Haridwar (xvii) PW20 A.C. Gupta, Sr. Manager, BHEL, Haridwar (xviii) PW22 D.V. Behl, AGM, CFFP, BHEL, Haridwar (xix) PW23 S. Ramabadhran, Executive Director (Finance), BHEL, Delhi (xx) PW24 N.K. Srivastava, Dy. General Manager, CFFP, BHEL, Haridwar (xxi) PW25 A.K. Kapoor, Addl. General Manager, CFFP, BHEL (xxii) PW26 K. Rama Krishnan, Director (Engineering and R&D), BHEL (xxiii) PW27 B. Shankar, CMD Secretariat, BHEL, New Delhi (xxiv) PW28 K.K. Seth, BHEL Corporate Office, New Delhi (xxv) PW29 Laxman Swaroop, General Manager, Industry Sector, BHEL (xxvi) PW31 V.S. Aggarwal, CFFP, BHEL, Haridwar (xxvii) PW32 Suresh Kumar Kaul, Manager (Purchase), CFFP, BHEL, Haridwar (xxviii) PW33 D.J. Syam, AGM, BHEL (xxix) PW34 Rajiv Kumar, Manager (Purchase), CFFP, BHEL (xxx) PW35 O.P. Batra, DGM (Management Services), CFFP, BHEL, Haridwar (xxxi) PW37 K.L. Ghorui, DGM (Finance), BHEL (xxxii) PW38 S.K. Sharma, DGM (Material Services), BHEL (xxxiii) PW39 A.K. Dua, Private Secretary, to A-2 R.N. Mahendru, CFFP, BHEL (xxxiv) PW43 M.K. Mittal, Director, BHEL (xxxv) PW44 M. Ramachandran, General Manager (Finance) (xxxvi) PW45 K.C. Lahiri, Director (Power), BHEL (xxxvii) PW47 B.R. Gulati, Executive Director, HEEP, BHEL, Haridwar Witnesses from Bank
(i) PW11 P.K. Aggarwal, Assistant General Manager, SBI, Local Head Office, New Delhi
(ii) PW13 Umesh K. Pandey, General Manager, Corporate Centre, SBI, Mumbai
(iii) PW21 S.K. Mukherjee, Dy. Chief Manager, Frankfurt Branch, SBI, Germany
(iv) PW30 Grace Koshie, Foreign Exchange Department, RBI, Mumbai
(v) PW36 S.K. Gupta, Overseas Branch, SBI, New Delhi
(vi) PW40 C.S. Panchamakesh, AGM, International Banking, SBI, New Delhi CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 13 of 87
(vii) PW42 U.K. Nagpal, DGM, SBI (Foreign Department), New Delhi Other witnesses
(i) PW4 V.K. Jain, Development Officer, Ministry of Industries, GOI
(ii) PW16 Arun Kr. Garg, Corporate Office, New Delhi
(iii) PW17 Rita Mathur, Director General Foreign Trades Office
(iv) PW41 R.S. Sangia, Assistant Collector, New Custom House, Bombay
(v) PW46 S.K. Sinha, Joint Development Commissioner & Executive Secretary, Ministry of Steel, GOI
(vi) PW49 S.S. Khosla, Director General of Technical Development, Ministry of Industries, New Delhi CBI Official
(i) PW48 N.K. Mukherjee, Investigating officer STANCE OF ACCUSED PERSONS & DEFENCE EVIDENCE
4.0 After closure of prosecution evidence, accused persons were given opportunity to file written statements under Section 313 (5) Cr.P.C. It would also be pertinent to mention here that accused P.S. Gupta (A-1) and J.L. Jain (A-5) were stated to be highly indisposed and bedridden. They sent their written statements under Section 313 (5) Cr.P.C. through their respective counsels.
4.1 All such written statements filed by accused (s) were taken on record.
4.2 A-1 P.S. Gupta claimed therein that all the decisions had been taken in the best interest of the company and the equipment in question was purchased after all the approvals granted by the Competent Authority. He also stated that the matter was duly approved by the Board of BHEL and he, alone, was targeted as some officers of BHEL wanted to settle personal scores with him and were looking for an opportunity to oust him and, therefore, he has been falsely implicated in the present matter. He also claimed that after the approval from the Board, the project was placed before the Committee of CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 14 of 87 Secretaries, Govt. of India and the project was duly approved by such Committee and, therefore, no fault can be found with respect to the decision of import of Forge machine. He also claimed that the key witness of the prosecution, i.e. PW-1 K.N. Khanna did not support the case of prosecution at all. He also claimed that the reasons for increase in the cost are clearly explained in prosecution's own document (D-3), i.e. Revised Cost Estimate and such reasons for increase in cost were beyond the control of accused. He claimed that there was nothing on record which may show that the investment in question was unproductive. On the contrary, such machine proved to be an asset. It was also stated by him that prosecution could not bring on record anything which may even remotely suggest that he had obtained any pecuniary advantage in context of said import. Reliance has also been placed by him upon the deposition made by CW-1 Sh. K.G. Ramachandran (Sanctioning Authority). A-1 also claimed that he performed his duties as per delegation of powers and purchase policy. He claimed that the press could not be inspected because the plant, where machinery was installed, was closed by order of Government of Germany due to environmental issues. It has also been asserted that the tour report (D-45) clearly indicated that the capacity of the Forge press was 7500 MT to 9000 MT and that the two Forging Cranes were of 140 Tones and not of 200 Tones as has been alleged by prosecution and such Tour Report clearly indicated that the entire process was transparent and no information has either been concealed or manipulated. Reliance has been placed on feasibility report (D-2). It has also been claimed that all the points raised by Sh. K.N. Khanna in the Board Meeting were considered properly and all such objections were taken into account and were duly considered by the Board Members. Reliance has been placed upon the Minutes of 175th Board Meeting (D-15). It has also been contended by accused Sh. P.S. Gupta in his written statement that approval of Government of India was sought at every conceivable opportunity.
4.3 A-2 R.N. Mahendru also claimed that the case of CBI was false and frivolous. He also relied upon the deposition of sanctioning authority, i.e. CW-1 K.G. CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 15 of 87 Ramachandran who deposed that the machine was giving production. He claimed that, initially, during the year 1983-84, budgetary offers were obtained for a 10,000 Tons Forging Press but the proposal was shelved due to its exorbitant cost. Since BHEL felt that there was need of high capacity forge press for manufacturing of heavy power generating equipments of Siemens KWU design to stop import of heavy forgings, the second-hand machine in question was imported as per the approval of Board of Directors. He also claimed that such Forge Press was a dual pressure press which could be used at 7500 MT in order to save power and with the help of intensifier fitted inside the Forge Press, the capacity of 9000 MT could be achieved. He also relied upon the recommendations of 'Marwah Committee' set up by the Board of Directors to examine the project in question. He also stated that the reasons for increase in cost were clearly explained in the revised cost estimate (D-3) and such reasons were beyond human- control. He also claimed that Government of India was kept in loop with respect to the import-decision. He also claimed that at the relevant time when the proposal was placed before the Board of Directors, power of Board was of Rs. 50 Crores as per order No. 1(13)/86-Fin(BPE), Govt. of India, Ministry of Industry, Bureau of Public Enterprises dated 7.11.1988. He also stated that QIE/ESR was a separate equipment but it was imported because with the help of QIE/ESR, it was possible to produce super refined steel and the total landed cost was less than Rs. 5 Crores which was within the powers of CMD, BHEL to approve. As regards import of Crane Girders, the locally manufactured crane girders were found costlier than the imported crane girders and also that these girders were not part of the initial import as those could be sold only after the press had been dismantled. He claimed that there was neither any irregularity nor any conspiracy and that the prosecution had failed to prove any of the allegations. He claimed that the Press was commissioned in 1994 and was giving regular production and thus the stand of the prosecution that it was a junk product stood completely negated. He claimed that most of the prosecution witnesses did not support the case of prosecution. He also chose to lead defence evidence. It will also pertinent to mention here that CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 16 of 87 simultaneously with the filing of written statement under Section 313 (5) Cr.P.C., his brief statement, in support of his such written statement, was also recorded on 28.11.2017 in which he claimed that at the relevant time, he was merely posted as General Manager (Incharge) and was not even part of the Board. He reiterated that the decision was taken by the Board as per prevalent policy and guidelines and later when he become Executive Director in BHEL, his role was simply to approve the formal purchase order as per decision of the Board.
4.4 A-4 Sh. Dhirendra Krishna also claimed that there was no procedural violation and IO deliberately did not produce the vital documents to mislead the court. He claimed that he never exceeded his delegated powers as laid down in the purchase policy and always acted in good faith and in the best interest of BHEL. The import of Forge press was taken to achieve the objective of acquiring world class Forge press for meeting the current and future needs of heavy forgings required by BHEL to meet National needs of power generation sets, defence sector and large plants. He also claimed that even the IO had admitted that it was the largest/heavy press in Asia. He also claimed that IO did not bother to collect the production figure of Forge press since the date of commissioning till the date of filing of charge sheet and deliberately gave wrong information that the investment was unproductive. He also claimed that the escalation was due to increase in foreign exchange rate, increase in custom duty, gulf surcharge, freight charges and increase in cost of civil work. He claimed that no loss was caused to BHEL due to the Forge Press in question and such machinery rather proved to be a pride for BHEL. He also claimed that his co-accused J.L. Jain had also furnished explanation qua each and every allegation and he wanted to adopt the same. He claimed that neither he abused his position nor he obtained any pecuniary advantage. He also claimed that he had correctly performed his duties according to financial concurrence wherever required and the decisions were bonafide and were taken in good faith and that there was no misconduct on his part. He also supplemented CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 17 of 87 that the sanction given by Sh. Ramachandran was a 'word-by-word' reproduction of the 'quashed-sanction-order' given by the competent authority and, therefore, sanction was not valid. His brief statement was also recorded on 23.10.2017. He also desired to lead evidence in defence.
4.5 As regards A-6 Sh. J.L. Jain, written statement was submitted by his counsel Sh. Anish Kaushik. He also made a statement to that effect before the court on 5.12.2017. As per the stand taken by Sh. J.L. Jain, he was merely posted as General Manager (Purchase) in BHEL at the relevant time and his duty was to follow orders regarding the purchase and he acted as per the procedure and in the bonafide manner. He claimed that there was no procedural violation and also claimed that the IO withheld certain vital documents. He claimed that there was no loss because of the import of the Forge press. On the contrary, it was found to be very productive and 'Pride for Nation'. Thus, he claimed that he was completely innocent and had not committed any offence at all.
4.6 Three witnesses were examined in defence by A-2 R.N. Mahendru, A-4 Sh. Dhirendra Krishna. These are DW-1 H.W. Bhatnagar, DW-2 Shaikhom Joy Meetei and DW-3 Girish Mohan Verma.
RIVAL CONTENTIONS 5.0 Defence contentions are, more or less, in synchronization with the written statements.
5.1 These have been refuted by prosecution. As per Sh. A.K. Rao, learned Sr. P.P. for CBI, prosecution has been able to prove its case to the hilt. His prime con- tentions can be enumerated as under:-
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 18 of 87(i) There was no requirement of going for any such purchase of forge press as BHEL was already running in losses and instead of taking the remedial steps to plug such losses, accused persons rather incurred unnecessary expenditure by acquiring an expensive press which was eventually found to be junk, not meeting the requisite capacity as per the proposal.
(ii) Whenever any such machine or equipment was required to be purchased, the proposal never used to come directly from outsider and the present case is unique in the sense that a direct proposal coming from an outsider was entertained.
(iii) Before purchasing the machine, BHEL officials did not bother to see whether machine was in operation as even when the team had gone to Germany, plant was lying closed and without seeing the machine under operation, the proposal should not have been processed at all.
(iv) A totally false and rosy picture was portrayed to show that forge press was having capacity of 9000 MT and its utility was projected on unreal facts.
(v) As per the delegated power of Board, BHEL could have taken a decision with respect to acquisition of asset not costing more than Rs. 20 crores and the accused, in terms of conspiracy, deliberately kept the cost within the aforesaid bracket so that matter does not go to higher authority i.e. PIB.
(vi) Since the press could not be made functional without some of the very essential accessories and the accused did not want the project to beyond Rs. 20 crores, such accessories were CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 19 of 87 not made part of the initial proposal and these were added subsequently.
(vii) Major penalty clauses were deliberately omitted and undue waiver was given with respect to bank guarantee.
(viii) As per the prosecution witnesses, it becomes clear that machine was having capacity of 6000 MT only as its pumps powered pressure of 200 bars only and not of 250 bars.
(ix) Payment of entire commission of one percent was made to Indian agent despite the fact that neither the press was provided in full nor the concerned agency, as undertaken, installed the same and, therefore, half percent of the commission should have been withheld.
(x) Neither the Forge Press nor the cranes were found to be
of the capacity as proposed.
(xi) Orders with respect to the crane girders were given to
the same company at an exorbitant cost whereas its local
fabrication could have been done at a much lower cost.
(xii) As regards, QIE/ESR, there was no technical expertise
available with BHEL and therefore, there was no point in incurring such expenditure.
(xiii) Since the investment was of Rs. 10.24 crores, BHEL
suffered equivalent loss.
(xiv) As regards crane girders, though these were never part
of the original order yet request for import licence, including such crane girders, was sent in advance which is indicative of conspiracy.
5.2 Ms. Rebecca M. John, learned senior counsel has defended A-1 Sh. P.S. Gupta.
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 20 of 875.3 She has contended that A-1 Sh. P.S. Gupta, at the relevant time, was posted as Chief Managing Director of BHEL and he acted in the best interest of the company. According to her, his role was rather exemplary as he left no stone unturned in getting the corroboration from neutral corners. She has also argued that Central Government was always in loop and the views expressed by PW1 Sh. K.N. Khanna were deliberated upon in the Board Meeting and the decision was taken by the Board by a majority view. She has asserted that at no point of time, any unilateral decision was taken by Sh. Gupta and he had rather adopted cost-cutting measures and had healthy discussions with everyone concerned in the best interest of the company. According to her, there is no malafide or criminality on his part. She has drawn my attention towards various documents including Mark P2/D (D-17), Ex. PW23/DA (D-15), Ex. PW4/X (D-10), Ex. P4/X (D-10), Ex. PW38/1 (D-15), Ex. PW4/X (D-10) and also towards all the three crucial Board Meetings dated 29.09.1989, 22.12.1989 and 12.01.1990.
5.4 She has also referred to testimony of various prosecution witnesses and has contended that none of them came up with any specific allegation against A-1 Sh. P.S. Gupta and rather, almost all such important witnesses of prosecution were cross- examined by the prosecution as they dared to reveal the truth. According to her, there is neither any oral evidence nor any document on record which may even remotely indicate any criminality on the part of A-1 Sh. P.S. Gupta. According to her, accused had written a letter to Sh. H.C. Gandhi, Secretary & Director General, Technical Development, Ministry of Industries and had requested him to nominate a senior representative of DG&TD for visiting West Germany to assess the press in question so as to ascertain its suitability. She has asserted that Sh. V.K. Jain had been nominated by DG&TD and he along with Mr. Marwah visited West Germany and gave report and such report was duly tabled before the Board. As regards Sh. Marwah, she has contended that Sh. Marwah had retired as Chairman & Director General of Ordnance Factory Board and was the best in field to assess the suitability of the forge press and all CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 21 of 87 these things clearly go on to indicate that opinion of Sh. Gupta was not his own decision, much less a whimsical and arbitrary one. She has also relied upon various judgments which I would advert to at appropriate place.
5.5 Sh. M.S. Khan, learned defence counsel for A-6 J.L. Jain has assailed the case of prosecution on various points.
5.6 He has contended that accused J.L. Jain was posted as DGM (Purchase), CFFP, Hardwar and in his such capacity, he used to sit in Hardwar. All the decisions were taken by the Board and the Board meetings used to be held at Delhi of which A-2 J.L. Jain was not part of, in any capacity whatsoever. Since decision was taken by the Board, as an employee of BHEL, it was his duty to process the formalities in relation to the procurement and import and, therefore, there was no reason whatsoever to have made him an accused. He has argued that there is nothing on record which might indicate that he was part of any conspiracy or part of decision making relating to import of said forge press machine. Additionally, it has been contended by Sh. Khan that the press was of the projected capacity and it could achieve 9000 MT with the help of intensifier and investigating agency, for the reasons best known to it, did not try to even inspect the machine during the investigation and did not try to get its capacity checked from any outside agency to arrive at a rightful conclusion. It has also been argued that on the contrary, an attempt was made to prejudice the mind of the Court by holding back the fact that such forge press had actually been successfully commissioned and was giving good production. It has also been argued that most of the prosecution witnesses have not supported the case of prosecution and even the sanctioning authority has clearly elaborated that the forge press was of 9000 MT, which capacity could be achieved with the help of slight modification by putting the machine on 'upsetting mode' and thus, CBI unnecessarily and unjustifiably reached a wrong conclusion that the machine was not of the desired capacity. My attention has been drawn towards the CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 22 of 87 testimony of various witnesses including that of IO-Sh. Mukherjee besides many other BHEL officials in order to show that prosecution has not been able to prove its case at all. It has also been asserted that there was no prohibition in sending advance request for grant of import licence. Sh. Khan has stated that because of the exigency involved and as per usual practice, request for grant of import licence was sent to the concerned quarter in anticipation so that there was no unwarranted delay in import and, therefore, no fault can be found even if request was made for grant of import licence prior to purchase order. In this regard, my attention has been drawn towards the admission made by IO-Sh. Mukherjee in his cross-examination.
5.7 Similar contentions have been raised by Sh. Kulshrestha and Sh. Mishra.
EVALUATION OF EVIDENCE 6.0 I have given my thoughtful consideration to the rival contention and carefully perused the material on record.
6.1 I must say that both the sides i.e. learned Sr.PP and learned defence counsels gave full assistance to the court which helped the court in surfing through the bulky record with relative ease. I acknowledge the same and place on record my complements for all of them.
6.2 The case is not a usual run of the mill kind of case. It is little peculiar in nature.
6.3 Main thrust would be to asses and evaluate whether the forge press was procured in violation of established procedure and manual and whether the press was CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 23 of 87 junk and unproductive, as alleged and projected by CBI. It also needs to be seen whether there was any deliberate attempt to ensure that acquisition cost remained below Rs. 20 crores so that matter does not go to PIB. It is also to be seen whether the angle of conspiracy had been proved by direct or inferential evidence and whether there was any pecuniary advantage to accused persons or to anyone else.
6.4 Let me evaluate all such points. However, before that, let me assure myself whether the sanction suffers from any blemish or not.
ASPECT OF SANCTION 7.0 It has already been noticed above that earlier the sanction for prosecution of A-4 & A-7 had been given by Sh. R.K.D. Shah. Said two accused persons challenged such grant of sanction and it is not in dispute that sanction order was quashed by Hon'ble High Court of Delhi vide order dated 26.05.1999. It was on the premises that Sh. Shah had himself once supported the purchase of equipment in question and, therefore, he was prohibited to judge the action of his subordinate who later on advocated and recommended such purchase. He was thus held disqualified for according sanction as once he had expressed his opinion and had recommended the purchase. Hon'ble High Court had also, while quashing the sanction, left it open to the concerned authority to consider the matter afresh and to take a decision whether or not sanction was required to be granted to prosecute said two accused persons.
7.1 Subsequent sanction was accorded by Sh. K.G. Ramachandran (CW1). He also entered into witness box at pre-charge stage and this Court has already observed vide order dated 13.09.2017 that such deposition of Sh. K.G. Ramachandran would also be read as post-charge evidence. Such order was passed as the accused persons had claimed that they did not want to put any further question to said sanctioning authority CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 24 of 87 and wanted to adopt the same cross-examination.
7.2 Learned defence counsel for A-4 has argued that such sanction given by Sh. K.G. Ramachandran cannot be looked into as it is ad verbatim with the previous sanction given by Mr. Shah with no change of any kind whatsoever. It has also been argued that sanctioning authority was required to apply its mind afresh and then to come to the conclusion whether sanction was required or not. However, sanctioning authority did not apply his mind and gave the sanction in a mechanical manner defying the observation given by Hon'ble High Court of Delhi.
7.3 I am afraid that such point cannot be re-agitated by defence. The validity of such subsequent sanction was challenged by accused Dhirendra Krishna after recording of evidence of Sh. K.G. Ramachandran and the same was considered by the then learned Special Judge. Reference be made to order dated 04.02.2005 passed by Ms. Pratibha Rani, learned Special Judge (as Her Ladyship was then). Taking note of deposition made by Sh. K.G. Ramachandran, it was observed that the sanctioning authority had properly applied his mind and then accorded the sanction. Merely because there was no change in the first sanction order and second sanction order did not mean that matter was not considered by the sanctioning authority. It was also stressed by the learned Special Judge that the deposition of sanctioning authority clearly proved that he had not made any modification just for the sake of eyewash and that no addition or deletion was made by him as it was not found required. It was thus held that sanction order Ex. CW1/A did not suffer from any infirmity.
7.4 Such order dated 04.02.2005 was challenged before the Hon'ble High Court of Delhi by filing Crl. Revision Petition No. 248/2005 and the Hon'ble High Court of Delhi dismissed the same holding that there was no infirmity in the impugned order dated 04.02.2005. Since such order has already attained finality, it does not lie in the mouth to CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 25 of 87 re-agitate the same point all over again.
7.5 Learned defence counsel for A-4 has also contended that even Sh. K.G. Ramachandran remained associated with the purchase of equipment and, therefore, he too was disqualified from according any sanction in the matter. Thus argument does not cut any ice. I have carefully gone through the deposition of Sh. K.R. Ramachandran. Merely because he had gone to Germany in relation to a civil litigation pertaining to the same equipment would not mean that he was involved with the process of procurement and, therefore, was not competent to accord sanction.
BASIS OF INITIATION OF ACQUISITION OF FORGE PRESS 8.0 It all started with one letter dated 02.05.1989 {Mark P2/B (D-17 Page 7)} sent by Sh. J.M. Sharma on behalf of M/s Empire Machine Tools.
8.1 As per said letter, M/s Empire Machine Tools apprised BHEL about the availability of one second-hand open dye forging machine manufactured by M/s DEMAG in 1980. Such letter also revealed that the press had a capacity to operate 9000 MT with pressure intensifier. It was also mentioned in the letter that since this machine was readily available and was being offered on "first come first served" basis, time for taking a decision was rather short. It asked BHEL to let them know whether they had any interest in the press or not so that they could come back with the detailed order. Along with the aforesaid letter, brief information of the machine, the photographs and diagram of the machine were enclosed. As per the brief description, it was stated to be a forging press having capacity of 7500 MT which could achieve pressure of 9000 MT with pressure intensifier. Year of it's construction was stated to be 1980. In continuation of said letter, M/s Empire Machine Tools sent another letter dated 22.06.1989 {Mark P2/B1 (Page 9 of D-17)} to BHEL mentioning therein the price of said machine as 6.75 millions CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 26 of 87 DM.
8.2 BHEL expressed its interest in the said machine.
8.3 It will be, however, important to mention here that as per the documents contained in D-17, M/s Empire Machine Tools knew that BHEL had envisaged in procurement of 10000 MT forging press and, therefore, they had requested M/s Smachtin to send them details/ description of said forging press and it was in that background that the aforesaid letter Mark P2/B and then letter Mark P2/B1 were sent to BHEL after collecting information.
8.4 When the court went through documents contained in D-17 and D-21 (Volume-I), it came to fore that BHEL had come out with a conteporaneous global tender as well.
8.5 A copy of tender notice is found contained in D-17 which has not been proved by the prosecution in any manner whatsoever. I would mice no words in supplementing right here that such vital aspect of 'floating of global tender by BHEL' is conspicuously missing from the charge-sheet. There is not even a whisper to that effect. A bare glimpse of charge-sheet would rather make one believe that solitary proposal received through M/s Empire Machine Tools was considered and processed by BHEL. Sh. Rao, learned Sr. P.P. for CBI has stated that there was no deliberate attempt to prejudice the mind of the Court and the omission, on this score, was inadvertent and also because of the fact that though global tenders might have been floated, the purchase order was given on the basis of original proposal and not on the basis of the bid.
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 27 of 878.6 PW24 Sh. N.K. Srivastava, who worked in CFPP, BHEL from 1984 to 1997 in various capacities has referred about note Ex. PW24/L24 which, inter alia, bears signatures of accused J.L. Jain and accused R.N. Mahendru at point A & B respectively. Sh. N.K. Srivastava made reference to note only for identifying the signatures of said two gentlemen and did not specifically utter anything about global tender. Such note, however, clearly indicates that a global tender was floated and such tender was opened on 25.09.1989. Six offers were received. Four bidders had offered a new press and two offers were for second-hand press. A comparative statement of the offers was prepared. Such note also shows that the other bidder for second-hand press was M/s PAHNKE Engineers, West Germany. It offered 8000 MT press which was originally designed in early fifties and was upgraded in 1977. It offered such press for Rs. 24.79 crores. Such bidder was not called for negotiation since their press was very old and, therefore, getting import licence for the same was not possible. The other offer was from M/s Empire Machine Tools whose offer was already under consideration of BHEL. I would like to emphasize here that in the noting, officials of BHEL did not suppress the fact that they had already received a direct offer of M/s Empire Machine Tools. Rather it was highlighted in the noting itself. Offer of M/s Empire Machine Tools was for the same forge press and the price quoted by them was 6.35 million DM (FOB) and taking into account the exchange rate of DM as Rs. 8.80 as on 25.09.1989, bid was found to be of Rs. 6.82 crores which included CNC control system, manipulator, turning gears, dyes and two cranes of 200 tonnes capacity each. As regards those bidders, who had offered new press, the cost varied from 44.3 crores to 106 crores. Thus the bid of M/s Empire Machine Tools was found to be lowest one.
8.7 Sh. Rao has drawn my attention towards D-21 (Volume-I) and has contended that BHEL officials were, initially, acting upon the solitary offer received directly from M/s Empire Machine Tools. Sh. Rao has asserted that it is not explained by BHEL as to why they did not think of coming up with a global tender immediately. He CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 28 of 87 has argued that such solitary offer was taken up very seriously and accused (BHEL officials) had even a meeting with Mr. Walter Smachtin. It has also been highlighted by Sh. Rao that before floating global tender, a team was deputed to visit Germany for technical assessment of forge press which indicates that concerned BHEL officials had already made up their mind to purchase the said machine and, therefore only, they had even prepared a draft of 'letter of intent'. He has also drawn my attention towards minutes of discussion which held on 17th /18th August 1989 between BHEL officials and M/s Smachtin Machine Tools Company, West Germany. It was attended by six officials of BHEL viz. Sh. Dhirendra Krishna, Sh. R.N. Mahendru, Sh. M.K. Mittal, Sh. S.K. Khazanchi, Sh. P.S. Bhatnagar and Sh. J.L. Jain. Mr. Walter Smachtin and accused J.M. Sharma also participated in such meeting and as per Ex. PW24/D15 (page 6 of D- 21 Volume-II), discussions were held and the offer of M/s Smachtin was considered and broad terms & conditions were also discussed. Such meeting was minuted and was signed by all the aforesaid officials as well.
8.8 To my mind, no malafide can be found on said aspect.
8.9 Need I remind myself that it was a second-hand machine. It was stated to be having optimum capacity of 9000 MT. If one compares the price of a new and old machine of same configuration, one would find enormous difference between the two. BHEL had earlier also floated tender in 1983 and shelved the idea as price was found to be exorbitant. It thought that acquisition of old forge press might be economically viable as well as fruitful. As and when any such heavy press is out for sale globally, it can surely attract buyers from across the world and there is a race amongst the contenders. In the present case also, there were reportedly other contenders like China and Korea and, therefore, even if little haste was shown by BHEL, it was quite understandable and, therefore, CBI should not have smelt rats. Merely because, there was a meeting with the seller and a team had also been sent to West Germany, it cannot be automatically CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 29 of 87 inferred that there was any malafide and conspiracy.
8.10 Budget manual did not envisage any such situation and if one adopts the red-tape system of approval and re-approvals, the opportunity could have gone begging. However, being a Government Undertaking, BHEL officials must have realized that it might not be proper and prudent to consider such solitary offer. Therefore, they took risk and thought to come out with a global tender despite the fact that the opportunity was a golden and precious one and could be lost if decision was not taken promptly. It, therefore, did not matter even if, while considering the sole offer, they had done some ground work as eventually they had decided to float a global tender.
8.11 Such global tender was duly published and they had received, as already noticed above, six bids and the bid of M/s Empire Machine Tools was found to be lowest one. In such a peculiar backdrop, bid documents submitted by the bidders including M/s Empire Machine Tools should not have been withheld from the court. However, for the reason best known to the investigating agency, no effort was made in this regard and no bid documents, given by any of the six bidders, were placed on record for judicial evaluation. On the contrary, a false picture was depicted as if BHEL was acting on the basis of one offer only. Thus, the allegation regarding their being a solitary proposal loses its sheen and significance altogether. The purpose of global bid was to ascertain and re-assure whether the offer was reasonably priced or not. Once, it was learnt that offer of M/s Empire Machine Tools was the lowest one, it really did not matter whether the purchase order was based on the previous direct proposal or as per the subsequent bid as the amount remained the same under both.
8.12 Moreover, the proposal was not taken on its face value. A team was rushed to Germany and feasibility report was prepared and neutral experts were also roped in before the matter was placed before the Board.
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 30 of 878.13 I would now like to make reference to 'tour report' Mark PW35/1 (page 35 to 48 of D-21 Volume-II) copy of which is also contained in D-45.
8.14 While considering the earlier solitary offer of M/s Empire Machine Tools, it was decided that a team may visit for "on the spot technical evaluation/suitability of such forging press". Since Sh. D.V. Bhatnagar, Executive Director was visiting M/s KWU, West Germany, it was decided that Sh. S.K. Khazanchi, Sh. R.N. Mahendru and Sh. Dhirendra Krishna would join him for technical assessment and such team accordingly visited West Germany between 18.07.1989 and 23.07.1989 and had discussions there. The press was found installed in the factory of M/s KLOCKNER WERKE, A.G. at Osnabruck. About the press, it was mentioned in the tour report that press had a capacity of 9000 MT and was in operation till 29.04.1989. It was found having two cranes of 140 Tonnes capacity each and was having three pumps and manipulator. As per the recommendations of touring delegation, machine was found to be in good condition and was able to meet the requirement of heavy forging LP Rotors and TG Rotors for 500MW and higher ratings. It was also observed that such opportunity, if availed, could make BHEL self-sufficient for heavy forging and for meeting the requirement of power generation, defence, nuclear, space, steel and host of other sectors. It was also mentioned that since press was already working till recently, it may take around 15-18 months to get it from West Germany to installed it at BHEL. It was also mentioned that such press would result in cutting down the import of BHEL by about 15 crores on a recurring basis and would make savings of foreign exchange to the tune of around Rs. 6 crores. It was also mentioned that it would be the highest press capacity in the country and would bring India in the list of "select few" having such facility in the world.
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 31 of 878.15 Accused R.N. Mahendru, who was posted as General Manager at CFFP at the relevant time, had also prepared a feasibility report {Ex. PW8/5 (D-2)}. In such report, while also making reference to the visit of team to West Germany, Sh. Mahendru gave reasons about the need and requirement of high capacity press and its justification primarily based on demand projection. In the ultimate analysis, he concluded that such forging press would be the highest-capacity forge press in the country and would make BHEL self-sufficient which would result in saving the precious foreign exchange for the country. Financial analysis was also made therein. In such feasibility report, press has been described as 9000 MT capacity press duly equipped with various other parts/accessories including manipulator (65 MT SACK), two forging cranes of capacity of 200 tonnes each.
8.16 Sh. Rao has expressed his surprise over the manner in which the feasibility report was prepared. According to him, Sh. Mahendru had deliberately, in order to achieve some hidden objective, portrayed a false and rosy picture and described the press as 9000 MT capacity press whereas the basic capacity of such press was 7500 MT which could be enhanced to 9000 MT with the help of intensifier only. He has also claimed that when Sh. Mahendru himself had visited the West Germany along with Sh. Bhatnagar and had seen the press, he must have noticed that the cranes were of 140 tonnes capacity each. Such aspect had been already highlighted by Sh. Bhatnagar in the tour report but for the reasons best known to Sh. Mahendru, he mentioned the capacity of the cranes as 200 tonnes each instead of 140 tonnes each. I, however, do not find any malafide in this regard either. The press was not found operational and the information was gathered after talking to plant officials and by referring to the drawings. Of course, the basic capacity of press was 7500 MT but with intensifier, it could achieve 9000 MT and, it was in that context, that the press was described as 9000 MT. As regards cranes being mentioned as having 200T capacity, again, I do not find any deliberate attempt to mislead anyone. These were of 140 tonnes capacity at the time of CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 32 of 87 commissioning when these were under operation in West Germany but these reportedly underwent upgrading in Germany itself. CBI, merely, on the basis of the inscription on the cranes, jumped to some conclusion. No witness has stated during the trial that the cranes were of 140 tonnes and not of 200 tonnes.
8.17 Sh. Rao has relied upon deposition of PW12 Sh. Hari Om in this regard. I have seen his testimony very carefully. In his examination-in-chief, he did not make any specific reference about the capacity of crane. However, in his cross-examination, he claimed that the cranes were used for lifting weight upto 100 tonnes. This, according to Sh. Rao, means that the cranes were not having 200 tonnes capacity. However, Sh. Hari Om in the next breath, also deposed that he did not remember whether the capacity of such cranes was of 200 tonnes each. Instead of outrightly denied such fact, he merely asserted that he did not recall the capacity of the cranes and, therefore, no mileage can be drawn by prosecution from his deposition.
8.18 Moreover, the entire matter was deliberated in the Board Meetings where Mr. Khanna had already taken up said aspect in black and white. Thus, all the Board- members very well knew about the capacity of press. There was, therefore, no question of anyone being misled. Moreover, prosecution has not brought any evidence to substantiate the same. No Board director has claimed that a rosy or false picture was portrayed.
TESTIMONY OF IMPORTANT OFFICIALS OF BHEL AND BOARD MEETINGS 9.0 It is very much evident that the decision of procurement/import was not taken by accused P.S. Gupta in his individual capacity being Chairman-cum- Managing Director. This was a decision taken by the Board. Capital Budget Manual Mark P7/A (D-
6) contains guidelines/procedures for approval of capital expenditure. Reference be CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 33 of 87 made to Chapter-III of said manual. It is admitted by both the sides that as per such manual, approval for any project related to capital expenditure between Rs. 20 lacs and upto Rs. 20 crores vested with Board of Directors. Beyond that, the power was with PIB/EFC/Cabinet. Right here, I would add that in the printed Budget Manual, such power is shown as Rs. 10 crores which has been struck off with a pencil and mentioned as Rs. 20 crores. CBI should have taken some pains to prove the same in appropriate manner. There might be some amendment at some subsequent point of time whereby such powers might have been revised but nonetheless, prosecution must have made the same very clear. Fortunately, there is no qualm from the side of defence on this regard. Though an attempt has been made by defence to claim that such power was further revised vide OM dated 07.11.1988 (Mark PW48/DA) and the Board of Directors could grant approval for any capital expenditure upto the project cost of Rs. 50 crores, such argument does not cut any ice as defence is attempting to misread the same. A bare reading of said OM would reveal that it was in different context i.e. in respect of company signing MoUs and having gross block over Rs. 200 crores and in such an eventuality, power to incur expenditure on 'replacement and renewal of assets due to normal wear & tear' was enhanced to Rs. 50 crores from the existing Rs. 20 crores. Such office memorandum therefore, does not stand attracted in the present peculiar factual matrix. It does not anywhere state that the power of the Board had been enhanced to Rs. 50 crores for capital expenditure as well 9.1 Let me make reference to three crucial Board meetings i.e. Minutes of 176 th Meeting of the Board held on 29.09.1989 (Ex. PW1/DD), Minutes of 177th Meeting of the Board held on 22.12.1989 and Minutes of 178 th Meeting of Board of Directors held on 12.01.1990 (Ex. PW1/DB). These read as under:
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 34 of 87Minutes of the 176th Meeting of the Board of Directors held on 29 th September, 1989 at 12 noon at New Delhi Present Shri P S Gupta Chairman & Managing Director Shri S Y Kalyanasundaram Director Shri C V Padmarajan Director Shri K N Khanna Director Shri A Madhava Rao Director Shri G Saran Director Shri A Gavisiddappa Director Shri K Ramakrishnan Director In Attendance Shri K J Thacker Company Secretary .......
.........
176-4 Additional information required by the Board of Directors in respect of Investment Proposal for "setting up of Heavy Forge Shop with 9000 T Forge Press" at CFFP, Hardwar
----------------------------------------------------------------------------------------- The Company Secretary informed the Board that letter No. AA:D (F): FIN dated 27th September, 1989 received from Shri K N Khanna, Director (Finance) was circulated to all the Members of the Board and this was forming part of the Agenda. The Chairman & Managing Director informed the Board that existing reheating facility available at CFFP, Hardwar would be utilized with necessary modifications. Similarly, for rough machining of forgings, machining facility in Hydro Turbine Shop at HEEP was available and to meet the projected lead one more machine would be transferred from Hyderabad would be modified to accommodate longer length of rotor forgings. Chairman & Managing Director further mentioned that the Vendor had given performance guarantee for six months and additional guarantee, if required, was also available with additional payment. He also mentioned that the Committee which CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 35 of 87 visited West Germany to find out the condition and suitability of the Press, had agreed with the recommendations of the BHEL's team which visited West Germany from 18 th to 23rd July, 1989. The Board took note of the Committees' Report as well as views of Director (Finance). The Chairman assured the Board that the guarantee for six months was adequate for the purpose and supply of parts required for commissioning of the Press was included in the lumpsum price of the Press and would be capitalised. He also assured that the custom duty of 35% was adequately provided. On his assurance, the Board approved the proposal for purchasing the second-hand 9000 T Forge Press and desired that the proposal be sent to the Committee of Secretaries for their approval to import the second-hand equipment.
The Board also noted that certain existing facilities in CFFP as well as HEEP Plant have been proposed for use against this Project. The Board wanted to be doubly sure that all the facilities required for 9000 T Forge Press had been provided for. To look into this aspect, the Board appointed a Committee consisting of S/Shri J C Marwaha, Ex-Chairman and Director General of Ordnance Factories, Ministry of Defence, as Chairman; Shri K Ramakrishnan, Director (ER&D) as Member and Shri R N Mahendru, GM, BHEL, Hardwar, as Secretary, to examine the following:-
1 To review the facilities in the Feasibility Report and to examine whether any augmentation was necessary. 2 To check availability of other facilities not covered in the report but required for the Project.
3 Based on the above, whether the cost estimated for the project utilising existing resources & facilities of the plant was in order? If not, a revised cost, considered adequately The Committee would submit its report to the Board by the end of October, 1989.
Minutes of the 177th Meeting of the Board of Directors held on 27th December, 1989 at 10 A.M. at New Delhi Present Shri P S Gupta Chairman & Managing Director CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 36 of 87 Shri S Y Kalyanasundaram Director Shri V Anand Director Shri C V Padmarajan Director Dr. N C B Nath Director Shri K N Khanna Director Shri G Saran Director Shri A Gavisiddappa Director Shri K Ramakrishnan Director Shri R K Saraf Director In Attendance Shri K J Thacker Company Secretary .......
.........
177-9 Feasibility Report for setting up of Heavy Forge Shop.
-------------------------------------------
The observations received from Shri K N Khanna, Director (Finance) vide his letter No. AA:D (F): Board dated 20 th December, 1989, on the Report of the Committee on Feasibility Report for setting up of Heavy Forge Shop, were circulated to the Members of the Board before the meeting. Further a statement giving comparison of cost indicated in the Feasibility Report vis-a-vis revision thereof after discussion with the Committee Members, was also tabled before the Board.
As for the VAD project, it was explained to the satisfaction of the Board that the same was planned to be executed under a separate scheme and as such it did not form part of the present proposal.
The Board after discussion felt that instead of availing Heat Treatment operation facilities from Heavy Engineering Corporation, the Management should examine the possibilities of carrying out these operations at CFFP itself.
S/Shri G Saran, Director (IS&P), A Gavisiddappa, Director (Power), K Ramakrishnan, Director (ER&D) and R K Saraf, Director (Personnel) expressed their views that the proposal was in the best CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 37 of 87 interest of the Company and, therefore, it must go-ahead with the investments as proposed reducing perennial dependence on imports of vital inputs for our major products thereby saving not only substantial foreign exchange but also improving our competitive edge both in terms of reducing costs and manufacturing cycles.
Having due regard to all the facts and the discussion, the Board desired that the project cost be worked out taking into account the actual offers of the equipment and the current rate of foreign exchange.
Minutes of the 178th Meeting of the Board of Directors held on 12th January, 1990 at 9.30 A.M. at New Delhi Present Shri P S Gupta Chairman & Managing Director Shri S Y Kalyanasundaram Director Shri V Anand Director Shri Bahadur Chand Director Shri C V Padmarajan Director Shri K N Khanna Director Shri G Saran Director Shri A Gavisiddappa Director Shri K Ramakrishnan Director Shri R K Saraf Director In Attendance Shri K J Thacker Company Secretary .....
.......
178-2 Confirmation of Minutes of the 177th
meeting of the Board of Directors
held on 27th December, 1989 at New
Delhi
The Minutes were confirmed subject to the following amendments:
In Item No: 177-9 the first paragraph be deleted and substituted by the following three paragraphs.CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 38 of 87
The observations received from Sh. K.N. Khanna, Director (Finance) vide his letter No: AA:D (F): Board dated 20 th December, 1989, on the report of the Committee on Feasibility Report for setting up of Heavy Forge Shop, were circulated to the members of the Board before the meeting. Director (Finance) reiterated his views and was of the opinion that investment will not be viable.
The Board took note of the views of Director (Finance). The Chairman invited the attention of the Board to the Feasibility Report wherein it has been indicated that nearly Rs. 24 crores of import savings would accrue on recurring basis per year as a result of this investment, of which BHEL alone had been importing forgings to the extent of Rs. 18 crores. Thus, the investment, if made, would be recovered within two to three years time. This would also help in reducing our import bill as directed by the Ministry of Finance.
Further a statement giving comparison of cost indicated in the Feasibility Report vis-a-vis revision thereof after discussion with the Committee Member, was also tabled before the Board.
In para 2, the words 'satisfaction of the' appearing in 2 nd line be deleted, to read the para as under:
'As for the VAD Project, it was explained to the Board that the same was planned to be executed under a separate scheme and as such it did not form part of the present proposal.
The last para be amended as under:
'In view of the fact that the project cost estimates were not based on the actual offers/tenders and the foreign exchange rates estimates were no longer valid, the Board desired that the project cost be worked out taking into account the actual offers of the equipment and the current rate of foreign exchange.
In Item No. 177-3 (NA) Condition No. 3 be added as under:-
(3) That there will be a nominee of BHEL alongwith nominees of other Public Sector Undertakings on the Working Committee of DPS Society.CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 39 of 87
178-3 Feasibility Report for setting up of
Heavy Forge Shop
-------------------------------------------
The Board noted the project estimates of Rs. 1957.50 lakhs based on actual quotation for UHP Arc Furnace at Rs. 10.02/DM.
Chairman and Managing Director explained to the Board that there would be an additional cost of Rs. 23.15 lakhs (at the rate of Rs. 10.22/DM prevailing on 11.1.90) for taking a forward cover to check exchange variations. The Board of Directors after discussions authorized Chairman & Managing Director to implement the investment scheme. The Board desired that in case the cost exceeds Rs. 20 crores, the matter be sent to PIB for approval.
9.2 Such minutes of first meeting show that on the assurance of CMD, the Board approved the proposal for purchasing the second-hand 9000 MT Forge Press and desired that the proposal be sent to the 'Committee of Secretaries' for their approval 'to import' the second-hand equipment. Right here, I would hasten to add that in fact, the matter was sent to such Committee which examined the matter and cleared the import. Prosecution also admits the same though it still claims that the acquisition cost was kept below Rs. 20 crores so that matter did not go to PIB. I would touch said aspect little later.
9.3 As regards second meeting, it is apparent that Board had considered the observations of Sh. K.N. Khanna and had also considered the feasibility report. All the board members were in the thick of technical specifications of such forge press. As per said Board decision, the proposal was found to be in the best interest of the company. Therefore, it was directed that the project cost be worked out. In the subsequent meeting dated 12.01.1990, slight modifications were carried out and it was observed that the project cost be worked out taking into account the actual offers/tenders of the equipment and current rate of foreign exchange. The Board also observed that if the cost exceeded Rs. 20 crores, matter be sent to PIB for approval.
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 40 of 879.4 In first meeting dated 29th September, 1989, second meeting dated 27.12.1989 and third meeting dated 12.01.1990, besides accused P.S. Gupta (CMD), other Directors were also present. Out of these Directors, prosecution has been able to examine only two Directors i.e. Sh. K.N. Khanna and Sh. K. Ramakrishna. Therefore, it will be appropriate to take up their testimony first.
9.5 PW1 K.N. Khanna is a material witness. He was Director (Finance) at the relevant time and he is alleged to be the one who had opposed the purchase of forge press.
9.6 Let me see as to what he has to say in witness box.
9.7 He deposed that purchase of equipment in BHEL was governed by Budget Manual and Board of BHEL was empowered to approve purchase upto Rs. 20 Crores and any purchase beyond Rs. 20 Crores was to be sent for approval to Government of India. Around 1987, a letter was received in BHEL from concerned party proposing to sell an old forge press. Since he was posted as Director in finance department, he made certain observations regarding said proposal. According to him, there was also a forging plant of a 'particular capacity' which was not giving profit and before going for purchase of an old forge press, existing plant should be tried to be set in order. He also pointed out that in order to bring such old forge press to its optimum working level, some other equipments were required for augmentation of its capacity and cost of such equipments should also be included in the cost of project which had been kept less than Rs. 20 Crores. He deposed that he reiterated such points in the Board Meeting and Board decided to set up a Committee and subsequently report of the Committee was approved by the Board. He also deposed that earlier BHEL never purchased/imported old equipments. He also detailed about the procedure for processing the proposal and CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 41 of 87 reiterated that in the present case, offer had been received from a private party only. He claimed that the Committee has given a report that such purchase of an old forge press would be useful for the working of BHEL and, therefore, Board had approved the purchase. Fact remains that since he did not come up with all the facts, he was cross- examined by the prosecution with permission of the court and during such cross- examination, he was shown his comments which he had made during the relevant time and he proved the same as Mark P-1/B (D-15). He admitted that in his comments he had mentioned that the capacity of forge press was 7500 ton which was capable of operating at 9000 ton only with an intensifier and that the cranes offered were of 140 tonnes each and not of 200 tonnes capacity. He admitted that in the Board Meeting dated 12.1.1990, he requested that his dissent views be recorded. He, however, does not seem to recall whether such comments/dissent notes were actually incorporated in the minutes of meeting or not.
9.8 As regards Sh. P.S. Gupta (A-1), he did not come up with any specific allegation which he had, otherwise, made during the investigation. He deposed that he could not say whether the entire project was initiated and processed at the instance of P. S. Gupta. He also failed to recall whether P.S. Gupta was adamant in procuring such forge press. He denied that P.S. Gupta never cared for his suggestion.
9.9 He was cross-examined by defence as well.
9.10 In such cross-examination, he admitted that a team had been constituted by BHEL to visit West Germany to check viability of the project and such team constituted Sh. D.V. Bhatnagar, R.N. Mahendru, S.K. Khazanchi and Sh. Dhirendra Krishna. In his cross-examination he claimed that as per his recollection, the capacity of old forge press was mentioned as 1000 MT (sic). As regards the capacity of crane, he did not exactly recall but claimed perhaps the crane was of 140 tonnes. He admitted that in the tour CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 42 of 87 report, it had been mentioned that such forge press had been proposed to be acquired which would make BHEL self sufficient for its requirement of heavy forging and would provide a stand-by arrangement for power generation. He, however, did not recollect whether tour report also mentioned that forge press was in working condition and would require 15-18 months from the date of finalization of the project till its installation in BHEL. He failed to recollect about any letter dated 31.8.1989 written by P.S. Gupta to H.C. Gandhi regarding nomination of a representative from Government of India to ascertain suitability and condition of the forge press and also does not know whether as per letter dated 8.9.1989, Sh. V.K. Jain had been nominated for the said purpose. He also does not have any knowledge whether R.K.D. Shah had requested Sh. Marwah to give opinion regarding purchase in question. He did admit that observations/comments made by him were taken note of in 177th Meeting of the Board and same were reflected at point 177.9 of the minutes Ex. PW1/DA (D-51). Similarly as regards Ex. PW1/DB (178th Board Meeting), he claimed his observations were considered in the meeting. He also claimed that decision to import was collective decision of the Board and not an individual decision of Sh. P.S. Gupta. His attention was also drawn towards corporate plans which used to be prepared projecting future projections/long term planning which were marked as Mark P-1/D1 & D2 but he could not throw much light over the same. It was put to him that feasibility report for setting up heavy Forge Shop envisaged production of rotor of 210 MW and 500MW on a conservative basis of 8 sets of 210 MV and two sets of 500 MW based on load projection in the corporate plan but he deposed that he did not recollect anything about that. He also could not recall whether installation capacity of forge press installed in BHEL during 1989 was 6000 MW p.a. He claimed that he had no knowledge whether CFFP found the capacity of imported forge press to be as 9000 MT with intensifier after it had started functioning. He also does not know whether global bid for procurement of Quality Improvement Equipment (QIE) were called. He did admit that change in foreign exchange, devaluation of rupee, increase in custom duty, increase cost of shipping due to gulf were factors leading to escalation in CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 43 of 87 future cost. He could not comment whether one of the feature leading to cost escalation was 'heat treatment facility' as taken in 177th Meeting of Board of BHEL. He claimed that he never personally challenged the Marwah Committee Report before any authority. He did admit that there was no document or rule book or statutory guidelines prescribing BHEL not to purchase old equipments. He also clarified that the entire project cost would have been more than Rs. 20 Crores but not specifically Rs. 40 Crores. He did not recall as to on what basis he commented that cranes girders were of 140 tonnes capacity and not of 200 tonnes capacity. He does not even recall whether Draft Board Memorandum was tabled in the Board Meeting (D-51). He admitted that he was officiating as CMD of BHEL when P.S. Gupta took over as CMD but denied that he had put contrary comments to settle personal score with P.S. Gupta as he wanted to dislodge him from the post of CMD, having an eye on such post.
9.11 In his further cross-examination, he claimed that he had no technical know- how regarding working of forge press and could not say as to what capacity of press would be required for production of a particular product. He claimed that his earlier comments in that regard were based on the basis of his discussion with his colleagues in BHEL. He claimed that he never confirmed from HEC, Ranchi whether or not they could produce forgings for 200 MW and 500 MW turbines. He, however, did admit that production of 200 MW and 500 MW turbines could not have been made with the help of the existing capacity of forge press plant of BHEL and the import was necessary to achieve such production. He did not recall that the forging prepared within BHEL could be cheaper than the imported one. He also admitted that old forge press was finally purchased after due approval of Government of India as per the procedure. He also claimed that since he retired in 1990, he could not tell the exact escalated cost of the project in question and also denied having knowledge of reason behind such escalation. He claimed that accused Dhirendra Krishna, individually, had no role in the corporate decision while volunteering that he was part of the team which visited the plant.
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 44 of 879.12 PW1 Sh. K.N. Khanna had given his views/comments from time to time as under:
S. No. Date Exhibit & D Number
1 25.08.1989 Ex. PW23/DA (Part of D-15)
2 06.09.1989 Part of D-15
3 27.09.1989 Ex. PW28/1 (Part of D-15)
4 20.12.1989 Part of D-15
9.13 All such reports have also been proved as Mark P1/B by him.
9.14 I have gone through the all the aforesaid four reports. In his first report
dated 25.08.1989, he seems to have highlighted the following points:
(i) Project required approval of government/PIB.
(ii) He insisted to have certificate from Chartered Engineer. In
his additional comments, he also wanted certification from Indian Agency of DGTD.
(iii) There should be adequate performance guarantee.
(iv) There would be additional requirement of 134 staff officials.
(v) Orders are only anticipated and not secured and the
utilization of forge press would become reasonable only if the anticipated orders fructified as per assessment.
(vi) There should be necessary provision of obtaining spares.
(vii) It was not clear as to how the cost of new press has been assessed.
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 45 of 879.15 He nowhere claimed that proposal was not viable because important and vital machine parts of such press were not incorporated in the order. He did not make reference with respect to the capacity of the press or for that matter about its cranes.
9.16 In his subsequent comments dated 06.09.1989, he highlighted that for technical evaluation, one DGTD nominee and one BHEL official had already been deputed and their report may be awaited. He also made reference about global tender and wanted evaluation of cost comparison of new and second-hand press. Such fact, very conspicuously, was missed out by him in his deposition. He also desired that if they decided to go for this press, BHEL required machining facility also. As regards spares, he claimed that confirmation had been received from M/s DEMAG about the supply of spares. In his such written note, he had also claimed that press in question was actually 7500 T press which was capable of operating 9000 T load with pressure intensifier and the cranes were of 140 T capacity and not of 200 T capacity and these aspects may also be looked into.
9.17 In his subsequent report dated 27.09.1989 Ex. PW28/1, he re-agitated the same points while highlighting that there was uncertainty about the projected orders and also claiming that there was already poor management, neglect of maintenance of equipment in BHEL and there was urgent need to apprise the existing problems and, therefore, he observed that it will not be advisable for going for proposed forged press.
9.18 All in all, his deposition does not take us anywhere. He has neither given any convincing answer nor attributed any malafide on the part of any accused. He was, merely, apprehensive about projected orders.
9.19 Let me now come to the deposition of the other Director.
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 46 of 879.20 PW26 Sh. K. Ramakrishna became Director in June 1989. He deposed that proposal to import heavy forge press was initiated during his tenure and he was called for a meeting by Sh. P.S. Gupta and during such meeting in his chamber, proposed German supplier was also present. Accused R.N. Mahendru was also present in such meeting. He then made reference about the manual of BHEL supplementing that he did not know whether the project for procurement of second-hand forge machine was processed in accordance with the manual of BHEL or not. This was an awkward narration from him. He was on the Board of BHEL and it was not expected that he would pleaded his ignorance on said vital aspect. He, however, did mention that Director (Finance), Sh. K.N. Khanna was not in favour of clearing the proposal and other Directors were in favour of the proposal. He also claimed that proposal was placed before the full Board where even Government Directors were also present. Since Government Directors wanted the proposal to be thoroughly examined by a Technical Committee, a Technical Committee was constituted. Such Technical Committee constituted a retired Chairman of Ordnance Factory (J.C. Marwah) as Chairman of the Committee and he himself and Mr. Mahendru were made members of such Committee. Such Committee went into all details and had discussions with Chairman of BHEL and other officials of CFFP. He deposed that Marwah Committee recommended that the crane girders should be fabricated indigenously whereas in the original proposal, girders were intended to be imported. He deposed that the cost of crane girders to be imported was very high in comparison to locally fabricated girders. He also referred to report of Marwah Committee and proved the same as Ex. PW26/A (D-9).
9.21 In his deposition dated 18.02.2017, he categorically claimed that capacity of forge press was 7500 MT which could be enhanced to 9000 MT with the help of accessories of capacity accumulator. He deposed that Mr. Khanna had objected that the capacity of the forge press was 7500 MT but was being projected as having capacity 9000 MT and the Board then explained to him that he was looking at the total capacity of CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 47 of 87 the press which could be attained either by the bare press or by adding accumulator. He is naturally referring to intensifier. It is also quite obvious from the record available before the Court that though the capacity of the forge press was 7500 MT but with the help of intensifier, such capacity could be enhanced to 9000 MT. Thereafter, he deposed about the revised cost estimate report. Such report has been proved by him as Ex. PW26/6 (D-4).
9.22 He also made reference to the comments on the proposal sent by 'Planning & Development Department' to all the Directors and Chairman of Board. Such comments have been proved by him as Mark PW26/A (D-46). It was bearing his signatures also at point A of Page No. 5.
9.23 As per such revised proposal, cost of the forge press had gone up from 19.57 crores to 35.49 crores and it was post facto approval as the part of the expenditure had already been incurred. He did claim that as per rule, any proposal approved by the Board if it was to be revised, it was required to be put up before the Board again. He deposed that by that time, Sh. P.S. Gupta had already retired and Sh. Gavisiddappa has taken over as CMD of BHEL and, therefore, such proposal went to Sh. Gavisiddappa. Such enhancement in expenditure was justified by Planning & Development Department. He also made reference to remarks of Sh. Ishant Shankar, AGM (P&D). At that time, Executive Director (P&D) was Sh. R.K.D. Shah, the earlier sanctioning authority and he also gave his comments and marked the matter to CMD and draft memorandum for Board meeting was prepared which has been proved him as Ex. PW26/7 (D-47). Matter was then placed before the Board Members including Government Directors and matter was taken up by the Board in Board 208 th Meeting dated 15.05.1993 chaired by Sh. Gavisiddappa. Minutes of such Board Meeting has been proved as Ex. PW26/8 (part of D-27) and same is extracted as under:
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 48 of 87Minutes of the 208th Meeting of the Board of Directors held on 13 th May, 1993 at 12.30 PM at New Delhi Present Shri A Gavisiddappa Chairman & Managing Director Shri C Ramachandran Director Shri V Anand Director Shri K Ramakrishnan Director Shri R C Malhan Director In Attendance Shri K J Thacker Company Secretary 208-1 Leave of absence All the Directors were present.
209-2 Revised Cost Estimates of investment proposal for "Setting up of Heavy Forge Shop with 9000-T Forge Press" at BHEL/ CFFP, Hardwar
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The Board considered the note on the subject.
At the outset, the Board expressed serious concern that major changes in the scope of the project had already been implemented, resulting in cost escalation without prior approval of the Board and contrary to the specific conditions of earlier Board approval. Further, contractual provisions had either been waived or not insisted upon at the proper time, with the result that this proposal, for all practical purposes, amounted to seeking an ex-post-facto approval.
In response to their earlier enquiry, it was confirmed to the Board that in the technical opinion of the Company, the installation of the manipulator was intrinsic and indispensable to the effective utilization to the effective utilization of the press. It was, therefore, all the more serious that based on a proposal from the supplier for the deferment of the supply of the manipulator and substitute quality improvement equipments in its place, the General Manager of the CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 49 of 87 Project through the General Manager (Finance) of the Unit recommended the same without adequate analysis and the previous Chairman & Managing Director had approved it without reference to either Director (ER&D) who headed the Committee, which finalized the scope of the Project originally or Director (Finance).
Under the circumstances, the Board considered that the Chairman & Managing Director should initiate appropriate action against the involved in the various lapses in the execution of the Project both in effecting changes in scope, financial powers exercised and relaxations granted against specific contractual provisions regarding supplies and payment.
As regards the limited issue of obtaining the manipulator through the alternate source suggested in the note, the Board felt that there was no other option at the present juncture since ti was stated to be indispensable for the utilization of the press and the procurement of new manipulator would be at exorbitant cost. Therefore, the Board approved the proposal for its procurement under the terms suggested, which was considered to incorporate the maximum possible guarantees against the obvious risks involved since the manipulator was now being procured after the lapse of extra time necessitated by the circumstances of the case. The Board also noted that the other supplementary items of expenditure essential for completing the Project brought out were unavoidable under the circumstances.
Periodical reports may also be given to the Board on the implementation of the Project and the progress in effecting the recoveries from the original suppliers.
9.24 As per said Board Meeting, Board Members considered the revised cost proposal and also recommended for appropriate action against the person involved in various lapses in execution of the project. Interestingly, Shri A Gavisiddappa recommended some action as CMD but I cannot lose sight of the fact that he was also a Director when the decision was taken to acquire such forge press. If at all, he felt that something was amiss, he should have raised the matter then and there. He admitted CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 50 of 87 that Board Meeting No. 177-9 (Ex. PW1/DA) was attended by him as Director and it was recommended that proposal was in the best interest of the company.
9.25 PW26 Sh. K. Ramakrishna deposed that five items were responsible for increase in the cost of the project. These included import of crane girders instead of its local fabrication, addition of QIE, addition of electrical equipment extension of length of bay and addition of manipulator. In this regard, he has proved his report as Mark PW26/AQ. I have seen his cross-examination very carefully. He claimed that he did not bring any objection with respect to acquisition to the notice of Government Directors volunteering that two government Directors were already on the Board of BHEL. He claimed that these Government Directors did not file any complaint regarding the process of acquisition. When asked whether he was aware about the procedure of procurement on single tender basis, he claimed that he did not recall the same. He does not know whether any team was constituted by BHEL to visit West Germany to check the viability of the project. When put to him specifically, he pleaded ignorance whether Sh. Bhatnagar and Sh. S.K. Khazanchi were part of the team which visited West Germany. He does not know about the two reports prepared by the officials of BHEL.
He also does not know that Sh. V.K. Jain was nominated by Government of India and that he too visited West Germany.
9.26 A specific question was put to him that Marwah Committee (of which he was also a member) looked into the various aspects associated with the acquisition of forge press and that such Committee was given full assistance at various levels. He answered in affirmative to aforesaid question. He also deposed that when Marwah Committee was assessing the overall capability of the machine, the Committee could not arrive at a precise cost because of the non-availability of budgetary permission. He also admitted that rough computation was carried out based on the cost of smaller size equipments installed in CFFP in mid seventies. Surprisingly, despite being member of CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 51 of 87 the Board, he claimed that he did not go through either of the two reports.
9.27 He claimed that there was a complete transparency in relation to issues, opinion and discussion which used to take place among the Board Members and decision of importing the forge press was a collective decision of the Board and not of any individual member and was neither unilateral decision of any Board Member. He claimed that there was subjective assessment of the Board Meeting. When asked about corporate plans, projecting the future needs on long term basis, he pleaded his ignorance. He also did not know whether dismantling of forge press in Germany took around one year. He admitted that there are various factors which increased the cost of acquisition. He admitted that foreign exchange was one of the factors which enhanced the cost estimate. He also admitted that increase in custom duty and shipping cost due to gulf surcharge was also instrumental in increase of cost. He also admitted that revised estimate was put up before the Board for approval of the Board.
9.28 In his cross-examination, he could not describe as to how ESR functioned and when a court question was put, he claimed that it was an old matter and he had lost some memory also.
9.29 He admitted that CFFP did not have the capability to manufacture QIE/ESR and the capability to manufacture gas turbine component, gun barrels & nuclear component and, therefore, it was long term commercial interest of BHEL to establish manufacturing capability of super clean steel in CFFP. It seems that therefore, QIE/ESR was decided to be imported. He admitted that QIE/ESR was imported after the retirement of Sh. P.S. Gupta. In his further cross-examination, he claimed that he had never seen the forge press in question as well as QIE. He did claim that he prepared a note highlighting the discrepancies regarding increase in project cost but claimed that despite his such objection, Board headed by Sh. Gavisiddappa including Government CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 52 of 87 Directors gave approval for the whole project. He also volunteered that since purchase order had already been made, Board was left with no option but to give approval.
9.30 He could not comment whether cost of ESR at the relevant time was Rs. 3.62 crores which was within the financial sanctioning power of CMD which was of Rs. 5 crores. He claimed that the capital project used to be regularly monitored by the Management Committee and Board of Directors. He also admitted that he was member of Management Committee as well as on the Board of Directors. He admitted that Heat Treatment Facility was not part of the original estimate and also admitted that custom duty had increased from 35 percent to 60 percent and the Gulf surcharge of 5 percent was also imposed and these could not have been foreseen while preparing the original estimate of Rs. 1955 lacs. He also admitted that there was an increase of cost of freight as actual weight of the heavy forge press was not known at the time of preparation of the original estimate. He also admitted that many items not included in the purchase order valued at over Rs. 3 crores were obtained free of cost from the closed factory in Germany which though resulted in extra expenditure on account of freight. He denied the suggestion that he had deliberately introduced the theory of indigenously crane girders being more economic in order to frame the accused persons. He claimed that he did not know whether any loss was caused to BHEL either by installation of the forge press or by acquisition of crane girders, quality improvement equipments, manipulator and other equipments supplementing that since he had retired in 1994, he was unable to comment. He denied the suggestion that import of crane girders was found necessary as its local manufacturing would have taken lot of time and would have been expensive as well.
TESTIMONY OF OTHER BHEL OFFICIALS 10.0 Let me now briefly refer to deposition of various other BHEL officials.
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 53 of 8710.1 PW-22 Sh. D.V. Behl had joined CFFP, BHEL in 1992 as DGM (Maintenance & Capital Repair Group). He is a key witness as he was the one who was responsible for maintenance of Forge Press Equipments in CFFP. He deposed that he was associated in the erection and commissioning of Forge Press Shop Equipments. According to him, there was one Forge Press of capacity of 2650 Tons in CFFP and the imported Forge Press was commissioned in First Quarter of 1994. Its capacity was7500 MT which could be achieved upto 9000 MT with the help of Intensifier. He also claimed that whenever it was required to increase the capacity of press from 7500 MT to 9000 MT, only then such Intensifier was required to be used. This witness was also cross- examined by prosecution but he reiterated that Forge Press was installed and commissioned in 1994 and after such installation it started functioning and giving production. In his cross-examination conducted by defence, he claimed that he too had visited Germany when the process of import of Forge Press was going on. He visited Germany for inspection of Manipulator, dismantling of Manipulator and its transportation. Sh. Rao highlighted that the Forge Press was installed in Germany and Manipulator, which was otherwise integral part of the Press, was not agreed to be supplied and, therefore, it was procured through M/s PANKHE and it was in that context that Sh. Behl had visited Germany.
10.2 Be that as it may, fact remains that Behl has categorically claimed in his deposition that he did not make any complaint to anyone/authority with regard to any irregularity in respect of import of Forge Press or Manipulator. He claimed that as per original drawing the press was named as Hydraulic Forge Press 75MN/90 MN operating at 250 Atmosphere Liquid Pressure from Accumulator Stations. He admitted that Forge Press was dual Pressure Forge Press of 7500 MT to 9000 MT. He also admitted that in such Forge Press, Hydraulic Pressure was increased from 250 to 300 Atmosphere through intensifier by upsetting. He claimed that Intensifier was received along with main Forge Press. He deposed that such Forge Press was having pumps and each pump CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 54 of 87 was having 3 Plungers. He claimed that such Plungers may get worn down due to usage over a period of time which may cause frequent leakages. He claimed that once such leakage becomes appreciable, the Plungers should be replaced. He, however, claimed that during his tenure Plungers were never replaced. He claimed that during his tenure in CFFP he never reported to any authority that the Press was not functioning or it was not functioning satisfactorily. He claimed that he had seen the technical drawings which were brought with the Press and categorically and specifically deposed that the Press was in conformity of such technical drawings. He claimed that the Press was designed for operating on 9000 MT as per the job requirement. Though he tried to retract by claiming that his answer regarding specifications were based on drawings only but fact remains that he himself categorically admitted that he never reported to any authority that the Press was not functioning satisfactorily or it was not as per the technical drawing. When defence confronted him with one letter of Sh. G.N. Mehra dated 20.10.1998, he pleaded his ignorance about such letter. According to defence Sh. Mehra, who was Secretary, Ministry of Heavy Industries, Government of India was the one who had recommended for Forge Press. He is not aware about test carried out by M/s Lloyd's. He claimed that till 1998, when he remained there, the Press was being continuously used at the maximum capacity of 7200 MT as the Pumps were delivering the liquid pressure at 200 Atmosphere Pressure. He was put a very specific question and asked whether there was any job/requirement of Pressure upto 9000 MT and he claimed that he had no knowledge regarding aforesaid and this could be answered by Forge Press Production Engineer. He denied that he was deliberately avoiding the question. He reiterated that during his tenure machine was functioning well and also claimed that no job work was declined due to the capacity of the Press.
10.3 PW-8 Sh. V.P. Singh worked in various capacities in Planning & Development Wing of BHEL between1980 to 2001. He is aware about the import of second hand Forge Press from West Germany. He, however, claimed that since he was CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 55 of 87 not a technical man, he would not be able to answer about the technical aspects related to Forge Press. He was the one who had prepared "Draft Board Memorandum and he admitted that in such memorandum capacity of the press was mentioned as 9000 MT. He supplemented that it was mentioned on the basis of 'feasibility report' and report of the 'expert committee'. He claimed that he had perused both the aforesaid reports. He also seems to be aware about the 'Marwah Committee Report' but failed to recall its contents. Thus, his testimony does not seem to be of much advantage to the case of prosecution. In his cross-examination, he also claimed that he did not know about the purchase procedure. He is also not aware about the objections raised by Sh. Khanna and does not know whether such objections were rejected by the Board of Directors. He, however, claimed that no irregularity was observed during the monitoring of the erection process of the press. He does not know whether any loss was caused to BHEL by such import. He is not aware whether any tender was floated regarding Press in question. Thus except for preparation of "Draft Board Memorandum", he has not stated anything which may substantiate the case of prosecution in any manner whatsoever.
10.4 PW-9 A.K. Chakravarty was working as General Manager (Financial Services) and also Company Secretary of BHEL during 1996-97. Surprisingly, he is not much aware about the Capital Budget Manual and about the Procedure of Purchase. Since he was not able to recall anything substantial, he was cross examined by the prosecution with the permission of the court and even during such cross-examination, he claimed that even if there was any modification in the project after it was approved by the Board, it was required to be re-approved with the Board but if the modification was within the prescribed limit of the competent authority (being referred as CMD), then the matter did not require re-approval by the Board.
10.5 PW12 Sh. Hari Om worked in CFFP from 1975 till 2009 and in his examination-in-chief, he claimed that during his tenure, forge shop was used for CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 56 of 87 maximum capacity upto 6500 tonnes. Sh. Rao has asserted that this clearly indicates that there was no requirement of importing the machine as it could not have been used for high capacity forging. Fact, however, remains that this witness also claimed in his cross-examination that forge shop was having inbuilt intensifier by using which, the capacity of the press could be enhanced upto 9000 tonnes. He also admitted that during his tenure, forging of steam turbines, hydro turbines, gas turbines, FP Rotors, IP Rotors and TG Rotors etc. were done. He does not know as to what pressure was required for manufacturing of gun barrels. He also does not seem to be aware about the report given by M/s Lloyd. Surprisingly, when he was confronted with one report dated 16.08.2000 (Mark PW12/D1), he admitted his signatures on the same. Such report clearly indicates that a test was carried out to confirm about the capacity of press and as per such report, all the pumps were tested in modified condition and the results indicated that the forge press was giving maximum force of 9000 T. Thus, this witness is trying to suppress the true facts and is deliberately avoiding about knowing the actual potential of the forge press as well as about the report given by M/s Lloyd.
10.6 PW18 Sh. S.L. Gupta was Head of CFFP from April, 1995 to October, 1997. He has deposed that Forge Press of 9000 MT was imported before he joined CFFP. He, however, supplemented that Forge Press was commissioned satisfactorily and was giving desired production. So much so he claimed that during his tenure, Forge Press was found to be a boon for CFFP, BHEL. He claimed that due to commissioning of the Forge Press, the capacity of CFFP got enhanced in the area of forging. It has enough of potential to indicate that the machine was neither a junk nor unproductive as alleged by the prosecution.
10.7 PW19 B.C. Gupta remained posted as Engineer in CFFP, BHEL and he was looking after the whole plant. He also categorically deposed that Forge Press was 7500 MT/9000 MT which implied that the capacity of the Press was 7500 MT without CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 57 of 87 intensifier which could be enhanced to 9000 MT with intensifier. He mentioned that if the pump of '250' was used in the Forge Press then such maximum capacity of 9000 MT could be achieved with the help of intensifier. He claimed that the capacity of the pump could be increased from 200 to 250 by modifying the plunger of the pump. In his cross- examination, he claimed that modification did not require any external or further investment. He deposed that after such modification, Forge Press started functioning at the full capacity of 9000 MT. He also admitted that since he had seen the machine functioning, he would be in a position to say that machine was having capacity of 9000 MT with intensifier. He was re-examined by the prosecution with permission of the court since he had come up with the aforesaid revelation which was, somewhat, not in synchronization with the case of CBI and during his such cross-examination he took a little somersault and claimed that 'minor expenses' were incurred in modifying plungers. However, he but did not quantify those expenses. He also made reference to the Lloyd's report dated 16.6.2000 and proved the same as Mark PW 19/D-1.
10.8 PW-23 S. Ramabadhran was Executive Director (Finance), BHEL Corporate Office, Delhi. He, however, did not work at CFFP, Haridwar and he was not concerned with the procurement of import of second hand Forge Press in question. This witness was also cross-examined by the prosecution with the permission of the court since he too was found suppressing the material facts. In his cross-examination conducted by defence, he admitted that he was also part of the team which had prepared 'feasibility report' in the present case and he also claimed that CFFP was making profit between 1989-90 to 1993-94.
10.9 PW-24 N.K. Srivastava worked in different capacities in various departments of CFFP, BHEL from 1984 to 1997. He claimed that he was not involved with the purchase process of Forge Press as it was not imported during his tenure. Fact remains that he too was cross-examined by the prosecution after he was declared hostile.
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 58 of 87Various suggestions were put to him but he pleaded his ignorance and did not come up with any answer which might suit the prosecution. Except for identifying the signatures of accused R. N. Mahendru and accused J. L. Jain on various documents, he did not come up with anything substantial in his such cross-examination conducted by prosecution. However, then Ld. Prosecutor did ask from him about the 'comparative statement' and then he revealed that quotations were received from different suppliers and those were compared with each other and after such comparison the quotation found suitable was considered for making the proposal. He also made reference to Ex. PW 24/A (D-11) in which such price comparison has been made in order to assess the reasonability of the price quoted by M/s Smachtin. During his cross-examination by Ld. Prosecutor showed him documents, one after the other. However, when cross-examined by defence, he claimed that he had no personal knowledge about all those documents which he had been shown for the first time in the court. He claimed that he had no idea about the contents of such documents. He also claimed that he did not know whether there was any violation of Purchase Policy of delegation of powers relating to Forge Press. In the next breath, he also claimed that such purchase of Forge Press was unique opportunity for BHEL.
10.10 PW-25 Sh. A.K. Kapoor also worked in different capacities in CFFP, BHEL from 1976 till 1997 and his job as Additional General Manager (CFFP) included looking after the production of Forge Shop and Foundry. He admitted in his cross-examination that during his tenure the CFFP, Forge Press was in use and that it was working satisfactorily. It was used for manufacturing range of products depending upon the other balancing facilities and not on orders. He claimed that since there was lack of balancing facility, press remained idle. Fact, however, remains that as per record, testimony of PW-25 is lying incomplete and, therefore, any part of his evidence, which is detrimental to accused, should not be pressed into service.
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 59 of 8710.11 PW29 Sh. Laxman Swarup, who was posted in Material Management Section of Corporate Office of BHEL, New Delhi during the relevant period also did not come up with requisite details and was cross-examined by the prosecution. Fact remains that in his deposition, he did admit that machine in question i.e. forge press was functioning and was giving production. He claimed that they were told that press was having capacity of 9000 MT and their impression was also the same that it was functioning at its full capacity.
10.12 PW34 Sh. Rajeev Kumar, who remained posted at CFFP, BHEL from 1974 to 2009 in different capacities, also admitted in cross-examination that the machine was functioning and was giving production. Testimony of PW35 Sh. O.P. Batra may not be of any useful purpose in the context of purchase/import of forge press as this witness was never associated with the Purchase Department. However, he did admit that during his tenure at CFFP, said forge press was operational. PW37 Sh. K.L. Ghorui was posted in CFFP in December 1991 as DGM (Finance). He did make reference about the profit/loss which CFFP made during the relevant period and also about separate order for crane girders and QIE. In his later deposition, he also claimed that as per record, parts worth Rs. 3 crores in relation to forge press were given to BHEL by the supplier free of cost and these parts were mentioned in the import licence.
10.13 Testimony of PW43 Sh. M.K. Mittal does not seem to be of any significance from prosecution angle. Despite the fact that he is a mechanical engineer and became Director of BHEL in the year 1997, he could not come up with any answer to the liking of prosecution and, therefore, he, too, was cross-examined by the prosecution and even during such cross-examination, he could not recall anything substantial. He claimed that he did not have any personal knowledge about the import of press in question. When he was asked to explain about the intensifier by the Court, he claimed that he was not in a position to explain the same. Testimony of PW44 Sh. M. Ramachandran, PW45 Sh.
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 60 of 87K.C. Lahiri and of PW47 Sh. B.R. Gulati also does not take the prosecution case anywhere either.
10.14 Right here, I would like to make reference to the testimony of sanctioning authority.
10.15 I would hasten to add that the previous sanction given by Sh. R.K.D. Shah was quashed as he was found associated with the procurement/import of forge press. In said order dated 26.05.1999 passed by Hon'ble High Court of Delhi whereby sanction was given by Sh. R.K.D. Shah was quashed, it was specifically noticed by the Hon'ble High Court of Delhi that Sh. Shah had recorded a note dated August 25/28 1989 for circulation of the Directors in which he himself had noted that there were few presses of such capacity and range in the world and getting offers for second-hand presses of such type was not so frequent and CFFP was, therefore, trying to encash such opportunity. Thus, he was the one who, too, had, virtually, recommended acquisition of such forge press.
10.16 Subsequent sanction for prosecution was accorded by Sh. K.G. Ramachandran and he has proved his such sanction as Ex. CW1/A. 10.17 In his cross-examination, he admitted that forge press was in working condition and was also giving some production. He claimed that to the best of his recollection, it was giving production since 1995. When he was asked and was confronted with the annual reports of BHEL, he had to admit that such reports were containing the figures regarding the production of heavy forgings. He also admitted that as per one publication of BHEL (Ex. CW1/H), such forge press has been mentioned as achievement for BHEL. He was put a very specific question and was asked to comment whether such forge press, which was giving regular production could be said to be CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 61 of 87 unproductive and he categorically claimed that it could not be called unproductive. It is surprising that despite admitting about the production and capacity of forge press and about the fact that it was giving production while granting sanction, Sh. K.G. Ramachandran, in his sanction order claimed that forge press could be run at maximum capacity of 6000 MT and with intensifier at maximum capacity of 7500 MT. It is not clear as to why he mentioned the forge press as junk while according such sanction. When he was asked to elaborate whether BHEL had suffered any loss on account of import of forge press, he simply claimed that press was not able to perform to its full rated capacity and, therefore, BHEL was not able to realize its expectations from the press. He, however, gave answer with respect to the assessment of loss of Rs. 10.24 crores by claiming that equipment could not be operated at its rated capacity and thus the German supplier has cheated BHEL and the amount of 10.24 crores was equivalent of DM 8.6 Million paid to the German supplier.
10.18 When asked whether during his visit to CFFP as CMD, he tried to verify the rated capacity of the forge press, he came up with an evasive answer by claiming that he did not recall. Though he was not a technical person but he did admit that he was aware that press with certain modification could attain the rated capacity of 9000 MT with intensifier. He also claimed that such capacity could be achieved by making certain modification in the pump "in upsetting mode".
10.19 Reference be also made to the documents produced on record by CW-1 Sh. Amit Srivastava. He had been authorized by Executive Director, CFFP to place on record the documents sought by the court and all such documents were taken on record as Mark CW 1/B. Reference be made to Minutes of Meeting of Project Review Committee dated 9.3.1995. (Part of Mark CW 1/B), whereby the progress of heavy Forge Press was reviewed. In such report, the Forge Press has been categorically described as 9000 MT press and it also discussed about its production aspect.
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 62 of 8710.20 Thus, almost none of the witnesses from BHEL deposed in league with the case of prosecution. On the contrary, they all claimed that such forge press was functioning satisfactorily and giving good production as well. None of them claimed that it was junk or unproductive. Their evidence gives a serious jolt to the prosecution case and junks the very foundational allegation that press was a junk.
TESTIMONY OF OTHER OFFICIALS & IO 11.0 Let me now refer to the testimony of PW4 Sh. V.K. Jain.
11.1 He seems to be a very crucial witness because he was the one who had been deputed by DGTD to visit West Germany in terms of request made by BHEL. As a representative of DGTD, he along with Sh. J.C. Marwah went to West Germany in September 1989. He claimed that they visited premises of M/s Klockner and but the plant was lying shut down. One German representative was also with them and it was revealed that machine was lying idle as the plant had been closed on account of environmental issues. Capacity of machine, as per the catalogue produced by M/s Klockner, was 7500 MT which could be enhanced to 9000 MT by using intensifier. Machine was not seen in functional condition. Officials of M/s Klockner, however, told that they would completely re-condition the press before being sent to India. He did not see any pump attached with the machine but it was informed to him that during re- conditioning, pumps would also be attached. He proved the report as Ex. P4/X (D-10) which was signed by him. Surprisingly, he does not remember whether they met Mr. Adolf Wagner, the Chartered Engineer. However, when he was shown certificate dated 07.08.1989 of Mr. Adolf Wagner, he had to admit that such report was part of their report Ex. P4/X. He claimed that with the help of intensifier, the capacity of the forge press would have been 9000 MT and he also admitted that their Committee recommended the import of the forge press. He also admitted that they were informed during their such CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 63 of 87 visit that machine was working properly till it was stopped due to environmental restraints.
11.2 Sh. Marwah reportedly died during the investigational stage and, therefore, the Court does not have the benefit of having his version.
11.3 It is quite apparent that the decision to import was taken by the Board and not by Sh. P.S. Gupta alone.
11.4 Undoubtedly, once such offer came to the knowledge of BHEL officials, they did not want this opportunity to let go by and, therefore, they made immediate efforts and quickly sent a team to Germany to assess the feasibility and suitability of forge press. Report of Marwah Committee is 'loud and clear' and it also recommended such import. Thus, Board was relying upon the wisdom of two neutral experts before taking a final call with respect to the import.
11.5 Testimony of various BHEL officials and the documents placed on record clearly go on to indicate that though basic capacity of forge press was 7500 MT but with the help of intensifier, it could give optimum capacity of 9000 MT.
11.6 Surprisingly, despite such fact looking evident from the evidence, IO, for his totally unknown reasons, claimed in his deposition that the basic capacity of such machine was 6000 MT and not 7500 MT.
11.7 His examination-in-chief is very precise. However, in his cross-examination, he failed to recall as to when the forge press was commissioned and when manipulator and OIE/ESR were commissioned. Though he claimed to have seen the forge press in Hardwar but he did not mention any such fact in the charge-sheet. He admitted in his CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 64 of 87 cross-examination that he did not obtain any independent technical opinion or certification etc. in order to assess the actual capacity of the forge press. He, however, volunteered that Mr. Behl had given opinion to that effect but he also had to admit that no such opinion was placed on record by him. He did not obtain any practical demonstration of the machine in order to ascertain its true capacity. He admitted that forge press was functioning after its commissioning but supplemented that it was giving 'minimal production'. His such deposition does not seem to be based on any document. As regards import, he admitted that he learnt during the investigation that import licence could be applied in advance before the placement of purchase order and it was as per the procedure. He admitted that such advance application of import licence was required because of consumption of time in completing various other formalities and in the present case also, same procedure was adopted and import licence was applied in advance. He, however, could not apprise the Court as to what were the basis of his coming to the conclusion that accused had cheated the BHEL to the tune of Rs. 10.24 crores.
REASONS BEHIND ESCALATION IN COST OF ACQUISITION 12.0 There was, admittedly, substantial increase in cost of acquisition.
12.1 Sh. Rao has contended that such escalation was due to the fact that various important parts and vital accessories of Forge Press were deliberately not considered at the time of formulating the initial proposal with the idea to keep the cost within Rs. 20 Crores so that matter does not go to PIB. Defence has, while refuting the same, has contended that due to increase in tonnage of Forge Press components, Foreign Exchange re-conversion rate, freight charges and custom duty tariff, inland freight, gulf surcharge and decision to procure Heat-Treatment facility, manipulator, QIE and Crane Girders, the purchase cost escalated from Rs.1957 lacs to Rs. 3549 lacs. The main CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 65 of 87 additions, according to them, were ESR and Crane Girders. If Crane Girders were not decided to be imported, then there was a possibility that it would have taken a longer time to manufacture those locally and it would have been costlier also. These are stated to be not essential components of forge press. As regards QIE, it has been agitated by defence that it was standalone equipment which was decided to be imported so that as and when required, super clean steel is manufactured.
12.2 In order to appreciate such rival assertions, it would be appropriate to see the revised project report which has been proved as Ex. PW 26/6 (D-4).
12.3 Undoubtedly, initially when the Forge Press was decided to be imported, the total investment was assessed as Rs. 1957 lacs but as per the revised report, it escalated to Rs. 3549 lacs. Such revised report had though been prepared by accused Sh. R.N. Mahendru but fact remains that it was submitted before the Board of Directors and was duly accepted. I need not remind myself that when earlier proposal was being assessed, an independent team was constituted which went to West Germany. Reference be made to report given by Sh. J.S. Marwah and Sh. V.K. Jain who had confirmed about the suitability of the Forge Press and recommended its import. Board of Directors, accordingly, discussed the proposal and after considering the objections raised by Mr. Khanna, proposal was eventually approved by the Board. It will also be important to mention that there was another Committee which was too constituted under the Chairmanship of Sh. J.C. Marwah having Sh. K. Rama Krishnan (PW-26) and accused R.N. Mahendru as its members and it had been asked to review the facilities mentioned in the feasibility report and to comment about the cost estimate. Such Committee also gave report endorsing the aforesaid investment with certain minor changes.
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 66 of 8712.4 In order to make super clean steel for special needs, CFFP thought of obtaining Quality Improvement Equipment (QIE) which was already installed by M/s Klockner in its plant of Germany. Such equipment was having potential to augment the capacity of the Forge Press of making super clean steel required for various sectors including defence, nuclear and space. Accordingly, M/s Smachtin gave another offer for such QIE. BHEL deputed a team of experts to examine such equipment in order to find out whether such equipment was in good working condition or not and whether it could be useful or not. Such team visited the premises of M/s Klockner and recommended its procurement.
12.5 Reference be made to letter Mark PW24/1 (part of D-11) whereby Sh. Walter Smachtin offered QIE as well as crane girders. On the basis of such offer, a note was prepared by Sh. R.N. Mahendru on 14.01.1991. Such note has been proved as Ex. PW24/A (Part of D-11). As per such note, Sh. Mahendru mentioned that Sh. Walter Smachtin had offered to sell crane girders at DM 1,80,000/- and QIE at DM 15,30,000/-. He also mentioned that since the forge shop of M/s Klockner was to be dismantled before 31.01.1991, there was requirement of taking an immediate decision otherwise those items would not be available. It seems that in that peculiar context, a decision was taken by BHEL immediately and purchase order was accordingly amended. Such purchase order has been proved as Ex. PW24/C (part of D-11). It is signed by Sh. J.L. Jain. Sh. Rao has contended that undue haste was shown in deciding the procurement of QIE and the decision was taken by CMD Sh. P.S. Gupta and he did not even think of placing the matter before the Board of Directors. Since plant was to be dismantled by 31.01.1991, BHEL must be anticipating that if quick decision was not taken, these items could go to someone else and, therefore, it will not be appropriate to smell anything fishy merely on account of hasty decision particularly when, admittedly, a team had been dispatched to Germany little later which actually inspected the aforesaid equipment and recommended its import.
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 67 of 8712.6 It will also be important to mention that at the time of initial proposal, manipulator was also part of the Forge Press. However, M/s Smachtin could not supply the same due to reluctance shown by M/s Klockner. There was dispute between two of them about the fact whether such manipulator could be considered as part of the entire Forge Press or not. M/s Smachtin expressed its inability to supply manipulator and requested that the value assigned for the said item may be reduced from the scope of supply. As regards Manipulator, reference be made to documents available in D-
23. One Fax message has been proved as Ex. PW24/F-1. It is obvious that when M/s Smachtin apprised BHEL that it was no longer in a position to supply manipulator, BHEL officials initiated process for procuring the same from other sources. A comparative statement was prepared which is also available in file D-
23. The quotations were received from M/s TRT-Germany, M/s GESENKSCHMIEDE-Germany and M/s PAHANKE ENGG.-Germany. These were compared and purchase order was eventually given to M/s PAHANKE Engineering. Noting in this regard has been proved as Ex. PW24/F-2. Fact, however, remains that PW-24 N.K. Srivastava has merely identified signatures of Sh. J.L. Jain on Ex. PW24/F-1 and PW24/F-2 and has deposed nothing about their contents as such. As per the comparative statement, the cost of Manipulator was assessed as 1.09 million DM which also included the amount towards modification of electronic control system and was also inclusive of amount to be incurred towards erection and commissioning. Purchase order was released on 12.6.1993.
12.7 In terms of directions contained in 208th Meeting of Board of Directors held on 13.5.1993, Sh. R.C. Malhan, Director (Finance), who was also part of the aforesaid Board Meeting in his such capacity, had considered the entire matter and had given one report dated 28.10.1993. In such report, besides deliberating CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 68 of 87 upon increase in cost on account of various aspects including inclusion of QIE/Crane Girders, he also considered the aspect of increase in cost of manipulator. He came to a specific conclusion that despite all efforts, it was not possible to obtain manipulator from M/s Smachtin and, therefore, it was procured through alternative source and efforts were made to recover the difference of cost. He eventually came to the conclusion that the execution of purchase order had been properly handled and there were no lapses. Such report of Sh. R.C. Malhan who was on the Board of Directors and was part of the meeting dated 13.5.1993 should have been brought on record by the prosecution itself. If at all, it had any grievance that the manipulator was deliberately got omitted from the initial proposal or that it was added at an exorbitant cost. Here, I would like to make reference to the testimony of sanctioning authority K.G. Ramakrishnan. In his deposition dated 18.4.2001, he categorically deposed that he was aware of the report of Sh. R.C. Malhan who came to the conclusion that there was no irregularity in the transaction.
12.8 As regards crane girders, reference be made to the report Ex. PW24/DX-1 given by eight officers of BHEL including Sh. D.V. Behl, K.N. Srivastava, K.L. Ghorui and O.P. Batra who all are prosecution witnesses and in their such report, they came to a clear conclusion that landed cost of girder was lower than the locally manufactured girders. Prosecution cannot be permitted to run away from such report of said Committee. Undoubtedly, the observations given by Marwah Committee were in direct contrast but said report given by a Committee comprising of eight members had come to a very specific conclusion. For the reason best known to the investigating agency, such document was not even placed on record by the prosecution. It was rather defence which eventually brought the same to the knowledge of court. PW-24 Sh. N.K. Srivastava was also confronted with the same and he admitted said report as well.
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 69 of 8712.9 In relation to QIE/ESR and also Crane Girders, let me make reference to deposition of some of the prosecution witnesses.
12.10 PW-10 Sh. S.C. Jain was the one who had visited West Germany to supervise dismantling of the equipment and also to study electrical and electric system of ESR. He compared the machine with the drawings made available to him and tested its feasibility and he found the machine matching with the drawings and also in perfect condition and he prepared a suitability report and submitted the same under his signatures and signature of Sh. S.K. Shukla to his General Manager. He seems to have given his report after necessary comparison and was of the firm opinion that the condition of QIE/ESR was good. His such answer did not suit the prosecution but he remained adamant in this regard even when he was cross-examined by the prosecution. He also claimed that such equipment was working satisfactorily in BHEL also after acquisition and installation. He also claimed that it was a valuable asset for CFFP which was indigenously manufacturing furnace and super clean steel. He also claimed that BHEL had a very limited time to take a decision regarding ESR else the valuable opportunity would have missed.
12.11 PW-12 Sh. Hari Om who worked with CFFP also admitted that function of QIE was to improve the quality of steel. He also claimed that Forge press was giving the desired production during his tenure.
12.12 PW-20 Sh. A.C. Gupta had also visited West Germany along with Sh. R. N. Verma for dismantling electric system involved in the Forge Press. He claimed that Sh. S.K. Khazanchi from BHEL was also there and Sh. S.C. Jain from BHEL also joined them. He claimed that Cranes which were installed at CFFP, Haridwar were the same Cranes which were working in the same Forge Press in Germany. He also categorically CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 70 of 87 claimed that QIE was a separate instrument installed separately from Forge Press. According to him, QIE was not part of the Forge Press. He does not have any knowledge that the Cranes had been upgraded upto 200 Tonnes by M/s Jessops while in Germany but fact remains that there is no witness who might have stated that the Cranes were not of 200 Tonnes capacity. PW-24 Sh. N.K. Srivastava has deposed that QIE was important equipment for forging of Gas Turbine, Gun Barrel and Nuclear Component. He also admitted that manufacturing of these components were planned as a growth area for a 10 years since 1998. It clearly indicates that QIE was procured in terms of the projection.
12.13 PW-25 Sh. A.K. Kapoor has deposed about the value and utility of ESR/QIE and he also supplemented that it was not connected with the functioning of the Forge Press.
12.14 PW-33 Sh. D.S. Syam has deposed that if the quality of steel is not refined with the help of ESR, there was chance of blast/barrel failure. He also claimed that ESR was to be installed in CFFP as part of proposed project of Bofors Gun Barrel manufacturing.
12.15 PW-37 Sh. O.P. Batra was posted as Deputy General Manager (Management Services), CFFP and he has also deposed about the utility of QIE. He claimed that with the help of QIE, CFFP manufactured a number of import substitution items like Gas Turbine Discs and other components. He also claimed that it was an independent equipment and not part of Forge press. It will also be import to mention that he had faced departmental enquiry also. Inquiry report against Sh. O.P. Batra has been placed on record by defence and it is in Ex. DW3/A from Page No. 44 to Page No.
65. Sh. O.P. Batra was facing allegation that he and Sh. J.L. Jain, in a joint report, falsely mentioned that QIE was in a good condition and was being offered at a CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 71 of 87 reasonable price. These allegations could not be substantiated as is evident from the report given by Sh. Arjun Singh, GM (Engineering)/Inquiring Authority. On the contrary, it was held by the Inquiry Authority that equipment was having some initial teething problem which had been ironed out. It was held that it was not a junk and when put to full commercial use, it would rather save considerable foreign exchange. While wrapping up the inquiry proceedings, it was also observed that QIE was an asset for making super clean steel for steam and gas turbine components.
12.16 PW-37 Sh. K.L. Ghorui has deposed that the manipulator was not supplied by M/s Smachtin and, therefore, consideration amount for the said component was not paid to M/s Smachtin Machine Tools. He claimed that reason for loss of CFFP was lack of orders resulting in loss of production and low sale but supplemented that machine was in production till he remained there.
12.17 Power of Chief Managing Director was upto Rs. 5 Crores and, therefore, even if Chief Managing Director had sanctioned the approval of said equipment, i.e. ESR/Crane Girders, which were within his delegated powers, no criminality can be found out in his such decision. It does not lie in the mouth of prosecution to say that Chief Managing Director should have placed the matter before the Board while power to sanction vested in him. Reference be also made to the testimony of PW49 Sh. Chakravarty who has confirmed said fact. Moreover in 208th Meeting, the revised estimate was placed before the Board and was duly approved also. It also become evident that the cost of imported Girders was found to be less when compared to the cost proposed of indigenously prepared Crane Girders and on account of number of factors including substantial jump in Custom Duty, Freight, Transportation etc. there was escalation in acquisition cost which could not have been anticipated in ordinary circumstances.
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 72 of 8712.18 As already noticed above, custom duty was also increased from 35% to 60% and thus there was noticeable increase in acquisition cost/investment. There is nothing before me which may indicate that any part of the equipment, without which the Forge Press could not have been run, was deliberately omitted at the time of consideration of the initial proposal. There is nothing before me that the cost of the acquisition was purposely kept within Rs. 20 Crores so that matter did not go to PIB.
VERSION OF DEFENCE WITNESSES 13.0 Defence has examined three witnesses.
13.1 DW1 Sh. H.W. Bhatnagar remained in CFFP, Hardwar and he deposed that intensifier was part of the machine and such forge press/machine was having capacity of 9000 MT with intensifier and of 7500 MT without intensifier. He also deposed about utility of QIE/ESR. DW2 Sh. Shaikhom Joy Meetei made reference about ACRs of Sh. R.N. Mahendru and Dhirendra Krishna.
13.2 DW3 Sh. Girish Mohan Verma was also examined by defence. Besides placing on record several documents, Sh. Verma also deposed that he joined CFFP in 1983 as Engineer Trainee and remained in Forge Shop during 1986 till 2010. He became Forge Shop In-charge in 2012. He claimed that such forge press was working satisfactorily during his tenure as in-charge. He also claimed that capacity of such forge press was 7500/9000 MT and if the intensifier was used and the pressure was increased to 300 bars, it was giving capacity of 9000 T. 13.3 Defence has also placed on record the summary of up-to-date production of the forge press indicating the same in tonnes and financial value of forging right from the commissioning till 2017.
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 73 of 8713.4 A bare perusal of such report would clearly suggest that the forge press was giving production right from the beginning. Defence has also placed on record report of the Committee dated 19.01.1997 whereby it was concluded that cost of imported crane girders was less than the locally manufactured crane girders. Such report is at Page No. 35 & 36 of Ex. DW3/A. Long-term planning issued by BHEL from 1989 to 1999 has also been placed on record by defence and is at Page No. 66 to 244 of Ex. DW3/A. It is in fact a corporate plan and as regards Hardwar Complex, corporate plan projections are available at Page No. 112.
13.5 Sh. Rao has contended that there was no question of having that much order to be made available to CFFP as projected in the Feasibility Report and, therefore, there was no point in importing Forge Press in question. I have considered the same very carefully.
13.6 I would like to observe and comment right here that such projection is generally given on tentative basis and even if same is not achieved, no malafide should be inferred automatically. Moreover, it is also important to find as to why, CFFP could not get projected orders. There can be multiple reasons for the same. Prosecution has not brought on record convincing material to show that CFFP did not get order as the machine was not of desired capacity. Most of the prosecution witnesses have rather deposed to the contrary. I have already noticed about the deposition of various witnesses and it cannot be said that the projection was unrealistic or based on false assumptions. As per Feasibility Report, the projection of turnover has been mentioned as under:-
Year MT Rs. (Lacs) 1991-92 749 853 1992-93 1609 1695 1993-94 2410 2475 CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 74 of 87 13.7 As per revised project report Ex. PW 26/6 (D-5), the revised turnover was stated as under: Year MT Rs. (Lacs) 1993-94 359 699 1994-95 1415 2692 1995-96 2410 4435 13.8 Defence has also procured summary of upto date of Forge Press and such
summary is found contained in Ex. DW 3/A (page-5 in particular). The production from 1994-95 to 2016-17 related to such Forge Press is as under:-
Year MT Lacs
1994-95 182.310 127.33
1995-96 57.798 95.89
1996-97 399.416 805.24
1997-98 614.410 1046.38
1998-99 677.083 1033.82
1999-00 509.822 862.40
2000-01 689.648 1024.34
2001-02 840.660 1328.54
2002-03 580.626 1033.24
2003-04 697.380 1375.08
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 75 of 87
2004-05 630.351 1475.73
2005-06 740.368 2153.76
2006-07 716.610 2344.04
2007-08 646.017 2110.34
2008-09 767.829 2543.14
2009-10 810.540 2701.33
2010-11 1057.535 5085.50
2011-12 884.582 4250.70
2012-13 1139.652 5580.72
2013-14 992.350 4764.81
2014-15 680.680 3497.40
2015-16 1131.240 5202.61
2016-17 985.000 4824.91
13.9 Though the initial turnover was less than what was envisaged, it is evident
that the Forge Press was being used regularly. It was giving consistent production also and it seems quite apparent that even the break-even point might have been achieved long back. Residual life of Forge Press was stated to be 18 years as per report of Chartered Engineer and it is found giving continuous production for around 23 years and is still in use and, therefore, it can hardly be claimed as a junk.
CONCLUSION 14.1 CBI came with foundational argument that the acquisition cost was deliberately kept within Rs. 20 Crores but there is nothing before me which might CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 76 of 87 suggest any deliberate attempt on the part of CMD or for that matter of anyone else in this regard. It is found mentioned in Board Meeting that if purchase cost exceeded Rs. 20 Crores, matter be sent to PIB for approval. Since it was eventually found to be slightly below Rs. 20 Crores, there was no occasion to send the same to PIB. Mere fact that it was marginally below would not sway the court to assume any criminality.
14.2 It cannot be said that there was violation of any specific provision contained Budget Manual/procurement process. Since the proposal had evidently come from outside, there was no occasion for Planning & Development Wing of BHEL to prepare any report in advance. However, despite that, a feasibility report was prepared and was submitted before the Board. It was duly deliberated upon. Such feasibility report was based upon the corporate plan which contained turnover and output projection for future years.
14.3 Undoubtedly, the initial proposal regarding second-hand forge press was received directly but it is very much noticeable from the evidence surfaced on record that BHEL did not act upon on such solitary offer alone. It invited global bids and after assuring itself that the proposal was viable and the most economic one, it processed the same. Such opportunity was rightly assumed as a golden opportunity akin to "best thing since sliced bread" as according to the most of the prosecution witnesses, such type of high-capacity forge press would rarely be available on second-hand sale and, therefore, BHEL official wanted to close the deal, as expeditiously as possible. After ensuring that the proposal of M/s Empire Machine Tools was the lowest one, the proposal was processed and the purchase order was placed.
14.4 There is nothing before me which may show that the machine was junk or unproductive. The press in question was giving continuous production. Almost all the key witnesses of BHEL have, unanimously, deposed that the press was having capacity of CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 77 of 87 7500 MT which could be enhanced to 9000 MT with the help of intensifier. Thus, the claim of CBI that the machine was having basic capacity of 6000 MT only is nothing but a self-invented imaginary claim.
14.5 It is also quite evident that it was not possible to dismantle the press (installed in Germany) and then to re-install in India in quick time. Rather, the entire process was required to take around 15-18 months. Such fact was laid bare at the time of initial proposal also and, therefore, CBI should not have expected that the machine would have been installed immediately in the year 1992 and would also start giving production at its optimum level forthwith. The press was eventually commissioned on 31.02.1994 along with manipulator and ESR was commissioned on 28.02.1995.
14.6 QIE was a separate component. It was procured after adequate analysis. Such equipment was inspected by a team comprising of Sh. S.C. Jain and Sh. S.K. Shukla along with one Sh. R.L. Verma, the then General Manager, BHEL who was already there in Germany. Decision about its import was taken after the recommendation of said team. It was essential for manufacturing various critical forging of defence, nuclear, gas turbines etc. and the availability of second-hand QIE/ESR equipment was also, rightly, taken as a business opportunity. Chief Managing Director was authorized to sanction capital proposal upto Rs. 5 crores and thereafter QIE was decided to be included in the revised project report. It is also quite evident that it was not possible to manufacture QIE locally as such technology of QIE/ESR was not available in India at the time relevant time. It was a prestigious asset for BHEL and with the help of heavy forge shop (9000 MT capacity) having facility of QIE/ESR furnace of 50T capacity, CFFP had virtually no limitation in forging.
14.7 The supplier did not come forward for the purpose of erection and commissioning but it proved to be a blessing in disguise as BHEL officials, who were all CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 78 of 87 along involved with the process of dismantling at Osnabruck, Germany had volunteered to re-install the same in India. They did not want any further expenditure to be incurred and thereby BHEL eventually saved 0.6 million DM.
14.8 As regards the alleged shortfall in supply of pumps and delayed delivery, deductions were made. Supplier was not justified in withdrawal of amount under Letter of Credit at SBI Frankfort. However, the moment it was learnt, remedial steps were taken. Undoubtedly, penalty stipulations for violation of any term of contract or retraction from the terms of contract should have been much more stringent and there should not have been any unnecessary relaxation. It would have been certainly better if bank guarantee in full had been insisted upon. However, since the supplier was not willing to give any bank guarantee and feeling that if such insistence of supplier was not acceded to, forge press might be sold to some other country, BHEL officials seem to have decided to relax the relevant clause. Therefore, it would not be appropriate to assume any malafide or criminality merely because such stipulation was relaxed after techno- commercial negotiations. It is admitted that civil litigation was also pursued in Germany but this Court is totally in dark as to what was the eventual fate of such litigation. Reference be made to the testimony of sanctioning authority who visited Germany in connection with such litigation and his deposition indicates that the claim was decided in favour of BHEL but such award was challenged by the opposite side. It is not, however, clear as to what happened thereafter. IO should have collected the relevant details and should have apprised the Court about the said civil litigation as well. Even if there was some shortfall or qualm about the capacity of the pumps, which seems to have been set right by doing some adjustment, BHEL officials cannot be hauled up.
14.9 Such forge press eventually proved to be asset for BHEL. Right here, I would say that criminality should not be adjudged from the final outcome. It may so happen that after taking all the best precautions in the world and after following all the CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 79 of 87 possible procedures and manuals, an equipment may still not give the projected production. Projection was, ostensibly, based on 'corporate plan' and a feasibility report was accordingly prepared and was placed before the Board. The Board had come to a conscious decision after deliberating upon all the technical and financial aspects and in such a situation, it was not appropriate for CBI to have picked up some officials of BHEL and to make them accused.
14.10 Undoubtedly, because of the internal dispute between M/s Walter Smachtin and M/s Klockner, manipulator could not be directly supplied but its proportionate price was deducted from the purchase order and it was decided to be procured separately. Officials of BHEL cannot be made to suffer penal consequences on account of violation of contractual obligation by the supplier. It could have given rise to civil liability and it would be harsh to infer any criminality or conspiracy on account of non-supply of manipulator.
14.11 It is also important to mention that even as per the testimony of some prosecution witnesses of BHEL, there were various items which were received as 'freebies' along with the forge press.
14.12 I would also like to highlight that prosecution should have brought a clear picture before the Court that despite obtaining 9000 MT forge press and QIE/ESR, CFFP was not able to process the local orders and that there was no reduction/cut in import. Testimony of PW14 Sh. Akash Deepak does not serve the requisite purpose. He simply claimed that imports were made during 29.03.1994 to 31.03.1996 also while supplementing that the general reason for import was "Customer Restrictions" as well as "Constraints on the part of CFFP". A chart (Ex. PW14/2) was also placed on record by him. He, however, did not recall whether any letter was received from CFFP showing its inability with respect to forging orders. As regards "customer restriction", he clarified that CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 80 of 87 it meant that customer provided its approved list of vendors for that particular product. Thus, if client wanted a particular product to be imported, instead of being manufactured at CFFP, CFFP cannot be blamed which was only a feeder unit, not entertaining direct orders from outside. Prosecution has not been able to place on record sufficient material which may indicate that 9000 MT forge press and QIE/ESR did not prove to be handy and substantial and that there was actually no reduction/cut in import.
14.13 It is quite evident that machine could not give the optimum production for number of reasons including non-availability of indigenous material, lack of orders and client restrictions. Simply because the projected output could not be achieved would not mean that decision to import was malafide or laced with criminal misconduct.
14.14 The previous sanctioning authority Mr. Shah had himself claimed that such forge press was a 'state of art' facility. Lloyd's inspection report (Mark PW19/D1) also categorically indicates that forge press was having requisite capacity and pumps were also giving requisite pressure. There is nothing on record which may show that any further expenditure was incurred in obtaining such optimum capacity. Reference be again made to the testimony of PW37 Sh. K.L. Ghorui who claimed that there were lack of orders and the loss was also on account of depreciation of forge press. PW43 Sh. M.K. Mittal, who eventually became Director of BHEL in 1997, has also no personal knowledge about the capacity of forge press and his version seems more of hearsay. PW45 Sh. K.C. Lahiri has also not given any satisfactory answers to the questions put to him by the defence and rather admitted that such press was useful in context of the requirement of BHEL.
14.15 PW29 Laxman Swarup also confirmed in his deposition that machine was giving production and was functioning at its full capacity of 9000 MT. PW22 Sh. DV Behl himself admitted that as per his own report Mark PW22/DX, press was specifically CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 81 of 87 designed for operating always at 9000 MT capacity as per the job requirement. It hardly matters whether CFFP eventually made any profit after the installation of forge press or not as long as it stands proved that such forge press was functioning properly and satisfactorily.
14.16 Decision to import forge press was taken by the Board. There were two "Government Nominated Directors" in the Board and the Court does not have the benefit of knowing their version. They, it seems, were never examined during the investigation and were never summoned as prosecution witnesses either. Central Government seemed to be in loop right since inception as is evident from letter Ex. PW4/X (page 140) (D-10) whereby BHEL had requested DGTD to nominate a senior representative for visiting West Germany. Pursuant to such request, Sh. V.K. Jain, nominee of DGTD, visited West Germany along with Mr. Marwah and recommended import of the forge press in question. I have seen both the reports i.e. report Ex. PW37/F given by Sh. J.C. Marwah, Sh. K. Rama Krishnan and Sh. R.N. Mahendru as well as report Ex. PW4/X given by Sh. Marwah and Sh. V.K. Jain, nominee of DGTD. BHEL was obviously relying upon the reports given by neutral experts and, therefore, decision to import cannot be said to be malafide.
14.17 Reason behind the escalation in cost could not have been anticipated and foreseen. There was quantum jump in custom tariff and very significant change in foreign exchange rate. QIE and crane girders were also decided to be imported. There is nothing to demonstrate that any part of forge press was deliberately left out from the scope of the first order.
14.18 There is also nothing on record which may even remotely indicate that there was any pecuniary advantage to any official of BHEL.
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 82 of 8714.19 Important prosecution witnesses Sh. Thacker and Sh. Khazanchi died before their deposition could be recorded and Sh. Marwah and Sh. D.V. Bhatnagar died during the investigational stage itself. Moreover, it is also quite evident that when the decision was taken to import the forge press, approval of 'Committee of Secretaries' was sought and there was no objection from such high-powered Committee either.
14.20 It may also be noted that though the revised cost was of Rs. 3549 lacs but eventually, final total cost was found to be of Rs. 2934.47 lacs. Break-up in this regard is available in Mark PW37/DX1. It is evident that when the matter was pending in High Court of Delhi in relation to challenge to sanction accorded by Sh. R.K.D. Shah, information was sought as regards break-up of the final cost and the manner in which CBI had assessed the loss as Rs. 10.24 crores. Information was accordingly compiled and as per such information, final total cost of forge press, manipulator, QIE, crane girders, pumps, including civil construction and electrical, erection and commissioning was of Rs. 2934.47 lacs only. The basic cost of the forge press was found to be Rs. 613.97 lacs only.
14.21 It will be important to mention that while preparing such report, officials of BHEL including Sh. R.L. Ghorui, Sh. N.K. Srivastava and Sh. O.P. Batra were not even able to assign any reason as to how the loss had been calculated as Rs. 10.24 crores when the press was in production and sale was also achieved. It will be also important that agency commission of one percent was only with respect to the basic cost of forge press, manipulator, QIE and crane girders and such agency commission of one percent was found included in the total cost of Rs. 2934.47 lacs. It was supposed to be paid to the concerned agent after commissioning irrespective of the fact as to who had carried out the installation.
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 83 of 8714.22 According to Sh. Rao, conspiracy has to be inferred as there would rarely be any direct evidence for the same. I agree with him but fact remains that the element of conspiracy has not been brought on record by the prosecution in inferential manner either. Defence has contended that there is nothing on record which may even remotely indicate any criminal conspiracy. It has asserted that it cannot be inferred merely on the basis of some suspicion or surmises. Reliance in this regard has been placed upon P.K. Narayan Vs. State of Kerala 1995 1 SCC 142 and CBI, Hyderbad Vs. K. Narayana Rao (2012) 89 SCC 512.
14.23 Sh. Rao has drawn my attention towards judgment given by Hon'ble High Court of Delhi in Runu Ghosh Vs. CBI 2011 SCC Online Delhi 5501 whereby it has been held that 'mens rea' was not required to be proved for offence under Section 13 (i)
(d) (iii) of Prevention of Corruption Act. In said case, Hon'ble High Court of Delhi observed that when a public servant's decision exhibited complete and manifest disregard to public interest with the corresponding result of a third party obtaining pecuniary advantage or valuable thing, he could be fastened with responsibility for "criminal misconduct" under Section 13 (1) (d) (iii). It was also held that there was nothing reprehensible in such interpretation because the "act" being "without public interest" was the key, the controlling expression, to such offence and offence- under Section 13 (1) (d) (iii) did not require proof of intent, or mens rea. Such situation does not exist here as prosecution has failed to prove any act done in utter disregard to public interest or in blatant and flagrant violation of established norms. Moreover, in C.K. Jaffer Sharief v. State, (2013) 1 SCC 205 it has been observed by Apex Court that even if there is an act prohibited by law but not accompanied by malafide intention and not actuated by any malice, it will not attract sec 13(1)(d) PC Act. Sh. Rao has further relied upon Dr. S.P. Kapoor Vs. State of Himachal Pradesh AIR 1981SC 2181 and has contended that the haste, in itself, suggested malafide. Here, it has already been noticed that though the matter was urgent, global bids were also invited and, therefore, CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 84 of 87 there was no haste in that sense.
14.24 Relying on Sat Pal v Delhi Administration AIR 1976 SC 294, Sh. Rao has asserted that evidence of hostile witness cannot, as a matter of law, be treated as washed off the record altogether. There cannot be any qualm with said proposition of law but in the present case, testimony of hostile witnesses of prosecution has rather made the entire case of prosecution unreliable. I need not remind myself that prosecution is required to prove its case beyond reasonable doubt and not on the basis of preponderance of probabilities.
14.25 Investigating officer, quite clearly, created a prejudice in the mind of the Court by holding back vital facts. He did not try to highlight the crucial aspect of there being a global tender. He also did not bother to find out, with the help of any neutral agency, about the actual capacity of forge press in question. He did not try to gather details of the production generated through such forge press till the filing of the charge- sheet. He also did not try to collect the import figures in order to show that despite such forge press, there was no reduction in import.
14.26 There is no evidence which may show that forge press or for that matter crane, crane girders, QIE etc. imported from Germany and installed in CFFP were different from the one installed in Germany and were not as per the purchase order.
14.27 BHEL, in order to become self-sufficient and to create niche for itself, decided to grab the opportunity with both hands and opted for import of second-hand forge press having optimum capacity of 9000 MT. Decision was taken by the Board and there is no convincing material on record which may indicate that the Board had been misled or that a false and imaginary picture was portrayed before the Board.
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 85 of 8714.28 I must hasten to supplement that public servants need to be given adequate space and air of freedom particularly when it comes to complicated technical and engineering aspects. Though court is considered to be a superior expert but BHEL officials were, in the present context, better equipped to take appropriate call about such heavy forge press, its various parts and accessories and also about advantages of acquiring such press. Undeniably, they, too, were required to take decision after comprehensive evaluation from all possible angles, be it technical or financial. Here, manifestly, no stone was left unturned by BHEL officials. Teams were dispatched to Germany and help of DGTD was also sought. Feasibility report was prepared primarily on the basis of report of neutral expert. Merely because, one member of the Board wanted the others to hold their horses and had given his dissent, which was otherwise dealt with in a very thorough manner by the Board, CBI should not have felt restive and apprehensive.
14.29 Even if it is assumed that the decision to import forge press was inappropriate, there is always a fine distinction between 'bonafide error of judgment' and 'malafide decision taken consciously'. Sometimes, for eventual betterment of an institution and in larger public interest, one may be required to take a bold and little risky decision. Such decision may backfire also but that should not, by itself, be taken as a case of criminal misconduct. If every bonafide decision is viewed with suspicion and is brought before court of law for evaluation, I am afraid public servants may, instead, stop taking decisions altogether which can arrest the growth and development of the country. All the BHEL officials, made accused herein, very pretty senior officials including the Chief Managing Director. Instead of leading a happy retired life, they had to face agony of trial for so long and at such an old age. It all happened because CBI seems to have misjudged the entire issue and ventured into creating a storm in a teacup. Perhaps, it could not properly distinguish whether the decision of accused in acquiring forge press was a bonafide one or actuated with any malice.
CNR No. DLCT01-000947-2011 & CNR No. DLCT01-000945-2011 Page 86 of 8714.30 As discussed above umpteen times, forge press was neither found to be junk nor unproductive and, therefore, there was no question of either BHEL being cheated or suffering any loss. There is also nothing to indicate that any of the BHEL officials had abused his position as public servant by indulging in any criminal misconduct.
14.31 As an upshot of my foregoing discussion, I grant benefit of doubt to all the accused.
14.32 A-1 P.S. Gupta, A-2 R.N. Mahendru, A-4 Dhirendra Krishna and A-5 J.L. Jain are acquitted of all the charges. A-9 Walter Smachtin is also acquitted in absentia.
14.33 Both the said cases stand disposed of accordingly by this common judgment. The signed copy may be placed in the old charge-sheet having CNR No. DLCT01-000947-2011 and Reader of the Court is directed to place on record attested copy of such judgment in the supplementary charge-sheet having CNR No. DLCT01- 000945-2011.
Announced in the open Court (MANOJ JAIN)
On this 12th day of March 2018 Special Judge (PC Act) (CBI)-04
Central Distt: Tis Hazari Courts: Delhi
Digitally signed
by MANOJ JAIN
MANOJ Date:
JAIN 2018.03.12
12:49:37
+0530
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