A Special CBI court in Rajasthan’s Jodhpur district has ordered the registration of a criminal case against former Union Minister Arun Shourie, retired IAS officer Pradip Baijal, and three others, after finding that offences including criminal conspiracy and cheating were prima facie proved against them in relation to the sale of a luxury hotel in Rajasthan in 2002.
Shourie, who was Disinvestment Minister at the time of the sale, was not named in the FIR registered by the CBI in the matter in August 2014. In its final report, CBI said there was not enough evidence to launch prosecution in the process of disinvestment of M/s Laxmi Vilas Palace Hotel (LVPH), Udaipur.
Also, no evidence has emerged to establish an association between the management of M/s Bharat Hotels Ltd (one of the accused), the asset valuer, the advisor, or senior public servants, the CBI said.
What is the role of Arun Shourie, according to the CBI?
There is no mention of Shourie in the FIR registered by the CBI on August 13, 2014. The FIR named Baijal, who was Secretary of the Disinvestment Department at the time of the sale; Ashish Guha of the New Delhi-based financial advisory firm Lzard India Ltd, which was financial advisor to the government at the time; asset valuer Kantilal Karamsey Vikamsey of Kanti Karamsey & Co.; and New Delhi-based Bharat Hotels, through its authorised representative and other unknown government officers/officials and private persons.
It was alleged in the FIR that LVPH was sold to M/s Bharat Hotels Ltd. for a paltry Rs 7.52 crore, resulting in wrongful loss of Rs 143.48 crore to the government, and wrongful gains to the accused individually/jointly. The FIR was registered under Section 120B (criminal conspiracy) read with Section 420 (cheating) of the IPC, and Section 13(2) read with Section 13(1)(d) of The Prevention of Corruption Act, 1988.
When did the sale of Laxmi Vilas Palace Hotel take place?
The CBI found that on February 8, 2001, the Government of India issued an expression for restructuring/disinvestment for hotel properties of ITDC, including M/s LVPH. Fifteen parties submitted requests for qualification (RFQ) for disinvestment of M/s LVPH. Only one party, M/s Bharat Hotels Ltd. submitted a financial bid for purchase of 99.97% paid up equity in Udaipur Hotels Pvt. Ltd. for a sum of Rs 7.52 crore. LVPH, Udaipur was sold to Bharat Hotels Ltd, New Delhi on January 24, 2002 for that price.
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What did the CBI say in its final report?
During investigation, CBI found that the valuation report of the property in question was prepared by Kantilal Karamsey Vikamsey, proprietor of M/s Kanti Karamsey and Co. after inspecting the property on October 10, 2001. The valuation was submitted to M/s Lazard India, the financial adviser, who analysed and submitted it to the Secretary, Department of Disinvestment, while the process of inviting bids was still underway. The valuer said that though the land rate as per the government varied from Rs 500 to Rs 1,000, it was being considered at Rs 45 per sq foot for freehold land.
The reasons cited by the valuer for the undervaluation were that the land fell under Red Zone, i.e., no development zone; it was within 500 m of the lake; and a high transmission line passed through the northern and western ends of the property. The conclusion reached by the asset valuer, that no construction could be done on the land as it fell in the Red Zone, was based on oral information.
Considering all these factors, the valuer concluded that the fair depreciated market value of the said property was Rs 7.85 crore as on the date of valuation, October 8, 2001. The total freehold area of the land was found to be 9,30,204 square feet.
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What prosecutable evidence did the CBI find against Shourie or others?
It found none. The CBI in its final report said no irregularity had come to light regarding the appointment of M/s Lazard India Pvt Ltd as financial adviser by the ministerial task force. No irregularity was found in the selection of M/s Kanti Karamsey & Company, Mumbai, as Asset Valuer, either.
The CBI final report said that no evidence had emerged to prove an association between the management of M/s Bharat Hotels Ltd., the Asset Valuer, the Advisor or the senior public servants.
The CBI investigation pointed out that the asset of M/s LVPH was undervalued by the valuer M/s Kanti Karamsey & Co., but there was no evidence to establish that it was done with an ulterior motive to facilitate fixing of a lower reserve price.
The reserve price was decided by the adviser and experts selected after a transparent process. Their recommendation was examined by an inter-ministerial evaluation committee, inter-ministerial group, core group of secretaries on disinvestment, and finally approved by the Cabinet Committee on Disinvestment, the CBI said in the closure report.
The report said that it was found that M/s Kanti Karamsey & Co. had failed to do a proper valuation of the asset of M/s LVPH, for which the matter was being referred to the Department of Investment and Public Asset Management of the Finance Ministry.
The CBI concluded in the closure report submitted to the court that evidence worth launching prosecution had not been found in the entire process of disinvestment of the hotel.
What has the court said?
The special CBI court of judge Pooran Kumar Sharma rejected the CBI’s closure report and said that offences under IPC Section 120B read with Section 420, as well as Sections of the Prevention of Corruption Act had been prima facie proved against Shourie and the others.
The court observed that the investigating officer had accepted in the probe that Laxmi Vilas Hotel was undervalued, and he should have presented a chargesheet. The court has ordered that a criminal case be registered against Shourie and the others. It has also summoned the accused via arrest warrants.
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