STATE Vs. K. MOHANACHANDRAN (IAS)

JUDGEMENT

(1.) M/s. SNC Lavalin is a Canadian Consultant Company having long standing association and transactions with the Kerala State Electricity Board (KSEB). In the political and social circles in Kerala, "Lavalin" is a controversial figure, and Lavalin is now the subject matter of political discussions and political fights in Kerala. Some contracts between M/s. SNC Lavalin (Lavalin) and the KSEB gave rise to the present case, started long back. "Lavalin" had undertaken some projects under the KSEB on earlier occasions, like the Kuttiyadi project, Idukki project etc. There were no complaints or allegations regarding those projects undertaken and carried out by Lavalin. In 1995, the KSEB took a decision for the renovation and modernisation of three Hydro Electrical Projects at a time when there was severe shortage of electricity in Kerala. Those are the "Pallivasal, Sengulam and Panniyar projects" (PSP Projects). After effective negotiations between the officials and office bearers of the KSEB and the senior Vice President of the S. N. C. Lavalin, the parties came to terms preparatory to the making of enforcible contracts, and accordingly, as a first step, a Memorandum of Understanding (MOU) was signed on 10/08/1995. After further discussions, regarding the terms of the contract and the nature of the modernisation and renovation works required for the three projects, the KSEB and Lavalin executed three separate contracts on 24/02/1996 with respect to the three Hydro Electrical Projects. For the smooth functioning of the works relating to the projects, the parties decided to have three different contracts. In the making of the three contracts, the KSEB was represented by the Electrical Member, and the SNC Lavalin was represented by its senior Vice President. The works were undertaken by the SNC Lavalin for a total consideration of Rs.243.49 cores. The works proceeded in terms of the contracts, but finally, the KSEB had to meet a total expenses of Rs.389 crores. Such excess payment happened to be made, consequent to the replacement of the three Consultancy Contracts by three supply contracts dated 10/02/1997. At that juncture also, no allegation came from any quarter, and the KSEB cleared the payments also. Doubts and complaints regarding the projects and the excess payments made by the KSEB came when the Principal Accountant General of Audit (Kerala) found out and reported some serious irregularities and anomalies in the project. The Principal Accountant General (PAG) found out, that there was very serious violation of the prescribed and accepted procedure in the matter of awarding contracts, that the K.S.E.B decided to modernise and renovate the three projects without conducting any feasible study, that the various equipments replaced as part of modernisation later developed defects, and that in spite of such renovation and modernisation, the K.S.E.B could not make any achievement in the generation of electric energy. The PAG also found out that excess payments were made to the Lavalin Company unauthorisedly, and thus, the K.S.E.B had to incur a loss of crores of rupees. The PAG even reported that the whole renovation process turned out to be a waste.

(2.) . The report of the PAG triggered off a controversy, which led to an enquiry by the Vigilance and Anti - Corruption Bureau (VACB). On enquiry, the VACB found some substance in the report of the PAG as regards the suspicious circumstances, and elements of misconduct in the making of the contracts. The VACB also detected the dishonest and vicious involvement of some officials and officers of the K.S.E.B including the then Chairman in the making of the contracts. Accordingly, a crime was registered on 27/09/2006, as Crime No. 1/2006 of the Eastern Range of the VACB, Kottayam. Investigation proceeded to unearth the dishonest involvement, and the elements of corruption in the making of the contracts. While such investigation was going on, some writ petitions came before this Court, seeking investigation by the Central Bureau of Investigation (C.B.I). After hearing all concerned, and on an examination of the various aspects of the issues involved, this Court ordered investigation by the C.B.I (Writ Petition Nos. 29124/2006, 32298/2006 and 33393/2006). The C.B.I accordingly took over investigation, and re - registered the Crime as RCMA 1/2007(A) under S.120B, S.409, S.420, S.465, S.468 and S.471 I.P.C, and under S.13(1)(c) and (d) read with S.13(2) of the Prevention of Corruption Act, 1988 ("the P.C. Act" for short).

(3.) . Before going to the further details of the crime, and the investigation that proceeded, let me see in what circumstance the K.S.E.B decided to renovate and modernise the three Hydro Electrical Projects. The K.S.E.B thought of renovation and modernisation of the three projects, and the K.S.E.B decided to entrust the works to the SNC Lavalin, in view of the long standing association with the SNC Lavalin. Lavalin had undertaken some works and projects of the K.S.E.B formerly, and had successfully carried out the works entrusted. It was in such a circumstance, the Lavalin Company was chosen by the K.S.E.B for the renovation and modernisation works also. Whether there was any vicious or dishonest element of corruption or misconduct in the making of the contracts in question, will be examined later. The K.S.E.B would justify the projects on the ground that the three Hydro Electrical Projects had surpassed their normal life period by 1995. The Pallivasal project was commissioned in 1940, the Sengulam project was commissioned in 1951, and the Panniyar project was commissioned in 1964. There was acute shortage of electricity in Kerala in 1995, when the K.S.E.B thought of renovating and modernising the three projects with the object of increasing the efficiency and generation capacity of the three projects. The K.S.E.B also assessed that the generating system and the allied machineries had become technologically outdated, resulting in frequent shortage in production due to frequent mechanism failure. The rationale of the decision taken by the K.S.E.B for modernising and renovating its projects cannot be subjected to judicial scrutiny. That is the internal affair of the K.S.E.B. The Court's concern must be whether there was anything vicious, or whether there was any element of corruption or misconduct in the making of the contracts and the follow - up actions for the renovation and modernisation of the projects, or whether any public servant within the K.S.E.B,or attached to the K.S.E.B otherwise by virtue of his official status, had in any manner misused or abused his position, due to which he or somebody else derived any unlawful benefit or gain. In a prosecution brought under S.13(1)(d) of the P.C. Act, the Court's concern must be only whether any public servant had abused his official position, or had acted illegally, with the object of obtaining or causing any unlawful gain or benefit to himself or somebody else, or with the knowledge that somebody outside the K.S.E.B would be unlawfully benefited by the said deal. The various allegations made by the prosecuting agency as regards the making of the contracts will be discussed later. Finding the absolute necessity of modernisation and renovation of the projects, the K.S.E.B went ahead, and accordingly the K.S.E.B entered into three consultancy contracts with SNC Lavalin on 24/02/1996.