Acceptance of conditional bank guarantee for Rs 40 cr worth work
Undue favour extended to contractor at cost of exchequer
JAMMU, May 14: Taking serious note of major illegality committed to confer undue benefit upon a blue-eyed contractor and jeopardize the interests of the organization, Chief Executive Officer (CEO) of Jammu and Kashmir Economic Reconstruction Agency (ERA) has written to the Principal Secretary to Government Finance Department for initiating penal action against Mohammad Yousuf Pandith, the then Director Finance J&K ERA and presently Director General Accounts and Treasuries.
Official sources told EXCELSIOR that several years back the work for construction of surface water drainage system in Athwajan catchment on National Highway Bypass at Srinagar was allotted in favour of M/s Abhiram Infrastructure Pvt Ltd at the original cost of Rs 40.40 crore.
Accordingly, a bank guarantee for Rs 4.04 crore—10% of the contract value was provided by the contractor drawn by the Karnataka Bank Ltd, Banjara Hills Hyderabad in favour of J&K ERA. The date of issuance of the bank guarantee was August 2, 2013 and its date of expiry was August 1, 2017.
However, M/s Abhiram Infrastructure Pvt Ltd could not meet contractual obligations during the execution of the contract agreement and the work was in part carried out through the sub-contractors nominated by the principal contractor, sources said while disclosing that the work progressed at very slow pace and during the process the validity of the bank guarantee was nearing to get expired by August 1, 2017.
In the meanwhile, the contractor got the fresh bank guarantee for the same amount of Rs 4.04 crore but through Syndicate Bank, Somajiguda Hyderabad and the original bank guarantee issued by Karnataka Bank Limited was released back to the bank.
As per the Contract Act, the bank guarantees should be unconditional guarantees by the bank to the beneficiary (buyer/principal) undertaking to pay the sum specified in the guarantee on demand without demur. Moreover, as per the General Contract Conditions, the performance securities to be furnished by the contractors for all the contracts being executed by J&K ERA are to be unconditional and without any addition/alternation, sources informed.
However, in blatant violation of the Contract Act and General Contract Conditions, Mohammad Yousuf Pandith, the then Director Finance in J&K ERA (presently Director General Accounts and Treasuries), accepted the conditional bank guarantee with the mention that payments for the works executed shall be routed through the bank in the account of the contractor M/s Abhiram Infrastructure Private Ltd, sources disclosed.
Moreover, the conditional bank guarantee was accepted by the then Director Finance despite being aware of the fact that principal contractor was not executing the works as per contractual obligations and the payments were being made by J&K ERA directly to the sub-contractors nominated by the principal contractor. “Due to this the condition imposed in the bank guarantee could not be fulfilled”, sources said.
As the pace of the construction by the sub-contractors was very slow, the ERA under clause 15.2 of General Contract Conditions terminated the contract vide Order No.ERA/PM/HYD/11/18/5576-84 dated December 22, 2018. Accordingly, Syndicate Bank was approached for encashment of Rs 4.04 crore bank guarantee, which was however, refused in view of condition mentioned in the guarantee and accepted by the then Director Finance ERA. Even the attempt to seek intervention of Reserve Bank of India failed to yield the desirable results.
Keeping in view the difficulties being faced by the ERA in encashment of bank guarantee, the Chief Executive Officer Dr Raghav Langer issued show cause notice to the then Director Finance Mohammad Yousuf Pandith (presently Director General Accounts and Treasuries) on February 28, 2019 mentioning that conditional bank guarantee was accepted to confer undue favour to the contractor, sources said.
The then Director Finance was asked to reply why conditional bank guarantee was accepted in violation of General Contract Conditions and others norms and why no timely remedial measures were suggested to get the condition removed from the bank guarantee. “No serious concern was shown to safeguard the interests of J&K ERA”, reads the show cause notice, the copy of which is available with EXCELSIOR.
“Though Mohammad Yousuf Pandith, Director General Accounts and Treasuries, was supposed to furnish reply within a period of 15 days but he preferred to ignore the show cause notice for the reasons best known to him”, sources said.
Few days back, the Chief Executive Officer J&K ERA conveyed the entire matter to the Principal Secretary to Government, Finance Department through a formal letter with the request to initiate penal action under Civil Services Rules against the officer for committing grave irregularity and causing huge loss to the ERA, sources said.
Even Principal Secretary to Government, Planning and Monitoring Department has been formally informed about the entire case. “Now, it is to be seen whether the Governor’s administration, which makes tall claims about fighting the menace of corruption with tooth and nail, takes any action against the officer or allow the file to gather dust”, sources remarked.