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Viji Pinarayi

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The 'SNC Lavalin Case' - Facts, Fallacies and Investigations

(An examination of the facts, figures, persons and actions involved
In the issue of alleged corruption in connection with the renovation
of Pallivasal, Senkulam and Panniyar Hydro - electric Power Projects in Kerala) ‍

Friday, 30 January 2009

As the Country is heading for another round of general elections, the decade - long political warfare on the 'Lavalin Case' - the issue of alleged corruption behind the agreement the Kerala State Electricity Board (KSEB, mentioned hereinafter as the 'Board') had entered into with SNC Lavalin Inc., Canada, ('SNC' or 'Lavalin' ) for renovation of hydro power projects at Pallivasal, Senkulam and Panniyar - has once again gained momentum and assumed the centre - stage following the Central Bureau of Investigation's (CBI) submission of the report of its investigation into the case in the High Court and its request to the Governor of the state for permission to prosecute Mr. Pinarayi Vijayan who was the minister for electricity when the final agreement for the project was signed and presently the State Secretary of the CPI (M), the major party in the ruling Left Democratic Front (LDF). While the CBI alleges that Mr. Vijayan and some officials of the Board indulged in criminal conspiracy, causing loss to the state exchequer, the party claims that the case against its leader is the result of a 'political conspiracy' hatched by the opposition Congress (I) and allies who are holding power in the Central Government that controls the CBI. The party has declared solidarity with Mr. Vijayan and announced that it will tackle the issue politically, whereas the opposition parties allege that the CBI probe and the party's stand have exposed the depths of corruption the party has plunged to.

In the wake of these developments that are sure to have long - lasting impact on the political scenario in the state, this article is an attempt to examine the varioius factors involved in the issue, i.e., the facts and figures, the persons involved and their actions. Even though this author has made every effort to ensure that the study is carried out impartially, without undue favour or prejudice towards any side, no 'guarantee' is implied thereof.


All the projects in question - Pallivasal, Senkulam and Panniyar, all located in the Idukki district - are among the oldest hydro power plants in Kerala. The Pallivasal plant was built in the period 1940 - 51 and had a capacity of generating 37.5 Megawatt (MW) while Senkulam plant (48 MW) was commissioned in 1954 - 55 and 30 MW Panniyar project in 1963 - 64. The Senkulam plant was set up so as to utilise the 'tail water' (water left after using for power generation) from Pallivasal plant, whereas the Panniyar project is an independent unit. The expected life of these projects was 35 years.

Whenever the 'Lavalin case' comes up, people think of the LDF Govt. of 1996 - 2001 wherein Mr. Pinarayi Vijayan was the Minister for Electricity, or the preceding UDF Govt. of 1991 - '96. However, contrary to the common belief, the 'story' actually begins in the year 1990, when the Board, considering the age - old status of the Pallivasal plant, prepared a proposal for 'Pallivasal Rehabilitation Scheme' suggesting replacement of the generators that had outlived their expected lifespan and extension of the facility with an additional underground power station. As required by law, the proposal was submitted to the Central Electricity Authority (CEA) for its approval. However, the CEA, in 1992, recommended that immediate replacement of the generators was not necessary because the plant was in fairly good functional condition, but suggested a new 60 MW plant as an augmentation of the existing plant. Accordingly, further proceedings for the proposed renovation were halted and the proposal was dropped. Upto this point, everything went on perfectly as per the law.

In 1995, considering the acute shortage of electricity the state was facing, the Board initiated Panniyar Augmentation Scheme intended to improve the water inflow to the Panniyar plant and increase its capacity by 29.43 MU. During the same period, another proposal for augmentation of the Senkulam project to generate an additional 85 MU of power was also being considered by the Board. All these augmentation schemes aimed at enhancing the capacity of the existing generators rather than outright replacement thereof.

The 'MoU Route':

The Congress - led Government that came to power in the Centre in 1991 had initiated many reforms and policy changes that marked the beginning of the era of globalization and liberaization in the ecomnomic sector of the country. One of the most notable indication of this deviation from the decades - long system was that the Government started encouraging privatization in various sectors that were till then considered proprietary of the government or public sector . As a part of the reforms series, the Govt., aiming at encouraging private players in the power sector, allowed construction, renovation and repair works to be carried out through what is known as 'MoU Route' wherein the electricity board would enter into a 'Memorandum of Understanding' (MoU) with a private company of its choice for carrying out the work in question. The contract - winning company would, in return, arrange for financial aid for the project from the country where the company is based. This arragement would be favourable for the Government because 85 to 90% of the expenses of the project will be taken care of through loans thus made available instead of an immediate investment of the entire cost of the project. Subsequently, many projects were carried out through this method.

However, this 'MoU Route' came under strong criticism from various corners. The most important and strongest argument against the MoU method was that it paved way for favouritism and large - scale corruption wherein private companies having 'contacts' among the officials could win contracts for major projects at exorbitant costs, leading to the government being burdened with unnecessary huge loans while the contract - winning comoany could harvest huge profits. Following the allegations and criticism, the Cental Government, in 1995, decided to impose restrictions on the 'MoU Route'. Enforcing this restriction, the Central government issued written instruction to all State Governements, with effect from 18th February 1995, directing that further MoUs should not be signed.

Formation of the Rehabilitation Project:

While the above - said Augmentation projects were in the pipeline, moves were on in the Department / Board level to undermine the same and go for a replacement of machinery instead. Following the duscussions held by Mr. G. Karthikeyan, the then State Minister for Electricity, with the Canadian High Commissioner, the Board entered into an MoU with SNC Lavalin Inc., Canada, on 10th August 1995 for establishing a joint venture for rehabilitation of the existing plants, identifying the Pallivasal, Sengulam and Panniyar projects for the first batch of renovation work involving complete replacement of the generators at Pallivasal and Sengulam plants and partial replacement of those at Panniyar. (This consultant company, SNC Lavalin, had a long - standing relationship with the Board, being involved in various projects since the Idukki hydro electric power project.) As per the MoU, a major share of the financial support needed for the renovation was to be arranged from the Export Development Corporation (EDC), Canada and Canadian International Development Agency (CIDA).

After deciding on the renovation and signing the MoU, the Board, in September 1995, appointed a retired Chief Engineer to conduct a feasibility study of the renovation project. Based on his report and further discussions, the Government sanctioned the renovation project as a composite scheme and Consultancy Contracts (referred to as 'Original Agreement') were signed with SNC Lavalin on 24th February 1996 for providing technical services for management, engineering, procurement and supervision of construction to ensure completion of the work within three years. The consultancy service charges agreed to amounted to 7.19 million Canadian Dollars (CAD) (Rs. 17.89 Crore, at the exchange rate of Rs. 24.88 per CAD) According to the Consultancy Contracts ('Original Agreement'), Lavalin was entrusted with providing:

• Preliminary and Detailed engineering
• Preparation of drawings, specifications, bills of quantities and tender documents.
• Calling for and evaluation of tenders and award of contracts.
• Producing civil drawings
• Review and approval of contractor’s design, drawings and other submissions
• Construction supervision and inspection
• Commissioning
• Technology transfer and technical training

The 'Original Agreements', even though termed as 'Consultancy Contracts', were not just agreements for consultancy. A detailed list of equipment and components to be imported and the prices thereof were included in the Contracts as Annexure. Also, like any other Contract, there were clauses for dealing with defaults and cancellation. As per Clause 17, it was agreed that in case the Government withdraws from the Contract, it should pay compensation as demanded by the company. Disputes, if any, were to be settled by International Arbitration, half of the expenses of which shall be born by the Government.

A few months after the Consultancy Contracts were signed, the general election to the State Assembly resulted in a change of Government. The UDF was voted out of power, paving way for a new LDF Government headed by (Late) Mr. E. K. Nayanar. Mr. Pinarayi Vijayan was entrusted with the ministry of electricity in the new Government. Considering the power crisis the state was facing, the government declared that every effort will be taken to generate more electricity from all possible sources. It also set up a committee headed by Mr. E. Balanandan to study the situation and recommend actions to ease the crisis.

As part of its attempts to alleviate the power crisis, the Govt. decided to go ahead with the process initiated by the former Govt. Accordingly, a high - level delegation of the Govt. of Kerala, headed by Mr. Pinarayi Vijayan, visited Canada in October 1996. Based on the discussions held by the delegation, the Consultancy Agreements were converted (10th Feb. 1997) into final fixed - price contracts for supply of goods and services ('Supply Contracts') for the renovation. (Meanwhile, just a few days before signing the Supply Contract, the Balanandan Committee submitted its report to the Government (on 2nd Feb. 1997). The report suggested that there was no need of replacing the generators, only repairs and improvements were necessary and the work could have been taken up with companies in India itself (like Bharat Heavy Electricals Ltd. (BHEL)) instead of roping in Lavalin from Canada.)

The originally estimated cost of the project was 67.94 million CAD (Rs. 169.03 Crore). However, it was later agreed that the scope of supply of equipment from Canada for Panniyar project will be reduced by 7.52 million CAD (Rs. 18.71 Crore) by substituting equivalent components procured from India. Also, the consultancy fees was reduced marginally by 0.47 million CAD (Rs. 1.17 Crore). Thus, the final foreign exchange component agreed (in July 1998) to be paid to Lavalin was 59.95 million CAD (Rs.149.15 crore), resulting in a net reduction of 7.99 million CAD in foreign exchange, equivalent to Rs. 19.88 Crore. The Contracts also stipulated that 85% of the foreign financial aid will be arranged by EDC. The rate of interest for the financial aid was reduced from 7.8% to 6.8% during the negotiations.

During the discussions and negotiations held in Canada, in addition to the renovation project, a review of the progress of Kuttyadi Extension project was also conducted. (It is worth noting that the MoU as well as Contracts for Kuttyadi Extension project were executed during the previous UDF Govt.'s regime, along the lines similar to the PSP renovation project and the work was carried out by the same SNC Lavalin itself.) During the discussions held in the review meeting, a proposal for setting up a hospital (Malabar Cancer Centre - MCC) in Kannur district for treatment of cancer patients was put forth by the Govt. and Lavalin agreed to mobilize funds for the hospital. The estimated cost of the hospital was Rs. 103.3 Crore, out of which Rs. 98.3 crore was agreed to be arranged by Lavalin. (Lavalin had earlier agreed to arrange a 'complementary grant' of Rs. 46 Crore (intended to be spent for social benefit) in appreciation of the long - term relationship with the Board.) Accordingly, on 25th April 1998, an MoU between Lavalin and the state overnment was signed for the arrangement of funds of the MCC, the construction of which was to proceed side by side with the renovation project. The first stage of the Cancer Centre was supposed to be completed in the year 2000 and the project was expected to be completed by 2001. It was agreed that a formal agreement in this regard would be entered later.

( 'Kerala Government and SLI will execute an agreement stipulating the terms and conditions under which the Government of Keral and SLI will carry out all the works undertaken by them for the implementation and completion of Malabar Cancer Centre (the Project).' )

Shortly after the Contracts were finalized with effect from Sept. 1998, Mr. Pinarayi Vijayan was elected to the post of the State Secretary of the CPI (M) following the death of Mr. Chdayan Govindan who was holding the post. Subsequently, Mr. Vijayan stepped down from the minister's post in October 1998.

As per the Contract, the supply of goods from Canada was to be completed within 27 months from the effective date of the Contract (Sept. 1998) and the projects were supposed to be re-commissioned in Sept. 2001. It was originally planned to carry out the renovation by shutting down all the units simultaneously. However, such an arrangement meant that the entire water inflow during the period of shutdown will be wasted, which couldn't be afforded considering the acute power shortage the state was experiencing at that time. Considering this drawback, the plan was changed so that the renovation work would be completed in two phases, keeping one half of the units of each plant running while the other half was shut down, so that at least half the capacity of the plants could be utilized during the period of renovation. However, due to technical problems and delay in completion of other works associated with the project, the projects couldn't be re-commissioned as planned. Some of the equipment were found to be faulty and had to be re-designed to suite the requirements. Since the Board's engineers were not familiar with the new imported machinery and components and neither 'technology transfer' (communication of the intricacies of the technology to the Board's engineers) nor technical training of the Board's engineers was carried out by Lavalin as stipulated in the Consultancy Agreements, the engineers were not in a position to assess the quality and reliability of the equipment and components. The training was to be provided by Lavalin at their offices and facilities in Canada as well as construction sites. In the absence of the training, the Board had to rely solely on Lavalin to solve the technical problems, leading to unforeseen delays. The plants were finally re-commissioned during October 2001 - Feb. 2003.

In the meantime, the formulation of the project for Malabar Cancer Centre was also delayed due to various practical difficulties and the project couldn't be finalized as expected. However, the Government ensured that the project and the agreement for arrangement of funds remained intact by renewing the MoU from time to time. During this period, efforts were also made to confirm the MCC deal by executing a proper agreement to replace the MoU. However, this couldn't be finalized due to some disagreement between the Government and Lavalin regarding the wording of some clauses in the 'draft agreement' sent by Lavalin. (Lavalin had mentioned that 'all reasonable efforts will be taken' to mobilize funds for the MCC, whereas the Govt. insisted on a concrete promise that funds will be arranged, which Lavalin was unwilling to accept.) However, Lavalin did keep their promise in the initial stages, and assistance of Rs. 8.98 Crore was arranged. This assistance was made available through a Chennai - based consultant company named Technicaliya Consultants Pvt. Ltd., which was in charge of construction work for the Cancer Centre. While the work for the Cancer Centre was in its inital stages, the political scenario that resulted out of the 'Pokhran - II' nuclear tests conducted by India which led to many countries including Canada stopping financial dealings with India proved to be an unexpected 'road-block'. The work almost came to a stand - still. It could be resumed in 2001 only, after the sanctions imposed were withdrawn.

Meanwhile, another round of elections saw another reversal of the political scenario in the state, with the UDF coming back to power under the Chief Ministership of Mr. A. K. Antony in May 2001. It was during the tenure of this Govt. that all the three projects were re-commissioned.

After the much - awaited re-commissioning of the renovated projects, it was expected that the imported equipment would ensure better performance than the outdated units that were replaced, thereby helping to ease the power crunch. However, quite contrary to the expectations, the outcome was lamentable. The power output from the renovated projects didn't even match the old levels, let alone improving. During the first two years after renovation, the total power generated from the three projects was way below the figures during the pre - renovation period, even though the rainfall during the period was better. This failure was attributed to technical faults of the newly installed components and unplanned deviations from the technical specifications agreed in the Contract. Even though Lavalin was bound by the Contractual obligation to repair / replace the defective equipment, the Board didn't initiate any action in this regard within the warranty period. Instead, the Board continued using the same equipment with repeated repairs.

The build - up of the Issue:

Following the repeated problems and the failure to improve performance that resulted in losses to the Board, allegations of irregularities in the projects started coming up. Meanwhile, the MoU for Malabar Cancer Centre expired in March 2002. Just before its expiry, Lavalin, in a letter written by its Senior Vice President to the Chief Minister on 5th December 2001, requested for a 'Letter of Appreciation' for the work already carried out to ensure continued assistance. It also requested to confirm the deal by converting the MoU into an agreement. The letter was also accompanied by a draft of the proposed agreement. However, the Government, instead of taking prompt steps to ensure continued assistance, made no efforts in this direction, either to revive the MoU or replace it with a proper agreement. This 'negative approach' came under strong criticism from even some sections that traditionally used to stand by the UDF. On 1st October 2002, 'Malayala Manorama', the leading daily in Kerala and well - known for its anti - Communist and pro - UDF stance, in its editorial, criticized the Government's inaction in the matter. It said that no efforts were being made to renew the MoU or to enter into an agreement with Lavalin to ensure continued assistance to the project that could be beneficial to a large section of the public. It also urged the government not to make patients into scapegoats in the political games. Two months later, Lavalin once again wrote to the Chief Minister on 2nd Dec. 2002, reminding him about the laspsed MoU and the earlier letter. However, the Government refrained from taking any action and continued its idle stand, thereby leaving no scope for obtaining further funds from Lavalin.

Following the expiry of the MoU, Lavalin refused to complete the promised payment of 'complementary grant'. Out of the Rs. 98.3 Crore promised, only Rs. 8.98 Crore was made available through the Consultant agency (Technicaliya Consultants Pvt. Ltd.). This refusal by Lavalin to arrange funds as promised prompted fresh allegations in the issue. The ruling UDF and the BJP started raising allegations of corruption against Mr. Pinarayi Vijayan who had finalized the supply contract. It was alleged that Mr. Pinarayi Vijayan had ulterior motives behind awarding the Contract to Lavalin, allowing the company to reap huge profits by providing sub - standard machinery and components and that, in return, Mr. Vijayan received huge amount of 'commission'. It was also claimed that 'Technicaliya Consultants' was a fraudulent firm set up by Mr. Vijayan's associates to siphon out cash in the name of the Cancer Centre. Further allegations claimed that Mr. Vijayan had carried out renovation of his house in Pinarayi spending around Rs. 40 Lakhs, while some others claimed that he had built a new house - a palatial banglow - that cost around Rs. one Crore, while yet another section alleged that he has invested crores of rupees obtained from Lavalin in a company named 'Kamala International' in Singapore, 'Kamala' being the name of his wife. Allegations flew thick and fast.

While these allegations were spicing up the political scenario in the state, the Subject Committee of the State Assembly reported that irregularities were detected in the projects and recommended a vigilance probe into the matter. Subsequently, on 6th March 2003, the Government ordered a vigilance enquiry. While the Vigilance enquiry was underway, the Comptroller and Auditor General (CAG), in an 'intermediate report' seeking some explanations from the Board as a part of the Commercial Audit for the year 2004 - 05, indicated that the renovation work was a complete failure and that the entire amount (Rs. 374 Crore Approx.) spent on the projects was wasted. This report (Dec. 2005) was like adding oil to fire in the political scenario in the state. 'Lavalin Scam' had become the biggest - ever case of corruption in the history of the state.

However, in Dec. 2005, the Board, in its reply to the queries raised by the CAG, said that it had incurred no losses in the renovation project. The Board also denied allegations of irregularities in the project. Later, Mr. Aryadan Mohammed, the then Minister for Electricity, confirmed that the Board had submitted the reply with his knowledge and consent. Thus, the stand taken by the Board, even though contradictory to the allegations raised by the ruling parties, became the official stand of the Government. Further, in a written reply to a question raised in the State Assembly, the minister reiterated that the payments due to SNC Lavalin for the renovation project were released after ensuring that the project had achieved the intended targets satisfactorily.

Meanwhile, a Public Interest petition was filed in the High Court asking for a CBI probe into the 'mother of all scams' in the state. On 7thFeb. 2006, The Government, in its affidavit in the Court in response to the PIL, said that the Vigilance and Anti - Corruption Bureau was already investigating the case and since the probe is proceeding properly and is in its final stages, there was no need of referring the case to the CBI.

Three days later (10th Feb. 2006), the Vigilance Director submitted the report of the enquiry to the Government. The report indicated that a few officials of the Board were guilty and legal proceedings need to be initiated against them. However, the report didn't find any evidence to implicate any minister, even though as many as four ministers (G. Karthikeyan who initiated the renovation projects, Mr. Pinarayi Vijayan who was elemental in finalizing the Contracts, Mr. S. Sharma who was successor to Mr. Vijayan in the LDF Govt. and Mr. Kadavoor Sivadasan during whose tenure in Office the projects were completed and re-commissioned) had held Office during the process of the projects. Subsequent to the submission of the report, Vigilance proceeded to submit the FIR in the Vigilance Court on 27th Feb. 2006, initiating legal proceedings in the matter. The accused included three former Chairmen, a few members and a former Chief Engineer of the Board.

Almost simultaneously, the CAG submitted the final report of the Commercial Audit for 2004 - 05. On 13th Feb. 2006, the government tabled the report in the Assembly. It could be observed that the CAG had, based on the reply submitted by the Board, made a few changes in the report compared to the intermediate ('draft') report like changing the conclusion to 'the expenditure on renovation amounting to Rs.374.50 crore did not yield commensurate gains' rather than the original indication that the entire amount spent was 'wasted'. However, most of the findings remained unchanged. The submission of the report in the Assembly led to a fresh round of political battle with the ruling front calling for a discussion on the report while the opposition raised a counter - demand that if the CAG report on the issue had to be discussed, an earlier report in which the CAG had observed that the Rs. 200 Crores spent on Kuttyadi Augmentation Scheme, the work of which was fully carried out during the tenure of the former UDF government, was wasted should also be discussed. (Incidentally, the Kuttyadi project in question was also carried out by the same SNC Lavalin based on another MoU and Contract signed by former minister, Mr. G. Karthikeyan, who had signed the MoU for the Pallivasal - Sengulam - Panniyar (PSP) rehabilitation project also. The Supply Contract for the former was signed on the same day on which the Consultancy Contracts for PSP project was signed.) Allegations and counter - allegations regarding the responsibility of corruption started flowing aplenty.

By that time, the state was gearing up for another round of general elections. The state Election Commission had already indicated dates for the polls. It was evident that 'Lavalin case' would assume centre - stage in the election campaign. The ruling front was all set to use the allegations raised in the CAG's report to launch an all - out 'attack' on the opposition LDF. On March 1, 2006, the day official notification for the election was to be issued, the Government, in a meeting of the cabinet, took two important decisions - one, to refer the 'Lavalin scam' to the Centre for CBI probe, and two, to remove Mr. Upendra Varma, the Director of the Vigilance and Anti - Corruption Bureau, from his post. The opposition was quick to counter both the decisions as politically motivated. It was alleged that the move to call for CBI probe even as the Vigilance had completed its enquiry into the case and submitted charge sheet against the accused officials was aimed at gaining political mileage for the ruling front in the impending elections. It was also alleged that the Vigilance Director was being unseated for not budging to the political pressure to implicate Mr. Pinarayi Vijayan in the case. Anyhow, the government couldn't carry out its decisions fully, as the state Election Commission intervened and stalled the ouster of the Vigilance Chief on the ground that since the Government's decision came after the official notification for election was issued and the Code of Conduct and other restrictions related with elections (like restriction on change of major officials and other government staff) had come into effect.

Subsequent to the decision to refer the case for CBI probe, the Government issued notification for the same. On 30th March 2006, the government officially requested the Central Government to initiate CBI enquiry. That was the last action by the UDF - led government in the case. The election to the State Assembly (April 2006) saw another turn - around in the political scenario in the state as the UDF government was unseated and the opposition CPI (M) - led LDF returned to power with Mr. V. S. Achuthanandan taking over as Chief Minister.

Acting on the state government's request, the Central Government had referred the case to the CBI. However, the CBI, after initial overview of the case, informed the government that the case, already probed by state Vigilance and Anti - Corruption Bureau, doesn't warrant a further probe. Following this response from the CBI, the central Government passed the information on to the State Government and asked for its opinion. The Government agreed with the stand taken by the CBI (4th Dec. 2006) and informed the Central Govt. accordingly. It seemed that the CBI probe which hadn't taken off even after 9 months since the referal by the state government, was dead.

However, another Public Interest petition came up in the High Court, questioning the CBI's non - acceptance of the case and seeking the Court's intervention to initiate the probe. This was followed by two more PILs with similar demands. Subsequently, on 16th Jan. 2007, the High Court allowed the petitions and directed the CBI to take up the probe. The Court also directed that CBI should periodically report the progress in the case to the Court. The State Government decided not to contest the High Court's decision in the Supreme Court.

The CBI, as directed by the Court, went on to conduct the probe. As part of the probe, a couple of officials of the Board as well as former Ministers Mr. Aryadan Mohammed and Mr. Pinarayi Vijayan were questioned. In an intermediate report, the CBI indicted the officials whom the State Vigilance team had already charge - sheeted. However, except for this indictment, no considerable progress was reported further in the case. As the probe seemed to be going astray, the Court seemed to be somewhat irritated by the lack of progress. While considering the progress of the probe, the High Court, on 17th Sept. 2008, made its unhappiness explicit. The Court asked what kind of probe the CBI was conducting, considering the fact that the they had questioned only four persons during the twenty - month period since initiating the probe. The Court even asked whether the CBI was waiting for the next election to come...! Subsequently, on 23rd Sept. 2008, the Court granted a four - month 'grace period' and set a deadline of 23rd Jan. 2009 to complete the probe and submit its final report and charge - sheet.

A few weeks before the deadline, a couple of pro - UDF newspapers including 'Chandrika', the official mouth-piece of the Muslim League, published an 'exclusive' report saying that the CBI has decided to implicate Mr. Pinarayi Vijayan as the ninth accused in the case. Days later, with just two days remaining for the Court - appointed deadline to expire, the CBI submitted its report to the High Court and informed the Court that the probe has been completed and they are ready to submit charge - sheet. They also said that since a former minister and two government officers were among the accused, permission has been sought from the State Governor and the Govt. as required. Even though the CBI didn't name the accused, it was almost evident that the 'former minister' listed as the accused No. 9 was Mr. Pinarayi Vijayan, which was later confirmed by the CBI. It was also clarified that the Vice President of SNC Lavalin and former Joint Secretary in the Department of Electricity were added into the list of accused along with Mr. Vijayan. Mr. V. Rajagopal, former Board Chairman, who was among the accused as per the Vigilance report was removed from the list following his death.

As expected, the CBI's report sparked off a fresh round of political drama filled with allegations and counter - allegations, accusations and defence. The CPI (M) denounced the charges as political vengeance by the Central Government for withdrawing the support the Left Parties had given to the Government, while their political opponents claimed that the CBI's probe has unveiled the ugly face of corruption indulged in by the Party. The central leadership of the CPI (M) announced solidarity with its State Secretary and declared that the politically motivated charges would be tackled politically, whereas the opponents claimed that this stand was contradictory to the 'high moral grounds' that the Party claimed to hold and that it was an indication of the involvement of the Party's central leadership in the scam. Meanwhile, the reluctance shown by the State Chief Minister Mr. V. S. Achuthanandan to come out openly to defend his Party's Secretary, on the grounds that being the Chief Minister, he couldn't speak like an ordinary party man in a matter that was sub judis, was projected as the evidence of the inner - party feud wherein the Chief Minister was pitted against the Party's 'official leadership'. The CBI's request for permission for prosecution of Mr. Vijayan is still under the consideration of the Governor while the request for permission to prosecute the government officials is pending with the government as on date. The drama is still on. Irrespective of how the impending acts pan out, one thing is sure - The developments - past and future - in the case will change the political scenario in the state like never before.

Since there is no apparent controversy regarding the charges against the Board officials who were charged by the Vigilance as well as the CBI and the entire public interest seems to hover over the allegations against Mr. Pinarayi Vijayan, I am taking the liberty to concentrate my inspection of the case on this aspect only.


To inspect the case, I would like to present the arguments on either side - against and in favour of Mr. Pinarayi Vijayan and then proceed to cross - examine the arguments against each other.


Note: Even though the CAG's report contained many findings, in this section, I am concentrating only on those points which directly or indirectly indict the LDF Govt. and Mr. Pinarayi Vijayan. For the details of the findings, please refer the complete text of the report.

The Comptroller and Auditor General, in the Chapter III ('Review Relating to Statutory Corporation') of his Commercial Audit Report for the year 2004 - 05, in Section 3.10 (Page 64), said:

'...Based on subsequent discussions held (October 1996) by a delegation headed by the Minister for Electricity, Government of Kerala, the consultancy agreements were converted (February 1997) into fixed price contracts for supply of goods and services for the renovation at a cost of 67.94 million Canadian Dollars (CAD) (Rs.169.03 crore).'

Further, under Sec. 3.11, the report highlighted:

'Global tenders were also not invited either before entering into the contract for consultancy or final agreement with SNC for supply, erection and commissioning of the projects.'

Later, under the same Section, on Page 66, the CAG said:

'The Ministerial delegation which conducted (October 1996) deliberations on the contract with SNC and funding arrangements with EDC and CIDA at Canada did not even consider the fact that SNC was only a consultant intermediary and not the original equipment manufacturer (the supply of goods was actually made under the contracts by Alstom, Canada). The contracts were finally signed (February 1997) with undue haste without ascertaining the reasonableness of prices.'

Under Sec. 3.12 (Project Consultancy), the report said:

'With the award of the above contracts the consultants (SNC) became contractors for supply of equipment and services as well as installation, and the technical services contemplated in the consultancy services viz.,preliminary and detailed engineering, design, calling for and evaluation of tender, supervision of installation, etc., were rendered superfluous. The Board, however, awarded the detailed design, supply, installation and supervision contract as an addendum to the earlier consultancy contracts without excluding 7.19 million CAD (Rs 17.89 crore) provided for therein.'

Thus, the charges are:

1. Global tenders were not invited before entering into the final agreement.
2. The delegation overlooked the fact that Lavalin was only a consultant and not the manufacturer of the equipment.
3. The Contracts were signed in haste, without ascertaining the reasonableness of prices quoted.
4. When Lavalin was 'promoted' from consultant to contractor for supply and installation, the consultancy charges for services rendered irrelevant were not excluded from the total consultancy charges.


Since the CBI is waiting for clearance from the Governor before submitting the charge sheet, the exact charges being levelled against Mr. Vijayan are not known as of now. However, the enquiry progress report submitted by the CBI in the High Court does give a fair idea of the charges. As per the report, Mr. Vijayan is accused as follows:

1. Criminal conspiracy to award the Contracts to SNC Lavalin:

Mr. Vijayan had maintained close contact with the representatives of Lavalin right from the beginning. Acting on this relationship, he joined the conspiracy hatched by the other accused to award the contracts for the renovation project to Lavalin. The conspiracy was initated during the regime of the preceding government and continued during Mr. Vijayan's tenure in Office.

2. Misuse of power to over - ride stiff opposition from some Board officials:

Many highly - placed officials and technical experts of the Board had expressed their opposition to the renovation project. However, Mr. Vijayan, in his capacity as Minister, over - ruled the objections raised by the Board officials. He used his power as Minister to silence the opponents of the project and went ahead with the contract.

3. Permission of the Central Electricity Authority was not obtained for entering into the Contract:

As per the Electricty (Supply) Act, 1948, it is mandatory that any project, the estimated cost of which exceeds Rs. 100 Crore must be submitted to the Central Electricity Authority for its approval before entering into contract. The renovation project for the three power plants were approved by the preceding government as a single package, for which the estimated cost would be around Rs. 170 Crores. However, these projects were split up and three separate contracts were signed for individual plants. This, the CBI says, was done to circumvent the requirement of CEA's approval.

4. The recommendations by 'Balanandan Committee' were overlooked:

The Government had appointed a committee headed by Mr. E. Balanandan to look into the problems in the power sector. The Committee, in its report, had suggested that the complete renovation of the three plants was quite unnecessary. Some repairs and replacement of certain components would have been enough to keep the plants in proper wroking condition. Also, the repair work could have been done at considerably low costs if the Board had employed Indian public sector companies like BHEL instead of bringing Lavalin in from Canada. The report that contained these comments and suggestions was submitted to the government on 2nd Feb. 1997. However, Mr. Vijayan, in his capacity as Minister, completely rejected the recommendations of the Committee. Instead, he went ahead with the project and the Supply Contracts for the projects were signed within the next eight days, on 10th Feb. 1997. This deliberate over - ruling of the Balanandan Committee report in favour of Lavalin indicates the 'special interest' that Vijayan had in awarding the Contracts to Lavalin, says CBI.

5. Misleading the Cabinet about the deal:

Mr. vijayan was so determined to award the Contracts to Lavalin that he even misled his colleagues in the Cabinet about the project. The observations and comments by the National Hydroelectric Power Corporation (NHPC) regarding the rates quoted by Lavalin along with many other factors were purposefully hidden from the Cabinet. The promised 'grant element' for Cancer Centre was projected with undue importance so that the members of the Cabinet were tempted to approve the proposal while being unaware of the darker sides of the deal. With this intention, details regarding the project were deliberately excluded from the Cabinet Note that came up for consideration during the Cabinet meeting that accorded approval to the Contracts.

6. No proper agreement was made for arranging funds for the Cancer Centre:

The only positive factor that was elemental in obtaining the go - ahead for the project was the grant offered by Lavalin to the Malabar Cancer Centre. However, this promise was not converted into a proper agreement. The Board had written to the Secretary of the Department suggesting that the offer for mibilization of funds for the hospital should be included in the Contracts for the renovation projects. This suggestion was deliberately overlooked. Even though the Cancer Centre project and the renovation projects were inseparably inter - linked, there was no mention of this in the Contracts. The proposal for arrangement of funds by Lavalin for the Cancer Centre was nmentioned only in the MoU signed in this regard. This MoU, being only an understanding and not a full - fledged contract, was not legally enforceable. Thus, the Government had no chance to ensure that Lavalin complied with their promise. In the absense of a concrete agreement, the MoU was only a 'smoke screen' to accumulate and divert funds in the name of the hospital, says the CBI.

7. Mr. Vijayan had 'special interest' to establish the Malabar Cancer Centre in his home district:

The CBI claims that Mr. Vijayan's interest in the project was solely aimed at the establishment of the proposed Cancer Centre in his home district, rather than the improvement of power scenario of the state. Hence, he accorded undue favours to Lavalin to achieve his goal. The proposal for the Cancer Centre and proceedings in this regard were 'pushed forward' by Mr. Vijayan in the Cabint meeting even though it was not included in the original agenda. Such 'out - of agenda' consideration is usually accorded only to very important issues that need to be looked into urgently. Yet, the proposal for Cancer Centre was rushed through in order to compel the Cabinet to accord its approval for the renovation project.

8. The illegal actions by Mr. Vijayan and the other accused resulted in losses amounting to Rs. 86 Crore to the State exchequer.

The CBI claims that the illegal actions indulged in by Mr. Vijayan in co-ordination with the other accused, aimed at awarding the Contracts to Lavalin has resulted in the State Exchequer incurring losses amounting to Rs. 86 crores, in addition to the non - avaiability of the promised grant for the Cancer Centre which resulted in delaying the Cancer Centre project and forcing the Govt. to search for alternate sources to finance the construction of the hospital.

Since the detailed arguments of the CBI on these matters are yet to be known (and will be known only after the charge - sheet is filed), elaboration on the above - listed charges is not possible at this point. It being so, I have to stop here and proceed to examine the arguments as listed above.


Now, I am presenting the counter - arguments raised by the Party and supporters of Mr. Vijayan against the charges levelled against him. These arguments are classified under three sections, the first two being arguments to defend against the charges raised by the CAG and the CBI, and then a series of counter - arguments against what they claim to be the role played by the political opposition.


1. Global tenders:

The allegations raised by the Comptroller and Auditor General (CAG) begins with the non - invitation for global tenders before signing the Contract. However, according to the Consultancy Contracts, the duty to invite tenders, examine and evaluate the tenders thus received and award the final contracts was entrusted with Lavalin itself. (Clause 3 in the list of services to be provided under the Consultancy Agreement, as listed under Sec. 3.12 (Project Consultancy) in the CAG's report itself (Page 66)). Since it was the duty of the Consultant to invite tenders, it's the Consultant's fault if they didn't provide the service entrusted to them. Mr. Vijayan can't be blamed for Lavalin's fault. Moreover, once the Consultancy Agreement was in place, specifying the list of equipment and components to be imported and providing for financial assistance from Canada, there was no chance of going for global tenders because that would have caused a direct conflict with the Consultancy Contracts. It may also be noted that Mr. G. Karthikeyan, the minister for electricity when the MoU and Consultancy Contract were signed, had admitted on the floor of the State Assembly that since the Contracts were part of a 'package deal', it was not possible to invite global tenders after agreeing to accept financial assistance from Canadian EDC and CIDA.

2. Lavalin was only a consultant and not the manufacturer of the equipment:

The CAG said that the delegation (headed by Mr. Vijayan) that negotiated the deal overlooked the fact that Lavalin was only a consultant and not the actual manufacturer of equipment. This argument makes no sense since there is no requirement or restriction that Contract must be negotiated with the original manufacturers only and not any third party. The Board or the Government could have negotiated with any party (including Lavalin itself) who was willing to supply the materials and equipment.

3. Contracts signed in haste; reasonableness of prices not verified:

The CAG said that the Contracts were signed in undue haste and without ascertaining the reasonableness of prices quoted by Lavalin. However, this 'haste' was not an 'unwarranted' one, considering the then - prevalent power shortage scenario in the state. The state was facing long periods of power cuts and load shedding which had almost crippled the industrial, agricultural and economic growth of the state. The common man was also suffering as the long hours of load shedding and extremely low voltages were upsetting the life in the households. In this scenario, it was the duty of the Government that was concerned about public interest to try every possible solution to provide at least some level of solace to the public, irrespective of the intricacies of cost - saving. So, it is only natural that the Government accepted the offer without too much deliberation. Had the Government spent more time assessing the prices and re-negotiating with multiple parties, it would have caused more delay in making the project operational. Moreover, there is no evidence that the prices were actually 'unreasonable'. Had the Govt. kept away from finalizing the Contract in the name of 'unsure unreasonableness' of prices, there could have been a public outcry alleging that while the people are suffering, the 'anti - development minded' (LDF) Government is playing 'politics', stalling a project initiated by their predecessors (UDF) in the name of a few lakhs of rupees. Moreover, if the Govt. had shown reluctance to go ahead with the project and it later turned out that the prices were indeed reasonable, even the possibility of the same CAG accusing the Govt. saying that 'the 'undue delay' caused by the Govt. in completing the process and finalizing the project resulted in huge losses in the argicultural and industrial sectors' can't be ruled out. In short, even though it may be 'wrong' from the point of view of the CAG as a financial auditor, the 'undue haste' alleged by the CAG was, in fact, 'due haste', in the better interest of the people of the state.

Moreover, as per the terms of the Consultancy Contracts which the CAG himself has quoted in the report (Sec. 3.12 Page 66), the task of inviting tenders, evaluation of the tenders received and awarding the contracts were entrusted with Lavalin itself. Given this scenario, even if the Government had considered the fact that Lavalin was not the manufacturer, it would have made no difference. If Lavalin wanted, they could have bagged the deal anyhow - may be by fabricating a tender in the name of a subsidiary unit or a 'dummy' firm, because Lavalin themselves were the sole authority who can decide to whom the Contracts were to be given. Thus, the Consultancy Contract signed by the UDF Govt. had, in effect, rendered the Government a mute spectator.

4. Superfluous Consultancy charges:

It is true that Consultancy Charges were not proportionately discounted when the consultant was made the supplier. However, the loss on account of this is offset be the reduction in the cost of materials for Panniyar project, the reduction of Consultancy charges and the reduction of interest for the financial assistance. According to the CAG's report itself, the loss due to non - exclusion of superfluous consultancy fees was Rs. 17.89 Crore, whereas the reduction in the scope of supply for Panniyar project and reduction of Consultancy charges reduced the cost of the projects by Rs. 19.88 Crore, well offsetting the aforesaid loss.


1. Criminal conspiracy:

The CBI alleges that Mr. Pinarayi Vijayan indulged in criminal conspiracy with other accused who were members of the Board to award the contract to SNC Lavalin. Since it has not mentioned when or where the alleged conspiracy took place, it is not possible to counter the allegation precisely. However, irrespective of whatever the CBI may claim, fact remains that it was not Mr. Vijayan who introduced Lavalin into the deal. Lavalin was an integral part of the project right from the beginning, when the original MoU was signed at a time when Mr. Pinarayi Vijayan was 'nobody' other than a leader of his party. He was not even an MLA and had no business whatsoever with the administration of the Board when Lavalin was brought into the deal through the MoU route by the previous Government. If there was any conspiracy involved, it must have been during the time when the project was formulated and Lavalin was roped in from 'out of nowhere'. Even if the CBI claims that conspiracy was involved only in awarding the Supply Contract by which Lavalin who was only a consultant was promoted to the position of Principal Contractor, it doesn't hold good since Mr. Vijayan was only following an existing precedent set by the former Government which awarded the Supply Contract for Kuttyadi Extension project to the Consultant party itself (which, incidentally, was the same SNC Lavalin). If granting Supply Contract to the Consultant is a result of 'conspiracy', what about the precedent set by the UDF Govt. which awarded the Supply Contract of Kuttyadi project to the same Consultant? Was that also by 'conspiracy'? Is CBI arguing that Mr. Vijayan (who was 'Mr. Nobody' then) 'conspired' for Kuttyadi deal as well? Or that the UDF Govt. was party to the 'conspiracy' to award Supply Contract to the Consultant Lavalin?

2. Misuse of power:

It is alleged that Mr. Vijayan misused his power to ward off to stiff opposition posed by some Board officials against the deal. However, the report hasn't mentioned who these officials were and what their oppositions were. Anyhow, some officials having opposition to the decision taken by the Board is no big deal. Drawing a parallel, Government officers - a section thereof - may have opposition to some decisions taken by the Government whereas the Government is under no obligation to change its decision to pacify the opposing officials. In such a situation, it can't be argued that the government is misusing its power to over - ride the officials' opposition except if the government's decision is outright illegal. In the same way, Vijayan taking some decision in his capacity as Minister can't be treated as 'misuse of power' just because it was against the opposition of some officials.(Had Mr. Vijayan taken a decision in favour of those officials who opposed the deal, another bunch of officials who were in favour of the deal would have oppose that decision also, right? By the same argument CBI is following now, the Minister's action in the opposite direction also could be treated as 'misuse of power', albeit in the other direction!)

3. Permission of the Central Electricity Authority:

Another 'charge' is that the project needed permission from the Central Electricity Authority (CEA) and that it was not obtained before signing the Contracts. This is also pointed out by the CAG. However, there are two aspects in this issue. First, the CEA's permission is required only for projects having cost in excess of Rs. 100 Crores. In the present case, three different projects are involved, and the cost one none of these exceeds Rs. 100 Crore. It is also alleged that even though three projects are involved, the renovation project for all three was taken up as a composite scheme and that since the cumulative cost of the package exceeds Rs. 100 Crores, permission of CEA was necessary. However, this argument also is not correct, because even though the government had granted permission for all the three projects together, they were treated as different projects right from the beginning, which is evident in the fact that three Consultancy Contracts were signed for the renovation of individual projects, instead of a single Contract for the so - called 'composite package'. Given that three Contracts were already in place, it makes no sense to argue that they should have been clubbed together while entering the Supply Contract.

Moreover, under Section 29(1) of The Electricity (Supply) Act, 1948, 'Every scheme estimated to involve a capital expenditure of such sum, as may be fixed by the Central Government, from time to time, by notification in the Official Gazette, shall, as soon as may be after it is prepared, be submitted to the Authority for its concurrence.' (emphasis added by author) Thus, the CEA's permission, if at all necessary, should have been obtained, at the latest, immediately after signing the Consultancy Contracts (wherein the estimated cost of equipment and components were enlisted). Since the Consultancy Contracts were signed much before Mr. Vijayan took charge of the Office, it would be unfair, to say the least, to blame Mr. Vijayan for some fault committed by the Board at a time when he was not at all involved in the process.

(It may also be noted that when the proposal for renovation of Pallivasal project (the oldest among the three) was initiated for the first time during the previous LDF Govt.'s time, the proposal was promptly submitted to the CEA even before any kind of agreement was made. The proposal for set aside since the CEA instructed against immediate replacement of the machinery. On the other hand, the UDF Govt. didn't bother to take CEA's approval even after confirming the deal and signing the Consultancy Contracts.)

4. 'Balanandan Committee' recommendations:

The CBI alleges that the recommendations of 'Balanandan Committee' were ignored while striking the deal. It may be noted that the Committee had remarked that there was no need of renovation of the projects and that only repairs and improvements were required. Also, the Committee had mentioned that there was no need of bringing Lavalin from Canada for the work which could have been done by companies in India itself at considerably lower costs. The CBI says that the Govt. ignored these recommendations and went ahead with the Contracts. However, this argument can't be accepted for two reasons: one, the Balanandan Committee was set up NOT to look into the renovation projects but to study the problems the state was facing in the power sector and to suggest ways to improve the condition; Two, even if the Government wanted to consider the Committee's recommendations, it wouldn't have been possible because by the time the Committee submitted its report, the proceedings of the renovation projects had reached final stage - only the formal signing of contracts was remaining (which was done just a week thereafter) - and the Government couldn't have even thought of going back from the project, especially considering the restrictive clauses agreed to in the Consultancy Contracts. The Consultant would have initiated legal proceedings to stay the project work and levy compensation as agreed in the Consultancy Contracts. Is the CBI arguing that the Govt. should have 'invited' legal hassles and (probably) lost millions in compensation - as in the case of Neriyamangalam Project - and arbitration expenses and further losses due to delay in the work of the project, so that another case for 'causing loss to State Exchequer' could be imposed on Mr. Vijayan? (To be read with this argument is the case of the Neriyamangalam Project, the MoU for which was cancelled by the former LDF Govt. The consultant company, M/s ABB, had approached the Court against the cancellation and the ensuing legal battle caused a four - year delay in the project, in addition to financial loss as the Govt. eventually lost the case. Given that even cancelling an MoU (which the CBI itself argues to be 'not legally enforceable' - refer the Cancer Centre issue) could lead to such 'unwelcome' outcome, is the CBI arguing that the Government should have tried its luck again with a 'legally enforceable' Contract?)

And, even if we blindly agree that the Government could have ignored these possibilities, is there any rule / law that Govt. must accept the recommendations of a Committee that it had appointed? If not, how can CBI allege that the Committee's report was ignored, as if it was legally binding on the Govt. to accept the report? If it wanted, Govt. could even have rejected the Committee's findings and recommendations altogether, may be, citing the reason that the Committee overlooked its 'terms of reference'.

5. Misleading the Cabinet about the deal:

It is alleged that Mr. Pinarayi Vijayan, under the influence if his ill motive, misled the Cabinet regarding the deal. Supporting this claim, CBI says that some factors like the negative remarks by the NHPC were purposefully not mentioned in the Cabinet Note of the meeting that discussed the deal. On the other hand, the 'unguaranteed promise' of financial assistance for the Cancer Centre was projected with undue importance in order to misguide the Cabinet into granting its approval for the renovation Contrats. This claim is a huge 'joke'. The Cabinet Note, as the name itself indicates, is a brief note only and not a detailed description of everything that would come up in the discussion of the Cabinet. For any matter that is mentioned in the Cabinet Note, ALL files related with the same will come in front of the meeting. Any member of the Cabinet can go through the files if any clarification or details are required. It being so, the claim that the Cabinet Note didn't mention everything is raised either out of ignorance of the Cabinet Rules of Business or with malicious intention to misguide those who are unaware of the same.

Moreover, it is only 'commonsense' that if anybody is misled, the only person who can complain is himself / herself. (If Mr. X gives some wrong / incomplete information to Mr. Y during a discussion, 'Y' can complain that 'X' misdirected him. But a third person, 'Z', who was NOT present during the discussion and is unaware of what all things were discussed between X and Y, can't complain that 'X' misled 'Y'.) When a Cabinet meeting is under way, only the ministers and the Chief Secretary to the Government will be present in the room. Given this scenario, the only persons who can allege 'misleading' are the ministers or the Chief Secretary. Given that none of them had ever raised such a complaint and the CBI hadn't interrogated any of them, a third party (CBI) raising the allegation of misdirection is like saying that 'I didn't hear what you told him, but I am sure that you misguided him'...!

6. Funds for Cancer Centre:

The CBI has pointed out that a proper and legally binding agreement / contract was not entered into with Lavalin for mobilizing funds for the Malabar Cancer Centre as promised in the MoU signed on 25th April 1998. The MoU being only an understanding and not an agreement, was not legally enforceable, leaving scope for Lavalin to escape in case of default, says the CBI. It is true that, as in the case of the renovation project, the proposal for the grant for Cancer Centre was initiated through the MoU. Provision for entering into a formal agreement was mentioned in the MoU itself. It was agreed that subsequent to the MoU, a formal agreement would be made within six months. It was expected that the Project report and other formalities for the Cancer Centre would be completed within that period. However, finalization of the project could not be completed as expected, delaying the finalization of formal agreement. Moreover, the disagreement between the Government and Lavalin over certain clauses in the 'draft agreement' (sent by Lavalin) resulted in further delay. (Lavalin had said that 'all reasonable efforts will be taken' to mobilize funds for the hospital whereas the Govt. insisted on a more solid assurance.) Adding to this delay was the situation that resulted from the 'Pokhran - II' nuclear tests that resulted in Canada stopping its financial assistance to India. Irrespective of these issues, the delay didn't affect the agreement (even though informal). The Government ensured that the MoU was renewed periodically so that continued assistance could be availed from Lavalin. On the other hand, Lavalin also continued to respect the MoU even though it was not binding on them and continued to arrange funds as promised. A total amount of Rs. 8.98 crore was thus received till Feb. 2001.

However, after the UDF came to power in May 2001, the Government didn't take interst in keeping the process alive. The MoU was not renewed after March 2002 without specifying any reasson thereof, as indicated in the report of the CAG.

' The actual contribution made (up to February 2001) by SNC towards this project was only Rs.8.98 crore by way of direct payment to Technicaliya Consultants Private Limited, a Chennai based firm for works in connection with the hospital. There were no records available to show that further funding was made towards the project (April 2005). The MOU has also not been renewed after March 2002 for reasons not on record'. (Sec. 3.18, 'Grant for Cancer Hospital' - Page 69)

Moreover, even after the expiry of the MoU, Lavalin was willing to keep their promise. In a letter to the Chief Minister , they requested the Govt. to renew the MoU or make a proper agreement for continuing further assistance. They also requested a 'letter of appreciation' for the work already done. Even the Canadian High Commissioner had written to the Government calling for revival of the project. However, the Govt. didn't take any action whatsoever in this regard, thereby allowing Lavalin to wind up the fund collection. Thus, it is more than evident that it is the UDF Govt's (premeditated?) failure to renew the MoU or convert it into a formal agreement that resulted in losing the foreign assistance for the Cancer Centre. Hence, blaming Mr. Vijayan for the UDF Govt's fault makes no sense. (Or, is the CBI arguing that Canadian High Commission was also working hand - in - glove with the 'Vijayan - Lavalin Nexus'...?)

7. Mr. Vijayan's 'special interest' for 'Malabar Cancer Centre':

Another argument of the CBI is that Mr. Vijayan took 'special interest' for establishing the Cancer Centre in Kannur. This can only be treated as another joke! Is CBI arguing that an MLA (who happened to be a minister as well) taking 'special interest' to establish a Govt. hospital - a facility that could offer enormous help to thousands of people - in his district was an 'offence'? If that be so, Mr. Vijayan, who was entrusted with the responsibility of striving his best to serve the Supreme Power of the nation - The People -, would be more than happy to spend the rest of his days in jail for taking 'special interest' to bring solace to thousands of patients...! (If CBI's argument was accepted, Mr. Lalu Prasad Yadav, the Union Minister for Railways, could be prosecuted a hundred times for showing 'special interest' to shower railway facilities in his state...! Why don't they try that as well?)

Further, the CBI hasn't mentioned what 'undue favours' did Mr. Vijayan accord to Lavalin in return for the assistance to set up the Cancer Centre. Almost everything he has done (except negotiating the scope of imported materials for Panniyar project and the grant for the Cancer Centre) was along the lines of what his predecessor, Mr. G. Karthikeyan had done for the Kuttyadi project. If what Vijayan did was 'undue favours', what about the same actions by Mr. Karthikeyan? What was his motive for the 'favours' like awarding the Consultancy Contract and Supply Contract without inviting tenders?

8. Loss of Rs. 86 Crore to the State exchequer:

The CBI claims that the 'illegal actions' taken by Mr. Vijayan and the other accused caused losses amounting to Rs. 86 Crore to the State Exchequer. But it hasn't explained how this figure of 86 crore was reached or what the role of Mr. Vijayan in this was. The only things Vijayan did (deviating from the prevalent precedent set by the former Government) were to reduce the cost of the project from Rs. 169 crore to Rs. 149 Crore and securing a promised grant of Rs. 98 Crore for Malabar Cancer Centre. How does this constitute a 'loss' to the State Exchequer?


Under this section, I am presenting some arguments and allegations and counter - allegations raised by political parties (NOT the statutory authorities or investigation agencies) in the issue.

1. The 'MoU Route': The pro - Vijayan camp points out that the 'MoU Route' that was introduced by the Congress - led Central Government was rejected by the same Central Government itself following wide - spread allegations of corruption. The Centre had directed all State Governments that no MoU shall be signed for projects in the power sector from 18th February 1995 onwards. Even after the Central Govt. had explicitly banned the 'MoU route', the UDF Govt. over - ruled the Central Govt.'s directives to curtail corruption and unilaterally went ahead and signed MoU and Consultancy Contracts with Lavalin. Thus, any corruption, if present, involved in the renovation project was initiated and facilitated not by Mr. Vijayan, but by Mr. G. Karthikeyan, the Minister for Electricity in the UDF Government that deliberately over-rode the Central Govt.'s directives in this regard and signed the 'banned' MoU and Consultancy Contracts, claims the supporters of Mr. Vijayan.

2. Over - riding the CEA: It is alleged that necessary permission was not obtained from the Central Electricity Authority for the renovation project. In a counter - charge to this allegation, the supporters of Mr. Vijayan points out that the very same CEA had recommended in 1992 immediate replacement of the generating units of Pallivasal Power Station was NOT necessary, since the plant was in fairly good condition and that the MoU and subsequent Contracts for renovation were signed over - riding the CEA's recommendations. ('...the Board, ignoring the recommendations of the CEA on the good conditions of the Pallivasal Power Station, entered into (August 1995) a Memorandum of Understanding (MOU) with SNC Lavalin Inc, Canada.... (Sec. 3.8, & 3.9, Page 64 of the CAG's Report) It is argued that if not obtaining permission from CEA was an offence, it should be Mr. G. Karthikeyan, the minister who signed the MoU, who is charged as culprit ahead of Mr. Vijayan. They also point out that the first proposal for 'Pallivasal Rehabilitation Scheme' was properly submitted to the CEA during the previous LDF Govt.'s regime and that the it was the UDF Govt. that side - stepped the CEA. The Board under the UDF Govt. didn't bother to approach CEA since they knew pretty well that the proposal won't be allowed because it had over - ridden what the CEA itself had suggested, goes the argument.

3. Feasibility Study: It is common understanding that before deciding on any project, its feasibility must be studied and verified so that it doesn’t' end up a failure. However, in the instant case, NO such feasibility study was conducted before signing the MoU. On the contrary, feasibility study was conducted one month after the MoU was signed, that too by a retired Chief Engineer who was later identified to be a consultant to Lavalin. This attempt of 'post - facto rationalization' is alleged as a clear indication of a 'premeditated design' to award the project to Lavalin.

4. Global Tenders: Another aspect of the allegations in the case is that global tenders were not invited for the project. The CAG's report had highlighted this discrepancy under Sec. 3.11 (Page 65) of the report. ('Global tenders were also not invited either before entering into the contract for consultancy or final agreement with SNC for supply, erection and commissioning of the projects.') It can be seen that this allegation has two parts: One, Global tenders were not invited before entering into Consultancy Contract (done during the UDF Govt.'s tenure), and two, tenders were also not called for before singing the Supply Contract (during LDF's period). However, the supporters of Mr. Vijayan argues that he or the LDF Govt. can't be blamed for this fault. They point out a clause in the Consultancy Contract to prove their case. As per the Consultancy Contract, among the services Lavalin was entrusted with include invitation of tenders, evaluation of the tenders received. Even awarding the contract was the job of Lavalin, and not the Government or the Board. (The CAG has listed the services entrusted with SNC in Sec. 3.12 of his report. (The list is quoted herein above while describing the background of the case. Cl. 3 of the list refers to invitation of tenders.) Thus, according to the Consultancy Contract, it was Lavalin's job to invite tenders. Hence, neither the LDF Govt., nor the Board can be blamed for not inviting tenders because it was not their job. On the other hand, UDF can't escape the blame for avoiding tenders before signing the Consultancy Contracts. Lavalin was roped in directly, without any form of tender being invited. And this was not a 'one - off' case. Out of the dozen - odd projects initiated during UDF Govt.'s tenure, tenders were NOT invited for even a single project. All were handled through the 'MoU route'.

5. Board kept in the dark - a case of 'misleading': The pro - Vijayan section points out another 'cover- up' exposed by the CAG. In Sec. 3.11 (page 66), the CAG noted:

The Kerala State Electricity Board (Meetings) Regulations, 1957 prescribed that the Board shall meet at least once in a month and any urgent matter transacted in between meetings should be ratified in the immediate succeeding meeting. The full Board was, however, not aware of the necessity for renovation, the signing of MOU (August 1995), or the contract (February 1996) for technical services with SNC, till January 1997...

If 'not mentioning all details in the Cabinet Note' amounted to 'misdirecting the Cabinet' and was an offence as per the CBI, what about keeping the members of the Board in the dark, asks the pro - Vijayan team. Wasn't the UDF Govt. keeping the Board officials - at least some of them - unaware of the MoU and the Contracts? If so, why is it that the UDF Govt. is not charged with 'misleading'?

6. Balanandan Committee: By alleging that the LDF Govt. overlooked Balanandan Committee's report, the CBI seems to have accorded a 'legally binding' status to the report, overlooking the fact that the Committee being not a statutory body, the Govt. had absolute power to decide whether to accept or reject the entire report or any part thereof. On the other hand, by accusing that the Govt. overlooked the report, the CBI has, in effect, accepted that the Committee's recommendations were correct, i.e., the UDF Govt.'s decision to go for renovation and to rope in Lavalin from Canada were wrong. If so, why is it that no action is taken against those who made the wrong decision that led to the so - called day-light looting of the tax-payers' money?

Moreover, Mr. Balanandan was not a special expert 'imported' from Canada or some other country. Whatever observations and findings the Committee made were reached based completely on the facts, figures and records and resources available with the Board and / or the Government. It being so, question arises: Weren't these facts and figures not available when Mr. Karthikeyan was the minister? If they were, why did he overlook them and unilaterally decide to go ahead with the renovation project, and blindly decide Lavalin as the Consultant? And why didn't CBI book him as well for overlooking the facts, figures and records that were available at his disposal?

7. Malabar Cancer Centre: Most of the allegations surrounding the deal is related with the Malabar Cancer Centre. All the allegations sprouted from the fact that out of the Rs. 98 crore assistance promised by Lavalin, only 8.98 Crore were received and utilized for the Cancer Centre. The amount thus received was also routed through a Chennai - based firm named Technicaliya Consultants Pvt. Ltd. In the initial stages, it was alleged that the entire amount of 98 crore was received but a lion's share of the amount thus received were siphoned out to fraudulent accounts controlled by Mr. Pinarayi Vijayan. It was also claimed that the consultant company was a 'dummy' entity set up by Vijayan's henchmen for the purpose. Later, when it turned out that this was not the case and that only Rs. 8.98 Crore were received, the allegations took a different turn. Thereafter, the charge was that Lavalin had indeed collected Rs. 98 crore as promised, but only 8.98 crore was paid to the consultant company and the rest was left with Lavalin itself, out of which a potion was paid to Mr. Vijayan as 'commission'. It was even claimed that Mr. Vijayan had invested the crores siphoned out of the funds for MCC in a Singapore - based firm named 'Kamala International', 'Kamala' being the name of his wife, that Mr. Vijayan had constructed a palacial house that cost around one crore, and that the expenses for the studies of his children were borne out of the 'Lavalin fund', and so on. The basic questions were why had Lavalin stepped back from its promise to arrange Rs. 98 crore and what had happened to the balance amount, if Lavalin had actually collected the same, and why was the money routed through a third party instead of being directly credited to the bank account set up for the purpose.

The pro - Vijayan camp seems to have simple answers to these complicated - looking issues. To begin with, they point out that Technicaliya Consultants was the consultant company entrusted with the construction of the Cancer Centre. The firm had the prior experience of handling similar work, including the Pariyaram Medical College. If Technicaliya was a 'binami' of Mr, Vijayan, how is it that the UDF Govt. had given the contract for Pariyaram Hospital work to the same firm? Were they 'helping' Vijayan extract money from the State exchequer? Further, the grant from CIDA is never given as money, but only as services or equipment through the consultant agency. Hence, the funds were routed through Technicaliya only because they were the consultants in charge of construction of the Cancer Centre.

Another important fact that needs to be considered is that the agreement for Cancer Centre, even though considered as an element that played an important role in rendering the deal acceptable, was NOT exactly a part of the renovation project deal. The minutes of the meetings held during the visit of the delegation indicate that the proposal for the Cancer Centre was first raised during a meeting held for reviewing the progress of the Kuttyadi project which was implemented by Lavalin itself under a similar MoU and Contract signed during the regime of the previous UDF Govt. Thus, it can't be argued that the MCC deal should have been made a part of the Agreement for the renovation project.

Regarding the funds, it is argued that if Lavalin didn't give the promised amount, it was because the UDF Govt. didn't take any interest in getting them to continue the assistance. The arrangement for funds was agreed vide an MoU which was an initial arrangement only. It should have been converted to a formal agreement or renewed from time to time till the final agreement was entered into. However, the UDF Govt. didn't bother to do either of these. Instead, it allowed the MoU to become lapsed by not renewing it after March 2002, that too, without specifying any reason. In the absence of a formal agreement, once the MoU was expired, there was no reason why Lavalin should continue to arrange the funds. Still, they had written to the Chief Minister (Mr. A. K. Antony) expressing willingness to continue the assistance provided the MoU was converted into a proper agreement or at least renewed, and had requested a 'letter of appreciation' for the work that was already done. (This was necessitated because Lavalin was facing problems in collecting the funds due to the bad impression caused by the allegations raised against the utilization of the funds already collected.) However, even after Lavalin's request, the UDF Govt. sat idle, showing no interest whatsoever in obtaining the balance amount. It was this criminal negligence on the part of the Chief Minister and the Minister for Electricity that resulted in Lavalin stopping further payments. The pro - Vijayan camp even raises a counter - allegation that the UDF Govt. purposefully allowed the MoU to lapse so that they can fix the blame on Mr. Vijayan for non - receipt of funds.

Further, the allegations in the name of 'Kamala International' is nothing but baseless, because there is no such firm existing in Singapore as per the Singapore Govt.'s database of commercial establishments. (If not, is it that the opponents believe that Mr. Vijayan was powerful enough to influence even the Singapore Govt. and manipulate its official database?) And the charges of amassing disproportionate assets (including the fictitious 'palace') were written off by the Income Tax Dept. itself, says the Vijayan camp. Moreover, there are records available to prove that expenses of his children's education and the renovation of his house were borne through loans from banks.

8. Losses due to faulty equipment and services not provided: In the Consultancy Contracts, there was a provision for technology transfer (i.e., providing the detailed information to the Board's engineers regarding the modern technology used in the equipment that were imported from Canada) and imparting technical training to the Board's engineers. These services were to be provided by Lavalin at its offices and facilities in Canada and at construction sites. However, this was not done, leaving the Board's engineers helpless in case of failures of the machinery. Moreover, some critical components supplied and installed by Lavalin were found to be faulty, causing unwarranted delays in completing the project. In the absence of technology transfer and technical training, the Board's engineers were unable to assess the quality and suitability of the imported equipment and components, resulting in losses to the Board. Also, the imported turbines supplied & installed by Lavalin did not match the technical specifications mentioned in the Contract. Using these out of specification equipment caused serious problems to the machinery. Even though the equipment and components were covered by warranty and Lavalin was bound to replace the same free of cost, the Board didn't bother to get them replaced, and instead, tried to use the same after repeated repairs, causing unwarranted expenses, more delays and loss of production. These problems resulted in the Board incurring huge losses, according to the CAG.

In the light of the non - availability of promised services and the losses incurred due to faulty components, wasn't the government duty - bound to initiate necessary action to recover the costs from Lavalin? The Govt. could even have withheld the payment of dues to Lavalin. However, in spite of these factors, the Govt. released the entire amount of pending payments to Lavalin in March 2005. If the claim that the 370 - odd crores spent on the project was wasted (because the renovation failed to achieve its purpose), why didn't the UDF Govt. take Lavalin to task? Couldn't they have recovered the losses (and may be even compensation) from the company? Then, why, on the contrary, the Govt. release the full payment dues, being fully aware that the supplier had failed to provide what they had agreed in the Contracts? Did Mr. Kadavoor Sivadasan, the minister for electricity when the payments were released, have any 'special interest' in 'awarding' public money to Lavalin for causing loss of production? Moreover, the Govt., in a written reply to a question raised in the floor of the State Assembly, stated that the pending dues were cleared after ensuring that the renovation work had achieved all the intended targets satisfactorily. Was the loss of production and the wastage of 374 crores the 'intended targets' that were achieved? If not, isn't Mr. Aryadan Mohammed, the minister who gave the aforesaid reply, guilty of deliberately misleading the Assembly and the public? If the CBI has charged Mr. Vijayan of 'misleading the Cabinet' even though nobody has complained of being misled, why did it not do the same to Mr. Aryadan Mohammed for misleading the Assembly and the public?

9. The 'Political Motive' angle: While the biggest allegation against Mr. Vijayan and the LDF Govt. is regarding the Cancer Centre project and the arrangement of funds for the same, the biggest counter - allegation raised by the supporters of Mr. Vijayan and his Party is that the case against Mr. Vijayan is 'fabricated' by the Congress - led UPA Govt. purely for political reasons. It is alleged that the Congress is trying to utilize the CBI to take revenge on CPI (M) for withdrawing support to the UPA Govt. causing considerable 'headache' to the coalition Govt. It is also claimed that the case is being activated now with eyes well set on the impending elections wherein the Congress and its Kerala allies want to utilize the case to gain political mileage by projecting CPI (M) as being involved in the biggest corruption in the history of the state. The allegations against Mr. Vijayan is not actually against Mr. Vijayan the person but against Vijayan who is the State Secretary of the CPI (M). They also raise a series of arguments in favour of this allegation, the major one being the timing - just three - four months before the general election. The political motive was evident right from the beginning, they claim. The UDF Govt. first initiated the vigilance probe to divert public attention from the notorious police firing on tribal settlers, killing a youth named Jogi in Muthanga. More than diverting the public attention, the Govt. had expected that it can pressurize the vigilance to implicate Mr. Pinarayi Vijayan in the case. It was because of this expectation that the Govt. delayed the vigilance probe for three years (because there was no major election in between!) and even opposed the demand for a CBI probe in the High Court. However, when it finally turned out that Vigilance couldn't find any evidence against Mr. Vijayan, the Govt. performed a clean 'volte face' and called for CBI probe, that too, exactly on the day Assembly election was notified. Moreover, the Govt. also tried to 'punish' the Vigilance Director for not giving in to the political pressure by removing him from his post. (That the move was stalled by the Election Commission is another matter.) The CBI was initially reluctant to investigate a case that was already probed by the State Vigilance. However, a series of public interest petitions saw the High Court ordering the CBI to take up the case. Even after the CBI started the probe, the investigation, similar to the Vigilance probe earlier, proceeded at snail's pace, with just four persons being questioned in the one and a half year period. This delay was aimed at keeping the issue alive so that the ruling front can cash in on the case in the impending election. This deliberate delay was so evident that even the High Court itself was forced to ask whether the CBI was waiting for the next election...! If even the Court felt that CBI was playing politics, it needs no more expertise to understand the political games being played in the case. And finally, the CBI has delayed the case to the maximum possible extent to make it as close as possible to the forthcoming elections. It was only because of the Court - appointed deadline that the CBI was forced to wind up the case now. Had the Court not intervened, they would certainly have gone on, setting the stage for the Congress and its allies to play another round of political gimmick at the time of the elections.

The pro - Vijayan camp doesn't stop here. They go even further, listing out a series of cases wherein CBI's status as a pawn in the political warfare was more than evident, like the 'Taj corridor' case against Mayawati and the disproportionate assets case against Mulayam Singh Yadav (wherein the CBI tried to change its stance after the 'political circus' that saw Mr. Yadav's Samajvadi Party offering support to the UPA Govt. in the nuclear deal issue, prompting even the Supreme Court to warn CBI against changing its stance in accordance with the political interests of the ruling party).

Countering these allegations, the Congress and its allies argue that there was no political motive in the case, and that everything was done in adherence with the law. The vigilance probe was ordered as recommended by the Assembly Subject Committee of which Mr. Kodiyeri Balakrishnan, present Home Minister, himself was a member. If the vigilance probe was politically motivated, did Mr. Kodiyeri Balakrishnan also had 'political motive' when the Committee which included him recommended vigilance probe? Further, they argue that CBI probe was decided as per the recommendation in the Vigilance report that further enquiry is needed in the case, and that CBI enquiry was initiated not by the Govt., but by the High Court, acting on Public Interest petitions. And finally, it was the Court itself that decided on the Jan.23 deadline for CBI to submit its report, goes the claim.

These claims are countered by Mr. Vijayan and his Party, claiming that Mr. Kodiyeri Balakrishnan hadn't asked for any specific probe, and that he was not given a chance to record his objection to the Subject Committee's recommendation. Also, why did vigilance take three years to complete its enquiry into some activities that were completed in less than six years? And why did the Govt. attempt to unseat the Vigilance Director within a few days after Vigilance submitted its report? And why did CBI take one and a half years to interrogate just four persons during the probe? And how come that the same CBI could complete the probe within just four months thereafter? And how is it that some pro - UDF newspapers reported that Mr. Vijayan will be the ninth accused in the case much before CBI submitted its 'confidential' report to the Court and requested the Governor for permission for prosecution? Is it that CBI was 'leaking' out sensitive information to media that is politically favourable to the ruling party? Or is it that the CBI's framework is so weak that even a local newspaper can get 'confidential' information contained in the enquiry reports? And, all said, is it by mere coincidence that all major developments in the Lavalin case has taken place when the state is on the verge of major elections or when the ruling front is facing troubles in the political front? (Vigilance probe was ordered when the Muthanga firing issue was burning hot, Vigilance submitted its report just two months before Assembly elections, Govt. decided for CBI probe exactly on the day election was notified, and CBI submits its report as close as possible to the announcement of Parliament elections... Were all these just 'accidental coincidence'?)


In this section, the last section of this article, I would like to conduct a cross - examination of the arguments presented above, evaluating the credibility and acceptability of the arguments and counter - points.


As described above, the allegations raised against the LDF Govt.'s actions (during Pinarayi Vijayan's Tenure) are that (i) Global tenders were not invited before signing Supply Contract, (ii) the delegation led by Mr. Vijayan didn't consider that Lavalin was not manufacturer of equipment, (iii) undue haste in signing the contract, without verifying the reasonableness of prices and (iv) non - avoidance of superfluous elements from the Consultancy charges.

Examining the facts presented, it becomes evident that there was no chance for inviting tenders once the it was agreed (vide the MoU) that financial assistance will be arranged from a particular country. If any change was to be made, it would have been necessary to cancel the MoU. Moreover, since the Consultancy Contracts were also in place before entering into Supply Contracts, a cancellation could have had legal implications that the Govt. couldn't afford. Thus, it follows that the only possible point when tenders could be invited was before entering into MoU. It being so, the allegation against the LDF Govt. doesn't stand. Whereas on the other hand, the same allegation does hold against the UDF Govt. which signed the MoU as well as Consultancy Contracts without any kind of tender whatsoever.

Now, considering the second charge: the argument in favour of Mr. Vijayan seems convincing. Since there is no requirement - legal or otherwise - that a supply contract shall be negotiated only with the original manufacturers, the allegation that Lavalin's status as consultant / supplier as against its status as not the original manufacturer doesn't hold. As per the usual trade practice, Supply Contracts are almost always negotiated with suppliers only.Moreover, what Mr. Vijayan did was just to follow the precedent set by the previous UDF Govt. in the Kuttyadi project.

Moving over to charge No. 3: It appears from the facts and figures available that there is some truth in the allegation. However, considering the fact that the state, at that time, was facing acute shortage of power that had almost crippled the agricultural and industrial growth as well as unsettled the life of the people, and the government had vowed to take all possible measures to improve the situation, the 'haste' in which the agreements were reached seems justifiable. Also, there is no evidence indicating that the prices quoted would have turned out unreasonable. It being so, and considering the fact that had the government kept away from finalizing the deal, it would have resulted in delaying the project further without any guaranteed gains, the Govt.'s move may be deemed justifiable. (Another facet of the case is that had the Government kept away from striking the deal and it later turned out that the rates quoted were indeed reasonable, it is possible that the Govt.'s action could have invited even stronger criticism - that the unwanted delay caused by the Govt.'s postponement of the deal resulted in heavy losses that could have been avoided in the agricultural, industrial and economic sectors. It is even possible that the CAG himself might have taken objection to the 'avoidable delay' and the resultant losses had such a scenario arisen. In short, the issue was a 'double - edged sword', and it seems that the Govt. decided to accept the more justifiable one in the larger interest of the people.)

This leads us to the only charge remaining - that the Consultancy Charges rendered redundant by the promotion of SNC from Consultant to Principal Supply Contractor were not deducted from the total consultancy charges. This criticism appears reasonable because once Lavalin became the supplier, there was no need of any 'consultancy' for supply. Thus, Mr. Vijayan can, at least theoretically, be accused of being responsible for this loss. However, the fault on the Govt.'s (Vijayn's?) side in this regard seems pardonable, considering the fact that the marginal loss (Rs. 17.89 Crore) incurred due to the failure to reduce consultancy charges for services not availed is more than offset by the gains achieved by reducing the scope of using imported materials and the negotiated reduction in Consultancy Charges. Moreover, the larger gain of Rs. 52 crore in the form of increase of 'complementary grant' from Rs. 46 Crore to Rs. 98 Crore for the Cancer Centre also adds up in favour of the Govt., thereby rendering the fault even more negligible compared to the gains.


Moving over to the charges levelled by the CBI against Mr. Vijayan, it can be observed as follows:

Considering the facts that SNC Lavalin was introduced into the renovation project by way of an MoU and that the same Lavalin was awarded the Consultancy Contract, both of which happened before Mr. Pinarayi Vijayan assumed Office of the Minister of Electricity, the CBI's case that Mr. Vijayan indulged in 'criminal conspiracy' to award the contract to Lavalin stands on shaky grounds. It doesn't make sense to argue that conspiracy was involved in awarding the Supply Contract only and not in bringing the company into the project (through an MoU without inviting any tender or even Letter of Intent) and later awarding Consultancy Contract to the same company. On the other hand, if would be even more hilarious to argue that when the conspiracy was hatched by the Board officials (the other accused), the minister at that time was not involved and Mr. Vijayan alone got himself involved after the Consultancy Contracts were in firmly place, only to award Supply Contract. If introduction of Lavalin by one minister was not part of any conspiracy, how can it be argued that awarding the Contract by another minister to the same party was out of conspiracy? Moreover, fact also remains that the practice of awarding Supply Contract to the Consultant itself also was already existing, as observed in the Kuttyadi Project, the Consultancy as well as Supply Contracts were awarded to the same company, Lavalin. If Supply Contract to Lavalin was the result of conspiracy, why is it that the same charge is not levelled in the Kuttyadi project as well?

Charge No. 2 - Misuse of power - also doesn't seem to hold much water, since it is not uncommon that some officials may raise objection to some decisions taken by the Govt., and the Govt. over - riding such opposition can't be treated as 'misuse of power' except if the decision in question was outright illegal. Otherwise, the Govt. can be accused of 'misuse of power' in almost every decision, because there can be some officials who are opposed to the decision.

The charge that concurrence of the CEA was not obtained for the project seems to be born out of a distorted interpretation of the law. The charge is based on the Section 29(1) of The Electricity (Supply) Act, 1948 which specifies that any project that involves estimated capital expenses exceeding a pre - defined limit must be submitted to the Central Electricity Authority for concurrence at the earliest after the project is prepared. The instant case involves renovation of three projects. The CBI's argument is that since the renovation proposal for these projects were granted by the Govt. as a 'package', they should have been treated as a single unit the estimated cost of which was Rs. 169 Crores, and hence the proposal must have been submitted to the CEA for its approval. However, it is evident from the records and evidence that even though the renovation was taken up as one batch, these projects were treated as individual entities throughout the renovation scheme. If the project was treated as a single unit, there was no need of three individual Consultancy Contracts - a single agreement covering all three would have been sufficient. It being so, to argue that since the projects were granted together by the Government, they should be treated as one is distorting the facts to suit the pre-meditated interpretation of rules instead of interpreting the applicability of the rules based on relevant facts.

Moreover, even if the distorted interpretation is accepted, fact still remains that, as set out in the law, concurrence from CEA must have been sought immediately after the estimate of the project (composite) was prepared. From the fact that the estimated cost of machinery and components to be imported was mentioned in the Consultancy Contracts, it is evident that the estimate was known already known. Hence, it follows that the Board must have approached CEA at that time itself, and not at the last moment, before signing the Supply Contracts. Thus, under either interpretation of the law, it is evident that Mr. Vijayan can't be held accountable for the alleged offence. Even if the 'composite project' argument is accepted, only the Bord's officials could be charged with the offence. And if the minister had to be held responsible for the Board's fault, it was Mr. G. Karthikeyan, the minister at the time when estimate for the 'composite project' was prepared, who should have been booked.

Now, moving over to the next charge, CBI presents a peculiar situation wherein the Government allegedly overlooked the recommendations made by a committee appointed by the Government itself. The CBI claims that by proceeding with the renovation project, the Govt. had completely overlooked the recommendations made by the 'Balanandan Committee'. By side - stepping the recommendations that renovation of the plants was not necessary at all and that only repairs and improvements were enough and that too could have been given to Indian public sector companies like BHEL at considerably lower costs, Mr. Vijayan (who led the high - level delegation that negotiated and finalized the Supply Contracts) had caused heavy loss to the State exchequer, says CBI.

This allegation is prima facie serious enough to book Mr. Vijayan for causing financial loss to the Govt. However, an in - depth review gives away gaping holes in the apparently 'water - tight' case. To begin with, defence point out that the PSP renovation project was not among the terms of reference of the Balanandan Committee. It being so, the observations the Committee had made on the project can't be treated as 'recommendations', but as 'retrospective remarks' only. Even if these 'recommendations' were to be taken into consideration, it can be seen that the first part of the recommendations (that renovation was not necessary) was in agreement with the recommendation of the CEA, the culprit in the offence of over - riding which is the Board (and the UDF Govt.) who initiated the renovation proceedings through the MoU and the subsequent Consultancy Contracts. Further, the second part of the Committee's recommendation (that there was no need of roping Lavalin when Indian companies were competent enough) also is a direct accusation against Mr. G. Karthikeyan, the former minister who roped in Lavalin through MoU route and awarded the Contracts.

Further, it must be noted that even if the Government wanted to accept the Committee's recommendations, it was too late. By the time the Committee submitted its recommendations, the proceedings of the renovation project had reached a very advanced stage from where the Govt. couldn't have even thought of going back, risking legal consequences and possible loss of crores of rupees in compensation and legal expenses that Lavalin could have sought as per the relevant clauses under the Consultancy Contracts. Thus, it turns out that the allegation of 'overlooking Balanandan Committee' is a misplaced as well as misdirected, and hence doesn't hold. Moving further down the list of charges, it is observed that the CBI has accused Mr. Vijayan of misleading the Cabinet about the deal, thereby bringing the Cancer Centre under his the electricity Department instead of Health Dept. In support of this claim, CBI points out that the Cabinet Note didn't mention all facts aspects of the deal with respect to the Cancer Centre. However, this allegation doesn't stand even the simplest counter - point. It seems that the CBI is either unaware of or has deliberately overlooked even the basic concept of a Cabinet Note, which is only a brief note indicating the matters to be discussed in the Cabinet meeting, the details of which will be available in the files that come up in front of the Cabinet during the meeting. Thus, it makes no sense to argue that all aspects were not mentioned in the note. Moreover, the allegation of 'misleading' can be raised only by the affected party - i.e., the person(s) who was (were) misled - and not by an 'outsider' unless he was fully aware of all communication that took place between the accused and the affected and was sure that the (supposedly) affected party was not already aware of the facts involved. In the instant case, there is no evidence to show that the CBI had interrogated any of the ministers or the Chief Secretary who were the only people present in the Cabinet meeting, none of whom had raised any complaint of being misled either by hiding or by distorting the facts. Hence, the CBI's charge against Mr. Vijayan falls apart.

Moving further ahead in the Cancer Centre issue, the most serious charge levelled against Mr. Vijayan is that by not entering into a proper, legally binding agreement for arranging funds, he helped Lavalin to cheat the State by not keeping its promise. It is further alleged that the MoU which had no legal validity was only a 'smoke screen' to divert funds in the name of Cancer Centre. This allegation does have an apparently strong basis - that proper agreement / contract was not set up for the arrangement of funds for the Cancer Centre and that only a small fraction of the promised assistance was actually received. However, the explanation given by the defence also seems strong enough to withstand the allegation because available records and other evidence indicate that the Govt. had taken all possible steps to ensure that funds were made available for the work of the Cancer Centre in spite of the absence of a proper agreement and there was no intention on the part of Lavalin or Mr. Vijayan to divert the funds. Moreover, the reason for not being able to finalize a 'binding agreement', as explained by the defence, also seems acceptable because records indicate that Lavalin had sent a 'draft agreement' which the Govt. didn't accept due to objection over the offer for arrangement of funds which was not a legally enforceable 'solid assurance' but a 'soft promise' only. Moreover, it is an undeniable fact that many countries including Canada had stopped cooperation with (and financial aid to) India in the wake of the nuclear tests. Given this scenario, it would have been quite unreasonable to expect that a proper agreement could have been executed immediately.

On the other hand, the counter - allegation raised by the defence against the UDF Govt. seems to be more serious. As pointed out by the CAG, the MoU based on which Lavalin had made funds available and was renewed from time to time by the LDF Govt. was not renewed after March 2002 by the UDF Govt., that too, without specifying any reason whatsoever. Making things even worse, the Govt. didn't take any action to re - activate the MoU or convert it into an agreement even after Lavalin itself had sent written requests to the Chief Minister in this regard a few months before and after the MoU had expired. Thus, it follows that the responsibility for the loss of the Rs. 89 Crore promised grant falls on the UDF Govt. rather than Mr. Vijayan and the LDF Govt. The callousness shown by the UDF Govt. in the matter is so serious that even th rather far - fetched allegation that the UDF Govt. purposefully allowed the MoU to lapse so that they can blame the loss on Mr. Vijayan seems plausible.

Moving further to the next item among the 'charges': The CBI claims that Mr. Vijayan had 'special interest' for setting up Malabar Cancer Centre in his home district and that he accorded undue favours to Lavalin to achieve his goal. This is undoubtably the weakest link in the CBI's case against Mr. Vijayan. It is a globally accepted concept that in democracy, people elect their representatives with the hope that the person they elect will strive his best to serve them in every possible way and bring them the amenities they need. Nobody in his proper senses would ever argue that a hospital is not such a facility that serves the public. It being so, to claim that an MLA showed 'special interest' to set up a hospital in his locality and to blame him for that 'interest' defies all logic. If at all anything, such a claim would be the best accolade a people's representative can win.

Further, even though CBI has claimed that Mr. Vijayan showered 'undue favours' on Lavalin, they haven't elaborated on what those favours were. From the facts, records and other evidence available, it can be seen that whatever Mr. Vijayan had done was either following the precedent set by his predecessor in the Office, Mr. G. Karthikeyan, or was unfavourable to Lavalin (like negotiating the prices and consultancy charges and asking for more assistance for the Cancer Centre etc). From these observations, it is evident that the CBI's allegations in this direction end up a lamentable failure. From the above observations, facts and figures, the only logical conclusion possible is that Mr. Vijayan had indulged in no 'illegal actions' as claimed by the CBI. Hence, it follows that the responsibility for the alleged losses amounting to Rs. 86 Crore lies on some of the Board officials and much more on the UDF Govt. that initiated the proceedings in the renovation project.


Before winding up the examination of the issue, I would like to take a look at the counter - allegations raised by Mr. Vijayan's supporters and Party, because the inspection of the issue will not be complete without considering the counter - allegations as well.

An in - depth review of the CAG's report and facts and figures known from other sources regarding the Pallivasal - Senkulam - Panniyar Rehabilitation project reveals that:

• There were numerous irregularities in the formation and proceedings of the project right from the beginning. To start with, the Board, during the UDF Govt.'s regime, side - stepped the Central Electricity Authority's recommendations about the projects and the Board's own plans.

• Secondly, as pointed out by the CAG, the Board didn't conduct a feasibility study of the project before deciding on the renovation and signing the MoU. Instead, the Board tried to fabricate a 'post facto' justification, that too, by employing a retired Chief Engineer who later turned out to be a consultant to the contract - winner company itself, thereby sacrificing the interests of the Board.

• The UDF Govt. had roped in SNC Lavalin from Canada though an MoU, without allowing for a fair competition that could have reaped benefits for the State. Once the MoU was signed, agreeing to accept financial aid from Canada, it effectively sealed the possibility for inviting tenders except from parties in Canada.

• The entire deal was treated as if it were the 'property' of a section of the Board Members. The full Board was kept in the dark about the decision for renovation, the MoU and even the Consultancy Contract. In other words, there was deliberate and successful attempt to mislead at least some members of the Board.

The charges levelled by the supporters of Mr. Vijayan in the above issues stands vindicated in the light of the findings of the Comptroller and Auditor General and needs no further elaboration.

• Looking further, it can be observed that, as indicated by the CBI itself, the 'MoU Route' was effectively banned by the Central Government following allegatgions that the system opens up numerous chances for large - scale corruption. Even after the ban that came into effect as early as Feb. 1995, the UDF Government disregarded the Centre's directives and went ahead to sign the MoU and subsequently, the Consultancy Contracts. Thus, it becomes evident that it was this unilateral decision by the UDF Government that paved the way for the alleged corruption in the whole deal.

• On the Cancer Centre issue, the counter - allegation from the pro - Vijayan camp that it was the UDF Govt.'s failure to renew the MoU or convert it into a full - fledged agreement that resulted in Lavalin refusing to provide assistance as promised can be believed to be true, considering the fact that the MoU was not renewed after March 2002, and the Govt. hadn't specified any reason for this serious lapse. The fact that this inaction was despite Lavalin's repeated written requests make the failure even more serious.

• Further, the detailed observations recorded by the CAG indicate that the Board (and hence the State) incurred huge losses due to failure on Lavalin's part to provide proper services and supply of proper quality equipment and components as promised in the Contract. Under these circumstances, the Govt. was duty - bound to initiate corrective measures including withholding of payments and legal proceedings to make good the losses thus incurred. However, records show that the UDF Govt. overlooked these facts and released full balance payment to Lavalin, thereby compounding losses to the exchequer. It may also be noted that almost ALL payments to Lavalin were made during the UDF Govt.'s period, and not a single rupee during Mr. Vijayan's tenure. (He had stepped down by the time the project became effective in Sept. 1998)

From the above observations, it is pretty clear that almost all, if not the entire, irregularities and illegal activities in the duration of the project were during the UDF Govt.'s regime, under Mr. G. Karthikeyan and Mr. Kadavoor Sivadasan. Yet, the Vigilance and the CBI seem to have deliberately overlooked these facts, and isolated Mr. Pinarayi Vijayan to bear all the blame. Moreover, as rightly pointed out by CPI (M) and supporters of Mr. Vijayan, it can also be observed that most of the major proceedings in the case took place in coincidence with major elections or other major political developments in the state - a fact that can't be ignored as a mere concidence. Thus, it can be fairly concluded that the claims by CPI (M) and the supporters of Mr. Pinarayi Vijayan that the proceedings in the case are the outcome of a large - scale 'political conspiracy' stands vindicated.


Note: This article was completed on 03 Feb. 2009 and modified later on 14 Feb. 2009.

~ വിജി പിണറായി ~
~ Viji Pinarayi ~

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