M/s Ranchi Expressways Limited, Hyderabad vs Union Of India Through C.B.I

Sanjay Kumar Dwivedi, J

Heard learned senior counsel Mr. R.S. Mazumdar appearing for the petitioners and learned counsel Mr. Prashant Pallav, appearing for the CBI.

This petition has been filed for quashing the entire criminal proceeding including the order dated 08.01.2021 passed in connection with  R.C. Case  No.  02  (A)/2019-R, whereby  learned  Special  Judicial Magistrate, C.B.I., Ranchi, was pleased to find a prima facie  case for proceeding under Sections 120B read with Section 409, 420, 477A of the Indian Penal Code against the petitioners and accordingly took cognizance of the same, pending in the Court of learned  Additional Judicial Magistrate-XVI-cum-Special Judge, C.B.I., Ranchi.

Learned senior counsel appearing for the petitioners submits that the prosecution case has been initiated on the basis of the FIR registered by the CBI being R.C. Case No. 02 (A)/2019-R dated 12.03.2019. He submits that it has been alleged in the F.I.R., inter-alia, that on P.Ε. 02 (A)/2018-R was registered in C.B.Ι., ACB, Ranchi 07.08.2018 in compliance of the order dated 25.07.2018 of the Hon'ble High Court of Jharkhand in W.P. (PIL) Nos. 3503 of 2014 and 2470 of 2015 in the matter of "The Court on its own motion Vs. Union of India".

He further submits that during the course of hearing in the above stated PILs, Hon'ble High Court of Jharkhand, vide order dated 14.11.2017, directed the Serious Fraud Investigation Office (SFIO), New Delhi, for inquiry into the matter, in which the Project of NH-33 from Ranchi to Jamshedpur was executed by the Agency and supervision by the National Highways Authority of India (NHAI) and advances that were given by the lending banks without commensurate physical progress in the execution of such a large public project involving Rs. 1655 Crores over a period of 5 years since its commencement in December, 2012. In compliance to order dated 14.11.2017  of  Hon'ble High Court  of Jharkhand,  SFIO submitted its Enquiry Report, in sealed  cover before the  Hon'ble Court,  which was opened on 14.06.2018.

He then submits that the above report pertains to the project of 4-laning of NH-33 from 114 Km to 277.50 Km. (Approx 163.50 Kms) on the Ranchi Rargaon Jamshedpur section. NHAI had invited bids for the above project on annuity basis on Design, Built, Finance, Operate and Transfer (DBFOT) pattern during March, 2010. After completing the process, Letter of Award was given to M/s. Madhucon Project Ltd. on  18.03.2011,  it  being  lowest  bidder. As  per requirement,  a Special Purpose i.e., M/s. Ranchi Expressways Ltd. (Concessionaire) was incorporated by Madhucon Group, to execute this project. Shri K. Sinivasa Rao, Shri N. Seethaiah and Shri N. Prithvi Teja were the founding Directors of the said company. For this purpose, the concessionaire M/s. Ranchi Expressways Ltd. entered into a Concession Agreement with NHAI on 20.04.2011, whereupon the project was entrusted to the Concessionaire for execution.

(i) He further submits that it has been alleged that the estimated cost of the four-laning project was Rs.  1655  Crores,  as per the Common Loan Agreement (CLA) dated 31.10.2011, between Ranchi Expressways Ltd. and Consortium of Banks. Initially a sum of Rs.1191.60 Crores was to be founded by a consortium of 15 banks led by Canara Bank, however, the same came down to Rs. 1151.60 Cores, as State Bank of Travancore backed out. Consequently, the contribution by  the promoters  was increased from Rs.  463.40  to Rs. 503.40  Crores.  The  SFIO,  concluded  in  its  Report  that  a  total  of  Rs. 264.01 crore was not made available for the purpose of the project/diverted, which is as detailed in the table below:-

Sl. No.

Description

Amount Involved (Rs. In Crore)

1.

Round  Tripping   exercise in  equity / sub-

ordinate debt infusion.

50.00

2.

Diversion of Mobilisation and Material Advance.

22.00

3.

Amount claimed to be spent on Maintenance.

98.00

4.

Utilization of material and mobilization advance  given  to  Madhucon  Projects  Ltd. which could not be ascertained.

94.01

Total

264.01

(ii) He next submits it is alleged that the enquiry into the PE revealed  that  as  per  the  terms  and  conditions  of  the  contract  between the consortium of banks and Ranchi Expressways Ltd., the initial drawdown by Ranchi Expressways Ltd. was conditional. It was mandatory for Ranchi Expressways Ltd., and its sponsors to constitute equity to the extent of at least 25% of the total project equity contribution i.e., Rs. 115.85 Crores, before the initial drawdown date.

(iii) He further submits that it has been asserted in the F.I.R. that the Directors of M/s. Ranchi Expressways Ltd., namely Shri K. Srinivasa Rao,  Shri  N.  Seethaiah  and  Shri  N.  Prithvi  Teja,  in  connivance  with one another fraudulently round tripped a sum of Rs.50 Crores given to M/s. Madhucon Projects Ltd., (the EPC Contractor) as advance on 03.01.2012. The said amount was diverted by M/s. Madhucon Projects Ltd. to M/s. Madhucon Infra Ltd., which in turn routed the said amount to the account of M/s. Madhucon Toll Highways Ltd. and further to M/s. Ranchi Expressways Ltd. as subordinate debt. In furtherance  of  the  conspiracy,  the Auditors  M/s.  Kota  and  Company, Hyderabad, dishonestly and fraudulently issued a false Audit Certificate dated 30.01.2012, based on the above round tripping of money,  showing total contribution by the promoters to the extent of Rs. 124.82 Crores.

(iv) He next submits it is also alleged that M/s. Ranchi Expressways Ltd., the Concessionaire with dishonest intention to fraudulently obtain the initial drawdown amount of Rs. 110 crores, knowingly submitted the false certificate given by M/s. Kota and Company, with Canara  Bank  and  thereby  obtained  initial  drawdown  from  the  lender banks to the extent of Rs. 110 Crores. Further, on 27.03.2012, M/s. Madhucon  Projects Ltd. transferred Rs. 30 Crores to  Madhucon Infra Ltd. which in turn transferred this amount as subordinate debt to Ranchi Expressways Ltd. This was further used for providing material and mobilization advances to Madhucon Projects Ltd. Out of the said Rs. 30 Crores, the EPC Contractor (M/s. Madhucon Projects Ltd.) instead of utilizing the same for the project work, dishonestly diverted sum of Rs. 22 Crores to M/s. Madhucon Infra Ltd. In order to regularize these transactions another false Audit Certificate dated 03.05.2012,  was  issued  by  M/s.  Kota  and  Company,  showing  Equity Contribution of Rs. 155.770 cores,  which was submitted to the lead bank of the borrower. It was on the basis of this that the lead bank issued  further  Lenders  Confirmation  Notice  for  release  of  drawdown to  the  extent  of  release  Rs.  86.98  Crores.  Thus,  in  furtherance  of  the conspiracy, the Madhucon Group companies undertook the route of diversion of funds meant for the project to show their equity contribution for getting further drawdown released from the Banks.

(v) He further submits it is also alleged that the Concessionaire dishonestly claimed to have spent a sum of Rs. 98 crores under the Head of Maintenance (repair & rehabilitation of Highway) in the Annexure-20 to the Affidavit dated 27.11.2017, filed before the Hon'ble High Court of Jharkhand. As per the Common Loan Agreement  with  the  Bank,  the  provision  for  maintenance  of  existing roads  was  only  to  the  extent  of  Rs.  11.19  crores.  On  the  other  hand, the Lenders independent Engineers, M/s. Meltech Infrastructure Engineers  Ltd.,  vide  their  certificate  dated  06.01.2018,  certified  only Rs.  11.19  crores,  to  have  been  spent  for  highway maintenance  up  to September, 2017 as per EPC scope of work.

(vi) He next submits as per the F.I.R. that the Concessionaire, subsequently,  dishonestly  obtained  a report  dated  28.11.2017  of  M/s. Servel Krishna Engineers Pvt. Ltd., purportedly justifying the expenditure  on  repair  and  maintenance  of  the  existing  road  to  be  Rs. 119,63,75,602/-. The Concessionaire deliberately submitted the report of 3rd party valuer, M/s. Servel Krishna Engineers Pvt. Ltd. to the bank in order to justify his false claim even though after January 2017, the maintenance of the existing road was carried out by NHAI and not by the Concessionaire. The valuation report of M/s. Servel Krishna is based on the site visit by the valuer during the period from 18.11.2017 to 20.11.2017. The expenses have not been certified by the Independent Engineers M/s. Aarvee Associates and the lender refused to  approve  the  additional  expenditure  incurred  on  maintenance  to  be part of the funding by the consortium of banks.

(vii) He further submits it has been alleged that a total of Rs. 357.75 crores was shown as advance paid to EPC contractor M/s. Madhucon Projects Ltd., by the Concessionaire, towards mobilization and material advance for the project. Out of the said amount, a sum of Rs. 191.74 crores, which was utilized in the project execution, was recovered  by  the  Concessionaire  from  the  EPC  contractor. As  such  a sum of Rs. 166.01 crores remained outstanding as on 30.09.2017 against mobilization advances. Out of the said outstanding amount of Rs. 166.01 crores, false entries were made in the books of account purportedly  showing  advanced  to  the  EPC  contractor  to  the  extent  of Rs.72 crores (Rs. 50 crore and Rs. 22 crore as above), whereas the remaining amount of Rs. 94.01 crores was not utilized for the project. As a result of the fraudulent acts of the said Directors of M/s. Ranchi Expressways Ltd., a total loan amount of Rs. 1029.39 Crores was released by the consortium of banks, however, there was no commensurate progress in the above said project. During the year 2018, the said loan account of M/s. Ranchi Expressways Ltd., was declared NPA, by the Consortium of Banks. As a result of the above, NHAI finally terminated its contract with the Concessionaire on 30.01.2019, for nonperformance of the Concessionaire and forfeited a sum of Rs. 73.95 crores by way of encashment of the Performance Bank Guarantee with Canara Bank.

(viii) He next submits as per the F.I.R. that the above facts reveal that Shri K. Srinivasa Rao, Shri N. Seethaiah and Shri N. Prithvi Teja, Directors of M/s. Ranchi Expressways Ltd., in conspiracy with the auditors M/s. Kota and Company used the accounts of Madhucon group companies named above, to fraudulently obtain the drawdowns from  consortium  of  banks. As  a  result  of  the  above  conspiracy  funds to the tune of Rs. 264.01 crores was diverted on account of round tripping in equity /subordinate debt infusion, diversion of mobilization and material advances and not utilized for the purpose of project as mandated by the Concession Agreement and the Common Loan Agreement. As  a result  of  the  fraudulent  acts  of  the  said  Directors  of M/s. Ranchi Expressways Ltd, a total loan amount of Rs. 1029.39 Crores was released by the consortium of banks to M/s. Ranchi Expressways Ltd. however, there was no commensurate progress in the above said project.

(ix) He then submits  it is also alleged  that the aforesaid facts prima facie discloses commission of offences u/s 120B r/w 420,  468,  471, 477A IPC and Section 13(2) r/w 13(1)(a) of P.C. Act, 1988 (as amended in 2018). Hence this case is registered against (i) Shri K. Srinivasa Rao, CMD of M/s. Ranchi Expressways Ltd. (ii) Shri N. Seethaiah, Director M/s. Ranchi Expressway Ltd.  (iii) Shri N. Prithvi Teja, Director of M/s. Ranchi Expressways Ltd. (iv) M/s. Ranchi Expressways Ltd. (v) M/s. Madhucon Projects Ltd. (vi) M/s. Madhucon Infra  Ltd.  (vii) M/s.  Madhucon  Toll  Highways Ltd.  (viii) M/s.  Kota  Company  and  (ix)  Other  unknown  officials  of  consortium of Banks led by Canara Bank. The case is entrusted to Shri Sudhanshu Shekhar, Dy. S.P., CBI, ACB, Ranchi, for investigation and report.

(6) Mr. Majumdar, learned senior counsel appearing for the Petitioners  submits  that  M/s.  Ranchi  Expressways  Ltd.  is  a  company registered under the provision of companies act, in which, the petitioner No.5 & 6 are the directors. He submits that NHAI had issued Letter of  Award dated 18.03.2011 to Madhucon Projects Ltd. for work of Four Laning of Ranchi Rargaon Jamshedpur Section of NH-33 highway from km 114.00 to 277.500 in the State of Jharkhand, which was to be executed on Design, Build, Finance, Operate and Transfer Annuity  basis.  The  project  was  to  be  completed  within  912 days  from  the  appointed  date  and  after  the  completion  of  the  project, the  annuity  was  payable  semi-annually  for  12.5  yrs.  He  next  submits that  NHAI  was  not  supposed  to  invest  into  the  project  and  the  entire investment was to be arranged by the successful bidder. He next submits that in light of Clause No. 4 of the Letter of  Award dated 18.03.2011, the Bidder, MPL, was directed to promote and incorporate a Special Purpose Vehicle (SPV) as a limited company under the Companies Act, 1956. In these backgrounds, he submits that the petitioner was provided the said project and started the work after arranging the loan from the consortium banks. He submits as per the Common  Loan Agreement,  28%  of  equity  was  provided  by  REL and rest 72% of the funds were to be provided by the consortium of banks in the said Escrow Account. M/s REL was required to infuse Rs. 463.40 Crores as equity as per the Debt, i.e. Equity Ratio (72:28) under the Common Loan  Agreement dated 31.10.2011. He submits however, the Equity component escalated to Rs. 503.40 Crores because of the fact that State Bank of Travancore withdrew itself from the  consortium  of  lender  banks  thereby  caused  an  extra  burden of  Rs 40 crores on M/s REL. He next submits that consortium bank has released Rs. 1030.65 crores, out of the sanctioned loan of Rs 1151.60 crores and the lenders paid an amount of Rs. 652.07 crores for the work done in the project and an amount of Rs. 378.58 crores was deducted by lenders for the towards Interest During Construction from the  total  payment  of  Rs.  1030.65  crores.  He  next  submits  in  view  of that out of the total payment around 36.73% amount of the payment of Rs. 1030.65 crores had been deducted towards Interest During Construction. In these backgrounds, he further submits that the criminal proceeding against the petitioners is not correct and it is abuse of the process.

(7) He also draws the attention of the Court to the charge-sheet and submits that in the charge-sheet itself, it has been revealed that the petitioners  already  completed  50%  of  the  work,  out  of  the  90%  loan amount disbursed to the petitioners. He also submits that the work has not been completed due to certain  other conditions as there was hitch in forest clearance also and thereafter the Court has terminated the entire work order of the petitioners. He then submits that the entire criminal proceeding and the order taking cognizance may kindly be quashed.

(8) On the other hand, Mr. Prashant Pallav, learned counsel appearing for the CBI opposed the prayer and submits that the said FIR has been registered by the CBI pursuant to the order passed by the Division Bench in a PIL proceeding and the order of PIL, which is the part of the FIR itself. He also submits that the charge-sheet has already been  submitted  and  in  the  investigation,  it  is  revealed that  total  loan amount  of  Rs.  1029  crores  approx  was  disbursed  to  M/s  REL by  the consortium of Banks (lenders) through Lenders' Confirmation Notices out of the sanctioned loan of Rs. 1151.60 crore out of the total amount of loan disbursed an amount of Rs. 374.95 crore was deducted by the lenders towards Interest During Construction. By way of referring the charge-sheet, he further submits that it has also revealed in the investigation that that disbursement of total loan of Rs.1029 crores approx for the sanctioned loan of Rs.1151.60 by the consortium of banks to M/s REL, the physical progress of the Project Highway remained at 50.54 only through multiple extensions were granted and in April, 2018, the Concessionaire abandoned the project. Thus, it has been established that the progress was not commensurate with the loan released as about 90% of the loan amount was disbursed to M/s REL but work in progress was only 50% approx. He also draw the attention of the Court into the charge-sheet and submits that due to diversion of portion of funds sanctioned by the consortium of Banks for this project to other project, the project was delayed and the petitioners herein have not completed the project. By way of referring the internal page 19 of the charge-sheet, he submits that the round tripping of Rs.50 crore on 03.01.2012 by the Directors of M/s REL has also been revealed. By way of referring the internal page 21 of the charge-sheet he submits that the diversion of mobilization and material advance of Rs.22 crore on 27.03.2012 by the Directors of M/s REL has been further found. By way of referring the supplementary charge-sheet, the  learned  counsel  appearing  for  the  CBI  further  submits  that  out  of material advanced of Rs.166.01 crore, an amount of Rs.94.01 crore was  not  utilized  for  the  project.  By  way  of  referring  internal  page  12 of the supplementary charge-sheet, Mr. Pallav, learned counsel appearing  for  the  CBI  further  submits  that  in  the  investigation,  it  has revealed that prior to  the aforesaid order  of Hon’ble High Court for registration of the case, the direction was given by Hon'ble High Court to Serious Fraud Investigation Office (SFIO), New Delhi for ascertaining whether the matter involves a serious case of fraud warranting investigation. The SFIO in its Inquiry Report dated 25.01.2018 concluded that on 30.09.2017 an amount of Rs. 166.01 crore of mobilisation and material advance given by M/s Ranchi Expressways Ltd. (REL) to its Engineering Procurement Construction (EPC) Contractor M/s Madhucon Projects Ltd. (MPL) for utilizing in the project of Four-laning of Ranchi-Jamshedpur National Highway (NH-33) in the State of Jharkhand was outstanding. During enquiry by SFIO, M/s REL couldn't provide detailed information regarding item- wise bifurcation of the balance mobilisation and material advance and plea was taken by them that the entire amount of advance was utilized by the EPC Contractor towards mobilisation of machineries, setting up quarries and camp offices, procurement of material and manpower etc. SFIO  was  not  satisfied  with  the  explanation  offered  by  M/s  REL and they  observed  that  a total  amount  of  Rs.  72  crore  was  round-tripped and diverted  from the amount  of  mobilisation and  material  advance. As regards, the balance amount of Rs. 94.01 crore, it could not be ascertained by the SFIO whether the same amount was utilized for said project or not.

(9) In these backgrounds, learned counsel appearing for the CBI submits  that  serious  allegation  is  there  of  siphoning  and  diverting  of public money, the project has been delayed and in view of that the High Court compelled to pass the order to enquire the serious fraud by none other than the Serious Fraud Investigation Office, New Delhi.

(10) In view of the above submissions of the learned counsel appearing for the parties, the Court has gone through the material available on record including the charge-sheet and finds that the allegation is there that the loan amount of Rs. 1029 crore approx was disbursed  to  M/s  REL by  the  consortium  of  Banks  (lenders)  through Lenders' Confirmation Notices out of the sanctioned loan of Rs. 1151.60 crores out of the total amount of loan disbursed an amount of Rs. 374.95 crore was deducted by the lenders towards the Interest During Construction. It has also come in the charge-sheet that no progress commensurate with the loan released by the lenders bank. 90% of the loan amount was disbursed to M/s REL but work in progress was only 50% approx. The allegation is also there of diversion  of  portion  of  funds  sanctioned  by  the  consortium  of  Banks for  this  project  to  other  project  by  the  petitioners.  Round  tripping  of Rs.50 crore on 03.01.2012 by the Directors of M/s REL has also revealed in the charge-sheet. Diversion of mobilization and material advance of Rs.22 crore on 27.03.2012 by the Directors of M/s REL has also  reveled  in  the  internal  page 21 of  the supplementary  charge- sheet. Out of outstanding mobilization and material advance of Rs.166.01 crore, an amount of Rs.94.01 crore was not utilized for the project that has also come in the supplementary charge-sheet.

(11) The High Court after being satisfied in light of the investigation of Serious Fraud Investigation Office, New Delhi has directed to lodge the FIR and to investigate the matter and thereafter the CBI has conducted the investigation and submitted the charge-sheet.

(12) The learned Court has been pleased to taken cognizance in light of aforesaid background looking into the materials available on record.

(13) Looking into the order taking cognizance, the court finds that the learned court has given reasons of taking the cognizance.

(14) In  these  backgrounds,  the  question  remains  as  to  whether  this Court sitting under Section 482 of CrPC can make  a roaming inquiry to conclude the case and for quashing the entire proceedings.

(15) The law in this regard is well settled that at this stage that if prima facie materials are there, the High Court is not required to roam into the matter to consider whether the case is made out or not? And if the prima-facie case is made out, Section 482 Cr.P.C. is not the remedy as has been held by the Hon’ble Supreme Court in the case of Priti Saraf V. State of NCT of Delhi reported in 2021 SCC Online SC 206 and further the case in hand is not coming under the ambit of State of Haryana Vs. Ch. Bhajanlal reported in 1992 SCC Supl.  1 335.

(16) This Court has also read the allegations in between the lines and finds that the benefits of any doubt is not going in favour of the petitioners, as it is admitted position that the petitioners have not completed the project within time, it has been terminated by the NHAI and the money has been misappropriated.

(17) In light of the above facts, reasons and analysis, this court finds that no case of interference is made out for quashing the entire criminal proceeding.

(18) As such, this CrMP is hereby dismissed.

(19) However, the learned trial court will proceed in accordance with law without prejudiced to this order.