Tag Archives: Firstpost

PMO

Pilatus aircraft deal: CBI has fugitive arms dealer Sanjay Bhandari, bureaucrats in its crosshairs

Leave a comment

Yatish Yadav Jun 22, 2019 16:10:17 IST First Post
New Delhi: A few days after the conclusion of Aero India Show at Bengaluru from 6 to 10 February in 2013, a six-page intelligence note landed at the desk of then chairman, Central Board of Direct Taxes (CBDT) detailing unusual activities of certain companies owned by fugitive arms dealer Sanjay Bhandari. The note purportedly provided the first solid evidence against Bhandari, who at that point of time, was allegedly using four firms registered in India to influence a majority of defence contracts.
Bhandari allegedly had a battery of retired defence public sector undertakings officials on his payroll. Firstpost on 9 April reported that two senior officers of Bharat Electronic Limited (BEL) who joined Bhandari’s firm after retirement, were under the scanner of investigating agencies in the basic trainer aircraft deal. The note highlighted crores spent at the Aero India Show by Bhandari’s firm AVAANA and warned about his links into procurement of 75 basic trainer aircraft for which India inked a Rs 2,859 crore deal in May 2012 with Switzerland-based Pilatus Aircrafts.

File image of arms dealer Sanjay Bhandari. CNN-News18

A year later, the Income Tax Department launched a probe and almost three years after the first warning against Bhandari, a preliminary inquiry was launched by the Central Bureau of Investigation (CBI) which culminated in an FIR against the arms dealer, his firms, close aides and the Swiss company.

The CBI tracked down the alleged kickbacks paid to Bhandari’s firms under the garb of consultancy fees. The CBI said after Request for Proposal (RFP) was floated by the Indian Air Force (IAF) in December 2009, Pilatus Aircrafts, Switzerland, dishonestly and fraudulently signed a service provide agreement with Bhandari’s firm Offset India Solutions Private Limited. This pact between the two firms in a bid to obtain the contract for supply of 75 basic trainer aircrafts to the IAF, was in violation of the defence procurement procedure, the agency stated.

“In furtherance of the said criminal conspiracy, Pilatus Aircrafts Limited made payment of 10,00,000 Swiss Franc (in 2010, 1 Swiss Franc was equal to approximately Rs 47) in account No. 52105058250 of M/S Offset India Solution Private Limited with Standard Chartered Bank, New Delhi in two tranches during August & October 2010 and also transferred huge funds, i.e. 49887900 Swiss Franc (Approximately Rs. 350 Crores) during 2011 to 2011 in the bank accounts of Dubai based company namely M/S Offset India Solutions FZC belonging to Sanjay Bhandari to obtain the contract for 75 basic trainer aircrafts. It is revealed that M/S Pilatus Aircrafts Limited dishonestly and fraudulently signed a pre contract integrity pact on 12.11.2010 with Ministry of Defence, deliberately concealing the facts about signing the aforesaid service provider agreement with Sanjay Bhandari,” the CBI said.

The investigating agency claimed Pilatus Aircrafts concealed the first payment of 10,00,000 Swiss Francs made to Offset India Solutions Private Limited and subsequent payments made to Bhandari in Dubai. The agency suspects the money paid to Bhandari was to influence the public servants of IAF and Ministry of Defence associated with the procurement process. After the deal was signed between Pilatus and Ministry of Defence in May 2012, a huge cash amount was moved by Bhandari from one company to another and even in the account of his wife in order to layer the transactions.

CBI said: “Offset India Solutions Private Limited and other Indian companies of Sanjay Bhandari namely OIS Advanced Technology Private Limited , AVAANA Software & Services Private Limited, SB Hospitality & Services Private Limited, Himalayan Helicorp Private Limited, Santech Investment Private Limited, Micromet ATI India Private Limited and Sonia Bhandari wife of Sanjay Bhandari, received Rs 25.5 crore during June 2012-March 2015 in lieu of cash provided by Sanjay Bhandari from various companies of Deepak Aggarwal, namley, Arti Securities & Services Limited, Hare Krishna Garments Private Limited, I-Tech Insurance Brockers Private Limited, Mysore Finlease Limited, Sperryn Gas Products Limited, Jaguar Equity Limited and Tyagi Portfolio Limited.”

In a bid to further channelise the alleged kickbacks in legitimate financial deals, Bhandari acquired five companies from Himanshu Verma, who has also been named in the FIR. These companies are: Greenpower Marketing and Advertising Private Limited, Bhayana Housing Private Limited (now VRG Housing Private Limited), Bhayana Reality Private Limited (now Stercon Private Limited), Beats Events & Advertising Private Limited and Efficacy Interiors Private Limited. Bhandari subsequently deposited Rs 39.36 crore in the accounts of these five companies with the help of Deepak Aggarwal. Of Rs 39.36 crore, Rs. 5.4 crore was transferred to a company called Saran Savdha LLP owned by Bimal Sareen. Sareen, who has been named in the CBI FIR, is also a director in Bhandari’s firm Offset India Solutions Private Limited.

“There is strong suspicion that the aforementioned cash amount was part of the commission amount paid by the Pilatus Aircrafts to Sanjay Bhandari to obtain the contract from IAF, Ministry of Defence for supply of 75 basic trainer aircraft,” the central investigating agency claimed.

Now, returning to the genesis of probe against Bhandari and Pilatus basic trainer aircraft, the six-page note indicated that the arms dealer’s involvement may not be limited to allegedly swinging the basic trainer aircraft deal in favour of the Swiss company, but may also extend to other deals. It said: “Crores have been spent in these three-day sojourn, specifically companies like AVAANA (owned by Sanjay Bhandari) which is engaged in mission critical system systems and software solutions, development and integration. Its portfolio includes UAVs and asset tracking solutions.” The note also named Bhandari’s Offset India Solutions Private Limited, Micromet-ATI and AVAANA, further adding that under the garb of offset contracts, large amount of commission have been paid via fictitious billing.

Bhandari fled the country in December 2016 and Indian law enforcement agencies believe he is hiding in London. His extradition to India may not only unravel possible links with the then establishment, but also other unholy defence deals he might have orchestrated in connivance with bureaucrats at the helm.

PMO, Uncategorized

Vigilance chief recommends action in Rs 7,900-cr IAF project scam, even as BEL’s management hunts down whistleblowers

Leave a comment

Yatish Yadav Apr 26, 2019 – Firstpost

New Delhi: The top vigilance officer in Bharat Electronics Limited (BEL) has recommended action in the Rs 7,900-crore air defence scam uncovered by Firstpost, but it is learnt that the top management has launched a hunt to identify the whistle blowers in a bid to cover up the revelations, which point towards a conspiracy involving BEL officials and private companies including foreign vendors.

The chief vigilance officer (CVO) Shiva Kumar has recommended the blacklisting of the design consultant of the Indian Air Force’s (IAF) sensitive air command and control centres, and action against eight BEL officers for allegedly favouring domestic and foreign companies at the cost of taxpayer money and national security.

The CVO, in the recommendation note highlighting the deep-rooted corruption, has said irregularities in the Integrated Air Command and Control System (IACCS), which started in the UPA regime, were carried out with criminal intent and government rules were flouted in awarding contracts for civil work as well as plant and machinery.

“There were serious violations involving criminal intent through violation of procedure, misrepresentation of facts to management, favouritism to place order on pre-fixed vendors through vested interest, collusion of interest and attempts to make corporate losses. The unit (BEL) has violated MoF (Ministry of Finance), GFR (General Financial Rules) and CVC (Central Vigilance Commission) guidelines while appointment of consultants, contracts for execution of civil works and procurement of items for plant and machinery and various subsystems,” the CVO directives reviewed by Firstpost said.

The comment by the CVO on the role of accused officers clearly indicates the need for not just departmental action but the initiation of criminal proceedings under the Prevention of Corruption Act and other penal provisions as well. A questionnaire sent to MV Gowtama, chairman and managing director (CMD) of BEL, seeking comments went unanswered. Department of Defence Production, Ministry of Defence and the CVC did not respond to a questionnaire sent on 20 April.

However, sources in the CMD’s office revealed there had been no move so far to act on the findings and recommendations of the vigilance department, but a discrete hunt has been launched to locate whistle blowers.

Vigilance chief recommends action in Rs 7,900-cr IAF project scam, even as BELs management hunts down whistleblowers.
“In this regard, top management is penetrating the computer and electronic records of all BEL employees in Bengaluru and Delhi,” sources in the CMD’s office said on condition of anonymity.

Sources quoted above also claimed that the top BEL management went into a huddle after the publication of the Firstpost investigation and subsequent recommendations by the CVO. It is learnt the officials were threatened for reporting massive irregularities in the project to the Prime Minister Office (PMO), defence ministry and the CVC.

The witch-hunt and silence of the BEL management is intriguing despite the CVO categorically pointing out the conflict of interest. The CVO said the design consultant of the highly-sensitive underground automated air defence command and control centres, M/s RD Konsultants should be blacklisted for the fraudulent transactions with BEL.

“Also as the agency (RD Konsultants) was involved in collusion of interest by executing the works through its affiliates, M/s CS Constructions Private Limited through subcontracting from M/s L&T, which has resulted in conflict of interest in the transactions with BEL. Financial penalty to be levied on M/s RD Konsultants as one way of punishment,” the CVO said.

According to sources in BEL’s finance division, since the IACCS project is worth Rs 7,900 crore and directly linked to national security, the audit committee comprising independent directors may recommend a probe by the Central Bureau of Investigation (CBI). The finance division of the defence PSU had raised several objections over the award of contracts flagging rule-books but the officers were overruled by the top brass. Even BEL officer Nataraj Krishnappa, director (other units) had raised objections while processing a certain contract. Sources close to Krishnappa confirmed that a criminal investigation may be on the cards. A CVO is considered the extended hand of the CVC and constitutes an important link between the concerned organisation, vigilance watchdog and the CBI.

As far as the eight accused officers’ roles are concerned, the CVO has observed that disciplinary proceeding including the suspension of an officer working in the infrastructure division (network-centric system), should be initiated for violating procedures and CVC guidelines, which eventually resulted in favor to M/s RD Konsultants.

“It is observed that there was suppression and concealment of facts by the committee in the proposal initiated during 2013 with respect of appointment of a consultant during 2011, for preparation of a preliminary project report. It is pertinent to mention that in the proposal for appointment of consultants during 2011, there is a noting from Senior DGM (Finance) that as per CVC guidelines issued dated 24 June, 2011, if M/s RD Konsultants is hired as a consultant for preparing a preliminary project report, then it cannot be considered for future similar requirements for an IACCS project. Although the proposal was agreed to by CMD, these facts are not brought in the consecutive file raised and the committee have succeeded to give an order on pre-fixed vendor M/s RD Konsultants. Because of concealment of information with regard to previous appointment and delinking of old files and notings, it led to misrepresentation and concealment of facts which resulted in the placing of order with prefixed vendor M/s RD Konsultants, although an open tender has been called for formality,” the CVO note said.

The scathing CVO note also reveals that entire scam was engineered since screening stages in 2011 and 2013. It said that the defence PSU’s committee, comprising officers, constituted to select the consultant did a shoddy job with a clear intention to favour a particular vendor.

“It is observed that the committee during the initial screening has brought down 26 agencies to 14 agencies with shallow scrutiny and with total arbitrariness. After presentations further screening has resulted in qualifying only six agencies. It is pertinent to mention that after presentations, M/s Super Dynamics was disqualified citing only two years turnover against the required pre-qualification of a three-year turnover. However, preferential treatment was given to M/s RD Konsultants. This shows a clear-cut case of vendor favouritism. During evaluation of pre-qualification criteria, the committee had violated the CVC guidelines and the company’s work contract procedures with respect to evaluation of documents submitted by M/s RD Konsultants, non-evaluation of relevant documents pertaining to works completed by M/s RD Konsultants. It appears that wrongful clearance was provided to M/s Konsultants and the committee had facilitated M/s RD Konsultants for pre-qualification by violating the company’s procedures, to place the order on pre-fixed vendor M/s RD Konsultants. The committee during evaluation of pre-qualification criteria had created confused trends by changing the pre-qualification criteria twice without any reason and during such changes, post facto approvals are taken from CMD, forcing the management to committee’s decision,” the CVO observed.

The CVO report has flagged collusion with design consultant and other vendors involved in sensitive air force installations at 10 locations across the country. The report has termed an affiliate as a benami firm, raising suspicion over the role and connivance of BEL officers. The CVO has also attacked the design consultant and BEL management for rigging the confidential contracts.

“The agency M/s RD Konsultants also was involved in collusion of interest by executing the works, through its own benami company M/s CS Constructions Private Limited which has resulted in collusion of interest in the transaction with BEL and capturing both design and execution of project. Under para 4B 3.2.3 of the design and engineering contract, M/s RD Konsultants and his affiliates as well as sub-consultants have been debarred from providing any goods works or service. It is observed that M/s RD Konsultants had violated the contract terms, CVC guidelines by involving in collusion with benami through rigging of contracts. This happened at various levels. The quote by M/s RD Konsultants was nearly the same as that which was estimated by BEL which leads to doubt whether the methodology of estimate was known to M/s RD Konsultants. It is pertinent to mention here that, PK Bhola, then DGM (Marketing-Network Centric System) who was the main resource in BEL for raising all the files and interfacing with customer for the project, joined M/s RD Konsultants after his retirement. This is a matter of great concern,” the CVO has noted.

The corruption in the project being handled by BEL was so blatant that even CCTV footage at the air force’s command and control centres construction site was compromised to facilitate the collusion as evident from the CVO report, which said the surveillance cameras were “not kept in the proper record, which led to non-maintenance of measurement books, subleasing and collusion of parties”.

Uncategorized

BEL allegedly violated string of norms to award contracts to German, Finnish firms; ex-CMD, two retired defence officials under scanner

Leave a comment

Yatish Yadav Apr 09, 2019 – Firstpost

New Delhi: Defence public sector undertaking Bharat Electronics Limited (BEL) handling Indian Air Force’s (IAF) confidential Integrated Air Command and Control System (IACCS) awarded a sub-system contract without floating global tender to a German company Mueller Safe GmbH, which had produced only 75 pieces of valves used for such installation.

Another company Pro Hub Hebetechnik GmbH was also selected by BEL for a contract despite submitting the technical proposal after closing time of bid. A Finland-based company Temet OY was given an award on a single tender basis. Interestingly, Temet OY and Pro Hub Hebetechnik GmbH were already mentioned in a detailed project report of IACCS prepared by M/S RD Konsultants in 2013, raising serious questions over conflict of interest. It is learnt that two BEL officers currently working on IACCS project are also under the scanner of the Central Bureau of Investigation (CBI), which recently received source based inputs regarding their activities.

These facts emerging from documents and BEL’s internal inquiry report raise serious questions that Central Vigilance Commission (CVC) rules and BEL’s own purchase procedures 2016, were allegedly violated in the entire process of the project contracts, which began when the UPA government was in power. As reported by Firstpost on 2 April, BEL has come under the cloud by its own inquiry report for allegedly favouring project design consultant M/S RD Konsultants.

Documents reviewed by Firstpost shows BEL, in the gross violation of purchase procedure, awarded plant and machinery contracts worth hundreds of crores to foreign firms including Temet OY of Finland, Pro Hub Hebetechnik GmbH and Mueller Safe of Germany. No open or global tender was floated to select the vendors. Sources confirmed that the government is likely to ask investigative and enforcement agencies to probe into alleged irregularities in hiring design consultant, the award of contracts for the plant and machinery and role of the serving and retired officers in the process.

After Firstpost mailed a detailed questionnaire to MV Gowtama, chairman and managing director (CMD) of BEL, his office said BEL follows standard procedures, guidelines and its business practices conform to C&AG and CVC guidelines.

“The contracts for any project are awarded through competitive tendering and based on capabilities and capacities of partners/vendors. Hence prima facie BEL does not see any irregularity,” the BEL CMD’s office said.

Temet OY, Finland citing non-disclosure agreement refused to comment on the contract and chose not to respond on working arrangements and details about its association with M/S RD Konsultants. It, however, claimed M/S RD Konsultants was not Temet’s agent.

“We can confirm that M/S RD Konsultants mentioned below is not and has not been an authorised Temet dealer. Of course, if there is an official investigation in progress, we will cooperate with the relevant authorities,” Tero Hanhinen from Temet OY said.

Temet OY though conveniently suppressed the fact that two of its officers, Likka Elias Kivisarri and Adel Velic were accompanied by M/S RD Konsultants’ Vikram Parvathoju to BEL office from 6 to 8 August 2018 for technical discussion with defence PSU officers.

Questionnaire sent to Pro Hub and Mueller Safe, Germany, seeking comments went unanswered. M/S RD Konsultants did not respond to a detailed questionnaire sent on 31 March.

Deal with IACCS design consultant’s foreign affiliates raises a stink

The design firm M/S RD Konsultants in the detailed project report had mentioned that it was working with several foreign companies including Temet OY, Finland and Pro Hub, Germany. The fact has rattled BEL’s internal investigators, who alleged that decision to go with a single vendor is surprising as the design consultant is questionable and requires further probe. The design consultant selected for all 10 sites has total control in the choice of sub-systems like electronic items, building management system and other sensitive hardware. By sidestepping the procurement procedure, BEL did not go for open or global tender for the procurement.

As per BEL purchase procedure para 10.1.7: “Open tenders shall be resorted to in case of non-production/ non project materials estimated to cost Rs 1 crore and above. The time allowed for receiving quotations against open tenders can be fixed, depending upon the geographical area covered, effort required to be put in by the vendors and other relevant factors, however shall not be less than 7 days. In case of global tenders, the notice will also be published in Indian Trade Journal and sent to Indian Missions abroad deemed necessary for adequate response in addition to the press advertisement and BEL website.”

None of these guidelines was followed by BEL in the procurement of equipment of IACCS and the competitive bidding for all 10 operation sites was surreptitiously eliminated and firms directly/indirectly linked with the design consultant were roped in. This is what BEL’s inquiry report had feared. The report mentioned Temet OY, Finland is represented in India by Stahl Tecniks Private Limited, which is directly/ indirectly linked to M/S RD Konsultants. One of the past directors of Stahl Tecniks was Suruchi Totala, who was also director of RD Designs LLP that was floated in 2015 by M/S RD Konsultants partner SK Anand. Now, the RD Designs LLP is in the process of shutting the shop. The BEL’s report also alleges that being the single vendor for all 10 sites, the design consultant carried out works to make sure that it suits the private vendors of plant and machinery of its choice.

“The civil design for the underground structures would have been carried out keeping in mind the various sub-systems to be installed inside. For example, if blast doors of M/S Temet, Finland are chosen that all the openings for the doors would have been designed suiting the doors from Temet. Same would be the case for hydraulic lifts, air conditioning ducts, opening for blast valves etc. Hence either the systems selected by the consultants have to be used or else minor/major modifications would have to be carried out in the civil structure for interfacing any alternate make sub-system. This also substantiates the fact that if minimum two consultants had been hired then at least the two consultants selected would have proposed multiple vendors for the various sub-systems which would have led to healthy competition between various vendors leading to competitive biddings for various sub-systems,” BEL’s internal inquiry report said.

As indicated in the internal inquiry report, after submission of detailed project report, the IACCS contract signed between BEL and IAF had no other choice but to include several of these companies against the requirement with a condition that something equivalent could also be explored. The CVC guidelines are very clear that any purchase order above Rs 1 crore should be concluded through the tendering process and for foreign vendor’s global tender should be floated. The opaque procurement process of BEL was orchestrated in such a way that it gives an impression of a level playing field by exploring other alternatives other than the vendor already mentioned in the detailed project report.

Documents reviewed by Firstpost reveals that a smokescreen was created by constituting a technical committee within the BEL for procurement of plant and machinery for IACCS. On 24 May 2017, BEL chairman and managing director (CMD) MV Gowtama formed the technical panel to explore and identify vendors for the equipment for IACCS complexes (details withheld). This was an interesting turn of event because BEL purchase procedure, 2016, does not mention the constitution of a technical committee to explore, finalise and recommend the vendors. Nevertheless, the technical committee chaired by Umesh Chandra with Pugazhenthi R, BP Pahuja, Subbarao G, Prashant Ranjan Maurya and Udit Agarwal as members were tasked to finalize specifications, identification, shortlisting of original equipment manufacturers/ vendors for supply, finalization of quotation for the equipment and evaluation of suitable make/model for each of the items required for seamless integration with the civil structure of IACCS.

How the contract process was manipulated?

The internal investigation report of BEL gives an indication that the procedures to select vendors for the project was handled through a very simple method of picking the names from the documents submitted by the design consultant, which had prepared a detailed project report mentioning the name of foreign companies it was working with. The project report submitted to BEL was later forwarded to IAF which signed the contract and sent it back to BEL. Subsequently, BEL formed a technical committee to purchase IACCS associated equipment. Thereafter, the technical committee went for shopping at companies first mentioned by M/S RD Konsultants in the detailed project report.

Documents reveal the Finnish firm Temet OY was given the contract for regenerative Carbon Dioxide Removal System for IACCS sites for more than Rs 60 crore without floating global tender. Interestingly, purchase order said that technical committee headed by Umesh Chandra had recommended searching more vendors and two other firms M/S Parker and M/S Airef were explored but both were found not capable of manufacturing Carbon Dioxide removal system with required specifications. Why and how these two companies were selected by the technical committee to explore more option instead of going for an open or global tender remain in the domain of speculation. A BEL officer in the finance division noted in the file that price of the system given to Temet OY needs to be justified since it was on a single tender basis.

“As per company’s policy, the price needs to be justified by technical evaluation or by comparing similar product available in the market not considered for the bidding,” Sanjoy Kumar Pal, senior deputy general manager, finance wrote on 22 August 2018.

There is some interesting observation in the documents, which expose the alleged irregularities. RK Sharma, an officer from the material management division (Network Centric System) gave a contradictory statement in a bid to clarify the pricing based on a single tender. He said price quoted by Temet OY was well below the unit cost considered for the selling price, however, he further went on to say that there was no procurement history of similar items and prices of this system is not readily available in the market.

Subsequently, the technical committee recommended that enquiry for carbon dioxide removal system be sent to Temet OY, Finland only. The proposal was on a single tender basis and Temet OY, Finland was called for technical-commercial negotiations, which was held from 6 to 8 August 2018. Besides BEL and Temet OY officials, Vikram Parvathoju from design consultant M/S RD Konsultants was also present in the meeting.

While appointing the technical committee in May 2017, the CMD, BEL had clearly mentioned that representatives of design consultant, project management consultant and the third-party inspection and certification agency should be involved in the proceeding but neither project management consultants nor officials from third party inspection agency were present in technical and price negotiation meetings. After technical committee recommendation, the single tender proposal was approved.

Just a day after the committee meeting on 8 August 2018, which was attended by senior BEL officers including Joydeep Majumdar (General Manager, Network Centric System), BP Pahuja ( Assistant General Manager, Infrastructure, Network Centric System) and two representatives of Temet OY, the defence PSU started placing the purchase order for Temet OY, Finland. The total quantity of carbon dioxide removal system (details withheld) is mentioned on the 20 August 2018 note, which further said, “The total quantity was indicated by Infra group based on the design and requirements finalized by design consultant M/S RD Konsultants.”

“Technical committee recommended that enquiry for Carbon Dioxide Removal System be sent to M/S Temet OY only. The proposal is on a single tender basis,” the note said.

German company favoured despite submitting the technical proposal after closing time

Another foreign company under the cloud is Pro-Hub Hebetechnik GmbH based in Germany that was awarded the multi-crore contract of goods lifts for the IACCS project. The company was mentioned by M/S RD Konsultants in the detailed project report submitted during the UPA regime. M/S RD Konsultants had claimed that it provides design consultancy to the Pro Hub Hebetechnik GmbH. This issue has been raised in the internal investigation report of BEL, recommending further probe to ascertain conflict of interest.

Satyaprem from M/S RD Consultants was present in the technical meeting on 16 July 2018 between officials from BEL and Pro Hub Hebetechnik GmbH. No representatives from the project management consultant and third-party inspection and certification agency were present in the meeting. Documents reviewed by Firstpost shows technical committee had selected two companies for goods lift — Pro Hub Hebetechnik GmbH and M/S Maspero Elevatori.

Documents reveal that Pro Hub Hebetechnik GmbH technical response vide 11 emails were received on 26 June 2018, after the closing time of bid. However, it was not disqualified. This move triggered suspicion among the BEL officer’s ranks and Sanjoy Kr. Pal, Senior Deputy Manager, Finance division, BEL on 26 July 2018 objected the move. He questioned on the proposal file for awarding the contract to Pro Hub Hebetechnik GmbH asking as to why late tender is being entertained and why purchase clause is not being followed in this case.

“The proposal is put up to CMD under what Sub Delegation of Powers (SDOP) clause? As per clause 10.2.7 of the purchase procedure, no late tender should be entertained. Why purchase procedure clause was not followed? Pal questioned.

On 27 July, RK Sharma, deputy general manager, Material Management (Network Centric System), BEL clarified that since the happenings and the facts related to the receipt of bids after closing time are in variation of the actually prescribed process in purchase procedure 2016, approval is sought of CMD for the process followed by Strategic Business Unit (SBU) of BEL. He further said that Pro Hub Hebetechnik GmbH was not disqualified because a ‘conscious decision’ was taken by the SBU, keeping in view the project requirements.

Sanjoy Kumar Pal, BEL officer from finance division, however, was not satisfied with the clarification and he clearly said that proposal was in violation of purchase procedure.

“The proposal is in deviation of purchase procedure and accordingly it is put up to CMD,” Pal wrote.

Despite the proposal contested by his own officer in finance division, CMD MV Gowtama approved the proposal on 27 July 2018.

Technical capability? Produced just 75 valves but selected by BEL

Another deal that has come under the scanner is blast valves, gastight valves and wall sleeves for the IACCS sites. The contract has been awarded to German company Mueller Safe GmbH, which primarily deal in safe and very recently ventured into valve manufacturing and till May 2018 had only produced 75 pieces. On the other hand, a UK company, European EMC Products Ltd (EEP), which had produced and supplied more than 2,000 valves was simply disqualified on the basis of not meeting the criteria for average annual turnover for last three years, which was vigorously contested by BEL officer Nataraj Krishnappa, Director arguing that EEP is technically suitable and competent.

“M/S EEP, UK has been dropped based on the criteria that annual turnover of the company for the last 3 years does not meet the desired requirement. This vendor is technically suitable and competent. Why cannot they be considered for Request for Quotation (RFQ) purpose? The site visit report of the committee does not indicate any reason for the disqualification of the vendor,” Krishnappa wrote on 28 May 2018.

Joydeep Majumdar, general manager (Network Centric System) wrote that the technical committee felt EEP being a small organisation with low turnover will not be able to handle contract estimated to be worth Rs 200 crores. Subsequently, the EEP, UK was dropped and instead of going for global tender, Request for Proposal (RFP) on the restricted tender basis was sent to Mueller Safe GmbH and Temet OY, a world leader in valve business, which had supplied more than 60,000 valves till May 2018 globally.

The bid was invited on 15 June 2018 and while the response from Temet OY was submitted before the expiry of bid submission time, Mueller Safe GmbH bid was received after closing time. Subsequently, Mueller Safe GmbH, which had no expertise in manufacturing valves was declared L1 and it was called for techno-commercial negotiations, which were held from 9 to 14 July 2018. Questions were raised within BEL as to why Mueller Safe, an inexperienced company in making valves, was given contract and why not re-tendering process inviting more companies was initiated by the BEL.

Documents reviewed by Firstpost reveals that an officer in the finance division had warned just before the finalisation of the contract to Mueller that “selection should be as per the technical manufacturing capability”. But, that was ignored. Even after Mueller Safe GmbH was awarded the contract, Naresh Kumar, deputy general manager of the finance division, BEL said that the bid of M/S Mueller Safe GmbH is received after the closing time and approval for bid acceptance received after closing time requires CMD approval. Another officer V Muralidharan, General Manager (Finance) also flagged the concerns on 26 July 2018 that since the proposal was accepted after the closing time of bid, CMD post facto approval of deviation would be required. The proposal was approved by the CMD on 27 July 2018.

Documents reviewed by the Firstpost also revealed Mueller Safe GmbH was not mentioned in the RD Konsultants documents and thus it appears that no representatives from the design consultants attended the meetings. No one from the project management consultant and third-party inspection and certification agency was present either. Also, the meetings held between 11-12 July 2018 at BEL office with the Mueller Safe GmbH functionaries had not representatives from the above-mentioned group.

It is further learnt that original equipment manufacturer for valve refused on Transfer of Technology (ToT) arguing that its business will be adversely affected in the case full know-how is given to BEL as defence PSU will become the competitor in the market. The technical committee agreed upon partial ToT and gave its go-ahead for the contract.

The BEL internal inquiry report has recommended further probe into the installation of the sub-systems of IACCS observing that site design might be designed keeping a particular company in mind.

“It is also claimed that ‘M/S RD Konsultants’ has designed the underground RCC structure taking into consideration a particular make of doors, hatches, blast valves, lifts, air conditioning, building management systems etc. All the reinforcement, cut-outs etc in the RCC structure were designed for interfacing with the particular brand (example for the doors the steel reinforcements in the opening were designed as per the hinge locations in the particular band of blast doors). Since the RCC structures have been made at many sides even before the finalization of the sub-systems to be installed hence it needs to be studied what was the repercussion in the change in scope of RCC structure already built and what was the cost repercussion BEL had to bear,” the internal inquiry report said.

Similarly, the order for radio and its accessories worth more than Rs 9 crore, was also given to a Germany based company (details withheld) on a single source basis without inviting tender. It appears this German firm selected without tendering process was not the original manufacturer. A key document reviewed by Firstpost said, “The firm indicated that most of the hardware being delivered by them is third-party hardware.”

IACCS prototype makers joined fugitive arms dealer Sanjay Bhandari firm

It is learnt that two senior officers of defence PSU, BEL, who were instrumental in designing prototype for Indian Air Force’s confidential IACCS project in 2007 joined fugitive arms dealer Sanjay Bhandari’s firm OIS Advanced Technology Private Limited after retirement in 2011. Interestingly, BEL was preparing to formally launch the IACCS project by inviting preliminary project report for 10 automated air operation centre for Indian Air Force around the same time. The two officers, who joined arms dealer’s company at senior positions, are now under the scanner of Enforcement Directorate (ED), which is probing alleged kickbacks linked to Bhandari in Swiss basic trainer aircraft Pilatus during UPA regime in 2012. Incidentally, BEL is the offset partner of Pilatus.

PMO

Bharat Electronics in the dock for ‘compromising’ confidential IAF project, favouring one vendor, BEL’s internal inquiry report reveals

Leave a comment

Yatish Yadav Apr 02, 2019 – Firstpost

New Delhi: Defence public sector undertaking Bharat Electronics Limited (BEL) is under the scanner for allegedly compromising national security by awarding a highly sensitive air command and control contract of the Indian Air Force to an ill-equipped and newly formed private design firm in 2011. The project was worth Rs 7,900 crore.

An internal inquiry report of BEL has exposed massive irregularities in the way the contracts were awarded and how the Integrated Air Command and Control System (IACCS) was implemented at 10 locations across the country.

IACCS is an automated command and control system for air defence operations that integrates all ground-based and airborne sensors. BEL is the executing agency for the highly-sensitive project.

BEL’s internal investigation report — exclusively reviewed by Firstpost — also highlighted a conflict of interest of a BEL officer, who was instrumental in the hiring of a private vendor to put together the Preliminary Project Report (PPR) of the coded system, in joining the same private company after retirement. The report also suggested that the investigative team looking into the irregularities was not provided with crucial project documents allegedly to bury the scam.

The defence PSU’s internal inquiry report was prepared in October 2018. It flagged discrepancies at various stages of the execution of the project. To begin with, the report questioned the move to hire M/s RD Konsultants to prepare the PPR in 2011 and then bringing the same company on board as the design consultant in 2013, violating the norms in place during UPA regime. The inquiry report also red-flagged other serious issues, including monumental lapses in ordering the execution of the contracts at all 10 sites across the country and deviations in the implementation at certain project sites where BEL had to bear additional expenditure.

After Firstpost mailed a detailed questionnaire to MV Gowtama, chairman and managing director (CMD) of BEL, Ranjit Karamchandani from the CMD’s office denied the findings of the firm’s own inquiry report.”BEL follows a transparent process in selection of its vendors/partners,” he said. “Prima facie, BEL does not see any irregularity, as alleged.”

Questionnaires sent to RD Konsultants seeking its comment on findings of the inquiry report went unanswered.

Deep-rooted nexus exposed

According to the inquiry report, BEL first hired RD Konsultants in September 2011 to prepare the PPR for IACCS. The report pointed out that the firm was barely one and a half years old when it was hired, having come into existence on 1 April, 2010, on 50-50 partnership between Ruby Kant and Suresh Kumar Anand. The BEL top brass approved the proposal to award the contract to the company on 6 September, 2011, with a note that made it amply clear that “as per corporate vigilance guidelines, if ‘M/s RD Konsultants’ is hired as a consultant for preparing the PPR, then it cannot be considered for similar requirements in the future”. The note added that for the IACCS project, BEL would have to look for new consultants for “future requirements of consultancy”.

The inquiry report also flagged the way RD Konsultants was hired to prepare the PPR. “…No norms of Request for Proposal or tendering were followed, but it was selected just based on a recommendation by the Defence Research and Development Organisation (DRDO) with no written correspondence from the DRDO,” it said.

But BEL officers went a step ahead to allegedly favor RD Konsultants in the second stage of the project while hiring a consultant to prepare a Detailed Project Report (DPR), the inquiry report suggested. As per the rules in place in October 2012, BEL formed a committee to select consultants to prepare the DPR along with a detailed design for 10 sites of IACCS nodes. That RD Konsultants should not have been allowed was clearly mentioned in the file initiated by BEL’s Network Centric System (NCS-Strategic Business Unit) on 28 July, 2011, and cleared by the top brass on 6 September, 2011. But that did not happen.

RK Handa, who was the general manager of the NCS at the time, was part of the committee that selected the vendors and hired RD Konsultants in 2011, the report noted.

“In fact the file raised in October 2012 should have been in continuation to the file initiated on 28 July, 2011. Why it was not done needs a detailed investigation with respect to malafide intentions to violate the Central Vigilance Commission’s guidelines for hiring of consultants,” it added. “Even in the selection of M/s RD Konsultants for the second time, there were a lot of deviations from the norms laid down.”

The inquiry report further highlighted that had a financial criterion been put in place, RD Konsultants would not have qualified for the job.

The defence PSU signed the second contract with the firm in September 2013 to prepare the DPR of all 10 IACCS sites. The inquiry report noted that RD Konsultants was paid Rs 13.5 lakh for consultancy charges to prepare the PPR but Rs 15.94 crore for the DPR, alleging that someone was pulling the strings to favour the company, and that the financial criterion was changed twice during the course of selection of vendors.

“M/s RD Konsultants’ had been established in April 2010, but to show a turnover in the last three years as required, they showed a turnover in 2009-10, also verified by a chartered accountant. This clearly shows that false information was provided. Also, a company that came into existence on April 2010 showed that its employees had an experience of five years in 2013. This again is false information. It is interesting to note that another company, M/s Systems Dynamics, was rejected by the committee on the criterion that it had shown a turnover for only two years (2010-11 and 2011-12),” the inquiry report said.

The chartered accountant certificate enclosed with the inquiry report does not mention a telephone number. The letterhead of the CA firm merely shows an address of Shakarpur in New Delhi.

Raising concerns over the track record of RD Konsultants, the inquiry report recommended further investigation to find out whether it has actually completed the big ticket projects as it claimed to BEL. Raising suspicion, the report said RD Konsultants had mentioned that by March 2013, they had completed 30 projects worth Rs 1,266 crore, with consultancy charges of Rs 36 crore, whereas they had 45 works worth Rs 1,743 crore underway, with consultancy charges of Rs 52.29 crore.

“How was a company, which came into existence in April 2010, awarded 75 projects within three years (when as per DRDO rules, any company without requisite experience and turnover cannot be awarded contracts). What was the timeline in which these projects were completed? These need detailed investigations to find the ground reality. As per the BEL Works Contract Manual, it is mandatory that all vendors who qualify submit proof of the works they claimed to have done. RD Konsultants took the plea that they could not share details of the works since they were for the DRDO and confidential in nature, though another vendor, ‘M/s Systems Dynamics’, submitted documents related to the DRDO as well as the integrated headquarters of the army to confirm the work they did. There is no secrecy in the order copy or listing of the works carried out for the DRDO. Non-submission of the details (by RD Konsultants) itself casts doubts on the validity of the claims made,” the inquiry report said in its scathing observation.

BEL’s inquiry report further alleged that RD Konsultants had claimed to have provided design consultancy to a few well-known brands that specialise in equipment used for structures similar to IACCS, such as Temet Oy Finland and Pro-Hub Germany. It added that RD Konsultants was also into civil construction “with direct/indirect control on a lot of companies like SR Ashok & Associates, CS Construction etc.”

“Being the designer agency, which got the order for all 10 sites, they have a huge influence on the selection of vendors for various sub-systems of the project. A detailed investigation is needed to find out where orders have been placed with companies where RD Konsultants has direct/indirect influence. (There was a case wherein SR Ashok & Associates had applied for civil execution of underground structures and CS Construction was hired by L&T for execution of work at sites). Also, Temet Oy Finland and Pro-Hub Germany have been given orders for sub-systems to be installed inside the IACCS structures,” the report observed.

Moreover, the file to hire consultants for IACCS structures was initiated with the mandate that one agency will not get the order for all 10 sites. Even the newspaper advertisement and qualification document clearly mentioned that a consultancy firm could be given a contract for five sites. However, the inquiry report alleged that the entire process was manipulated. Further alleging serious charges of conflict of interest, the report said BEL officer PK Bhola, who was instrumental in having RD Konsultants cleared to prepare the PPR for the IACCS project in 2011 joined the same company after retiring from the defence PSU. The report said he might have passed on crucial information to benefit the company.

“How come the order for all sites was finally awarded to only one vendor, which violated the tender document? The quote given by RD Konsultants was nearly the same as that estimated by BEL, which leads to doubts whether the methodology of estimates was known to RD Konsultants. Mr PK Bhola (DGM of NCS-Marketing), who was the main resource in BEL for raising all the files and interfacing with the customer for the project, joined RD Konsultants after his retirement from BEL, and hence, all information was being transmitted to RD Konsultants through Mr Bhola,” the report alleged.

Firstpost reviewed two BEL notes regarding the inquiry report’s observations on Bhola. The first note from July 2011 signed by Bhola, when he was the deputy general manager of marketing at the NCS, is on hiring RD Konsultants to prepare the PPR for the IACCS project. The second note, dated 8 August, 2016, which is basically minutes of a pre-bid meeting for two tenders related to the IACCS project. In this, Bhola is mentioned as a representative of RD Konsultants.

Irregularities in ground execution

RD Konsultants is the design consultancy firm for all 10 IACCS sites, but the contract to execute the project was given to different companies. The details quoted by the inquiry report from the files related to the project suggests that after clearance, certain changes were made in the quantities, which escalated the cost of the project by Rs 106 crore to the government exchequer. The report said such changes were concurred to by the BEL director of finance vide note no 37, where it is mentioned that “this is a deviation from the works’ contract manual”.

The report further observed that L&T was awarded the execution work at three sites, but its cost per site was more than that of the other sites being constructed by other companies. The inquiry also found that L&T had subcontracted work at two IACCS sites to a private vendor, which is allegedly linked to RD Konsultants.

“L&T has further subcontracted part of the work at two sites to ‘M/s CS Constructions’, which is again a company related to RD Konsultants. The director of the company, Mr Rahul Bhuchar, has been coming to BEL and meeting the assistant general manager (infrastructure) as a representative of RD Konsultants. The sub-contracting of work by L&T to a party related to RD Konsultants is in violation to the terms of the contract. A civil engineering expert needs to go into the details of the costing for each site and the various considerations that led to the difference in the cost of various sites. As per the file on the selection of a consultant, DRDO representatives had brought out that all sites will be same, with only cosmetic differences in design. If that was so, then how come the difference in the costing between the lowest and the highest is more than two times?” the report said, flagging the loopholes in financial deviations, seeking further investigation into the entire matter.

It also said that under “para 3.2.3 of the design and engineering contract, RD Konsultants and his affiliates as well as sub-consultants have been debarred from providing any goods, works or services”. “RD Konsultants failed to make a voluntary and complete disclosure in this regard, thus violating the contract,” it concluded.

BEL shelled out more due to deviations in project

BEL’s internal investigation report said that at three IACCS sites, deviations in execution on the ground forced BEL to shell out more money. The report observed that at all three locations, the conditions of the sites during excavation were found to be in mismatch with those taken by RD Konsultants while designing and preparation of the Standard Operating Procedure (SOP) for excavation.

The report also revealed that a few IACCS sites under construction had collapsed. An inspection team visited one of the sites on 22 and 23 March 2018 to investigate the mishap. Although CCTV cameras were installed, the BEL fact-finding team was told by its own manager deployed at the site that the footage was not available. Interestingly, an engineer from MECON Limited, the government-owned company that blew the whistle on irregularities at a project site, was transferred. MECON Limited functions under the Ministry of Steel and is working as a project management consultant at five IACCS sites.

Firstpost is withholding the name of the whistleblower and the location of the IACCS project in the interest of national security. The inquiry report mentioned these in detail.

“There was a complaint received from ‘AAAAA’ (site engineer) posted by M/s MECON at the ‘BBBBB’ site alleging that though he had brought out that quality procedures were not being followed at the site, senior executives at BEL, in collusion with the vendor, have not responded to his calls/reports. He alleged that pressure was put on him to ignore the facts since it was more important to meet the timelines. He also alleged that he was transferred along with the local BEL site engineer because they had highlighted that procedures were bypassed. The complaints need to be pursued to find out the facts,” the inquiry report asserted.

Firstpost reviewed the engineer’s complaint dated 28 March, 2018, which was sent to two senior BEL officials. In the letter, he claimed higher officials of BEL impose a lot of unethical verbal instructions on juniors, which is damaging for a PSU of national importance.

“I was posted as the site in-charge of MECON Limited and tried my best to act as a whistleblower, being a part of a project of national importance. I had issued innumerable emails and letters regarding quality issues of the project. But the engineer in charge and other higher officials from BEL desisted me verbally to not follow quality procedures strictly on the pretext of progress of the project. They actually always blindly favored the contractor anywhere and everywhere,” the MECON Limited engineer wrote in his complaint.

“However, when we did not allow any relaxation in this regard and made deduction in bills wherever quality procedures were not followed, higher officials of BEL were not satisfied with the site in-charges (both officials of BEL and MECON Limited) for not favoring the contractor and for following the rule book strictly. For this reason, the BEL general manager and assistant general manager transferred their own site in-charge and pressurised MECON Limited to transfer its senior manager (name withheld) in September 2017 on the pretext that they did not perform satisfactorily, whereas actually it was just the opposite. This was to instill a sense of fear so that other engineers fall in line.”

The inquiry report said walls at the site of another project collapsed twice due to the soil conditions being different from what were assessed by the design consultant when the SOP for excavation was formulated. BEL had to get the soil analysed independently by the Indian Institute of Science in Bengaluru at its own expense.

“The total cost of the execution increased because of the side wall collapse and also the change in the foundation, which, once again, resulted in extra cash flow of crores of rupees. All this needs detailed investigation by some civil engineering expert,” report further added.

The report also highlighted glaring irregularities in the hiring of civil engineer Manish Goyal to look after the IACCS projects’ infrastructure as a manager. It claimed Goyal was hired despite falling short of the required 10 to 12 years’ experience and without having any exposure to highly specialised work like the IACCS project. The report expressed shock over this, saying it was quite surprising how and why the human resources division of BEL did not fully check or verify the documents Goyal’s submitted while establishing his experience as per BEL’s requirements and rules. The report said Goyal earlier worked with L&T. As the manager of NCS-infrastructure, Goyal was later given charge of the three IACCS sites that the infrastructure giant is working on and authorises L&T bills.

It is pertinent to mention that before the internal inquiry report was submitted in October 2018, a three-member BEL team had submitted an investigation-cum-site inspection report in May 2018 regarding certain allegations related to the execution of the IACCS projects. The panel, which included BEL officers AK Raheja, Sayanarayana and MM Roy, had submitted the report to BEL’s vigilance department, concluding that there were serious irregularities in the implementation of the ambitious national security project. Also, BEL’s panel report clearly said that the RD Konsultants’ capabilities were not checked before it was awarded the contract in 2011 and 2013.

“There are evidences of work being subcontracted to CS Constructions Private Limited by L&T, the execution contractor, both on the material and labour front. The registered addresses of CS Constructions Private Limited and RD Konsultants are one and the same. The company profile of YS Anand Consultants Private Limited shows Suresh Kumar Anand (partner of RD Konsultants) and Sarita Anand (director of CS Constructions Private Limited) as its directors. This evidences the fact of RD Konsultants’ involvement with the affiliates related to persons otherwise interested in project,” the panel’s report noted.

“The soil test report as submitted by the design consultant does not match the strata found in excavation,” it added. “Evidence exists of Manish Goyal (manager, NCS-infra), a key person in the infrastructure project, being a former L&T person. The documents submitted by Manish Goyal lack transparency. A part of the work experience of Manish Goyal conflicts with the tenure of pursuing M Tech, and to that extent, his work experience falls short of the minimum eligibility criteria. After the soil collapse at YYYY site (location withheld), no independent inquiry was conducted by the management for any corrective measure. The design of the soil extraction was changed without analysing the reasons for the soil collapse. Although a CAR (Comprehensive All Risk) policy exists in the joint name of BEL and L&T, no insurance claim was lodged. Pinpoint focus by BEL IACCS-Infra is somewhere lacking, and work is being left at the mercy of site engineers and the agencies hired.”

The panel’s report further suggested that BEL officials had tried to cover up the collapse. It indicated that the non-availability of CCTV camera footage at the important sites was yet another attempt to allegedly conceal the wrongdoing.