IN THE HIGH COURT OF JUDICATURE AT PATNA CWJC No.8980 of 2004 COUNCIL FOR PROTECTION OF PUBLIC RIGHTS AND WELFARE Versus THE UNION OF INDIA & ORS ----------- For the Petitioner : Mr. Mahendra Prasad Gupta, Advocate For the C. B. I : Mr. Bipin Kumar Sinha, Advocate For the Union of India : Mr. Anjani Kumar Sharan, ----- P R E S E N T Hon'ble the Chief Justice & Hon'ble Mr. Justice Kishore K. Mandal -------- Dated, the 19th August, 2008. This Public Interest Litigation is at the instance of Council for Protection of Public Rights and Welfare. The grievance raised in the writ petition concerns the implementation of Fertilizer Concession Scheme of the Government of India in the State of Bihar during the period 1994-1998. The petitioner alleges that there has been large scale fraud and bungling involving hundred of crores in the sale of de-controlled fertilizers during that period. The petitioner has sought for a direction to the Central Bureau of Investigation (for short „CBI‟) to investigate into this alleged fraud and bungling in Fertilizer Concession Scheme and recovery of the public money paid to suppliers, companies etc. 2. The matter has been hanging fire, for almost four years, before this Court. The orders have been passed by this Court - 2 - time and again directing the parties to file affidavits and counter affidavits. We do not deem it necessary to refer to the earlier orders as it would unnecessarily make our order bulky. Suffice, however, to say that no notification has been issued by the Central Government under section 5 of Delhi Special Police Establishment Act, 1946 (for short, „Act, 1946‟) entrusting the matter for investigation to the CBI. 3. As noted above, the alleged fertilizer scam relates to the period 1994 to 1998. This happened after the Government of India decontrolled the sale of fertilizers in 1992. The Ministry of Agriculture, Government of India issued a modified procedure for implementation of Fertilizer Concession Scheme on 7th September, 1994. The salient points of the scheme are: (i) Manufactures/ Importers were required to submit Proforma A, containing the details of sale/subsidy claimed, to the State Government with a copy to Joint Secretary, Department of Agriculture, New Delhi; (ii) On receipt of Proforma A, the State Government was to submit verification report in Proforma B; (iii) On the basis of Proforma B report, Department of Agriculture and Cooperative, New Delhi was to release 100% subsidy to the Manufacturers/ Importers. 4. The scheme also provided that on no account concession amount would be released to the Manufacturers/Importer without receipt of the report in Proforma B from the State - 3 - Government. In case of delay, the Department of Agriculture and Cooperative was to take special steps to get the report. The payment of sub-standard samples was to be withheld. 5. The Government of Bihar issued a circular on 27th July, 1994 providing therein the regulatory guidelines which included: (a) the distribution to be done by Cooperative Banks/PACKS/Biscoman Depots/Private sellers; (b) the distributors to maintain name and address of beneficiaries, quantity / cash memo details, complaints etc.; (c ) the District Agriculture Officer / Sub Divisional Agriculture Officer, Block Development Officers to inspect regularly sale centres; (d ) the District Agriculture Officer to compile sale of subsidized fertilizers in the district and to send utilization certificate every month to Joint Director/Director, Agriculture; and (e) the Director, Agriculture to furnish verification report to Agriculture Ministry, Government of India. 6. It is also an admitted position that the State Government recommended for CBI probe in the matter on 9th February, 2002 through the Department of Personnel and Training, Government of India. 7. The stand of Vigilance Investigation Bureau is that the CBI should probe and investigate the distribution and sale of the fertilizers for the period 1994 – 1998. The reasons therefor are : - 4 - (i) that, the entire subsidy amount belonged to the Government of India. Its major chunk (80%) was released as advance by the Government of India to the manufacturers / Importers without waiting for Bihar Government reports. Only 20% amount was cleared after the so called wrong certificates furnished by the State Agriculture Department; (ii) that, the possibility of siphoned off fertilizers having been smuggled to other states/ bordering countries cannot be ruled out; (iii) that, most of the manufacturers, some of whom are Public Sector Undertakings, are located out side the state of Bihar. Their role will be the main subject matter of enquiry/investigation. The PDIL and the CBI are better equipped to handle the same; (iv) that, CBI has the authority and is better equipped to scrutinize the conduct of Central Government officials in releasing 80% subsidy without waiting for State Government reports, the role of State Government officials for release of remaining 20% subsidy, the conduct of PDIL in giving clean chit to certain manufacturers etc. (v) that the scope and magnitude of the scam is of gigantic proportions. This may have happened in other states as well; (vi) that CBI has vast resources and expertise to investigate such scams. 8. CBI, however, thinks otherwise. CBI would submit that upon receipt of the request dated 9th February, 2002 from the - 5 - Government of Bihar, the matter was taken up and it was found that the matter did not merit CBI probe. The matter was again sent for examination by the CBI in October, 2002 as the State Vigilance Department, Government of Bihar was not making much headway. After re-examination of the matter, CBI obtained copies of the report of the Financial Management & Internal Resources Committee of Bihar Legislative Council, Report no. 2 (Civil) of C & AG for the State of Bihar, guidelines of Fertilizer concession scheme and certain other information from the Department of Fertilizers, Government of Bihar. The officials of CBI discussed the matter with the officials of the Department of Fertilizers. During the process of re-examination, CBI prepared two scrutiny reports dated 27th February, 2003 and 4th November, 2003. 9. In its scrutiny report dated 27th February, 2003, the CBI made the following recommendations: “On going through the reports available on records it transpires that during enquiry verification, nothing fruitful have been done collected so far to establish the prima-facie case against the suspect. Keeping in view the facts and circumstances discussed by the State Vigilance Department. Legislative Committee, Bihar, CBI Patna Branch and other officers if it is established that the manufacturers did not supply the fertilizers and submitted the inflated statement for subsidy claim and obtained the false certificate from Director of Agriculture and subsequently, the subsidy claim obtained from Department of Fertilizers and Department of Agriculture Cooperation, New Delhi. Then it can be a solid case with full proof. In view of the above, the matter is required to be inquired to prove the non-supply. To establish the above facts, it is proposed that a PE can be registered and during the inquiry, the verification of the supply of 2-3 manufacturers with unearth the facts of non-supply of - 6 - fertilizers. If the non-supply diversion of the fertilizers is proved during inquiry then Nos. of R.Cs can be registered Since Bihar State Vigilance Legislative Committee and Department of Agriculture have already enquired the matter. The suspect Govt. officials are also of the State Government of Bihar. On scrutiny of various reports and on interaction with the Department of Fertilizer, it appears that the matter is not a case of complicated nature to be investigated by CBI. Hence it is proposed that it can be investigated at the level of State Government of Bihar on the aforesaid line of action.” 10. In further scrutiny report dated 4th November, 2003, the CBI made its recommendations thus : “Keeping in view, the contention of Cabinet Vigilance Department, Bihar, Financial Management and Internal Resources. Committee of Bihar Legislative Council that State Vigilance Department of Bihar not to conduct an enquiry in the matter as it is roving in nature. The Department of Fertilizer is also not taking responsibility to provide us prima facie facts indicating the commission of an offence as this exercise is yet not done by the DOF. The DOF should take interest to conduct/verify some facts physically to ascertain the allegation rather than pass on the responsibility to CBI. On the other hand, the reason suggested by the Cabinet Vigilance and the Committee of Bihar Legislative Council for the CBI enquiry are baseless as the concerned authorities are not interested to enquire the matter which should be. In view of the facts disclosed during the discussion with PDIL and on scrutiny of the PDIL Reports and the ramifications in the instances of the corruption and also wastage of resources, we may decline that the case does not merit CBI probe. At this stage we should forward the matter saying that it has been re-examined by the CBI and the PDIL has not submitted the consolidated technical reports for all the companies. The PDIL has submitted the reports of the 5 companies and their reports indicate that there is no anomaly in the dispatch and sale of the quantity supplied by the companies in Bihar. Keeping in view the results of PDIL Reports received so far it appears that no case is made out and the case does not merit CBI probe.” - 7 - 11. The stand of the central government in not issuing notification under section 5 of the Act of 1946 is reflected from office memorandum dated 27th September, 2007. We deem it proper to reproduce the office memorandum as it is : “The undersigned is directed to refer to Department of Fertilizers O.M. No. 15011/3/2006-MPR dated 05.09.2007 on the above subject and to say that the request dated 09.02.2002 of the State Government of Bihar for CBI investigation into the matter relating to the claiming of subsidy from that Government by their fertilizer producing firms without distributing fertilizers to the farmers of the Bihar State was taken up with the CBI who had informed that the Bihar State Vigilance Bureau and the Ministry of Agriculture, Government of India were already looking into the said matter, and that the case did not appear to be of complicated nature and therefore, did not merit CBI probe. 2. Subsequently, on receipt of further request from the State Government in this regard, CBI‟s comments were sought. Apart from reiterating their earlier views, CBI intimated that in the meanwhile, the Department of Fertilizer had entrusted an inquiry to Projects and Development India Ltd. (PDIL), a public sector undertaking under them, to verify the quantities of fertilizers supplied by the suppliers. CBI had also informed this Department about the filing of a PIL in the Patna High Court in this matter. They apprised that a reply had been filed by the CBI in the High Court giving a detailed account of reasons for not taking up of the inquiry. On the basis of CBI‟s comments, a reply was accordingly sent to the State Government of Bihar vide letter No. 228/59/2006-AVD-II dated 3.1.2007 intimating that the case did not merit CBI probe. The State Government were also apprised that the Department of Fertilizers had also entrusted the enquiry to the PDIL. It was also informed that a reply had been filed by CBI in the High Court giving a detailed account of reasons for not taking up the enquiry. 3. A perusal of the Hon‟ble High Court order dated 31.8.2007 indicates the following facts. On 11.07.2007, time was taken by the counsel for the CBI from the - 8 - Court. The matter thereafter was listed on 19.7.2007. An affidavit was filed on behalf of the CBI disclosing the reasons for not investigating the case. The Hon‟ble High Court directed to submit an affidavit as to the reasons for not taking up the investigation of this case. A supplementary affidavit was filed by the CBI on 01.08.2007 stating that since the matter was already with the Vigilance Department of Government of Bihar, the CBI did not intend to investigate the case. 4. The Department of Fertilizers may also take note to the fact that the CBI has filed a counter affidavit in this case as well as a supplementary counter affidavit in the Hon‟ble High Court. The Counter Affidavit and the supplementary Counter Affidavit filed by the CBI in the Hon‟ble High Court indicate the following reasons regarding the case not meriting a CBI probe:- (a) The officials concerned who have issued verification certificates or who did not maintain records for verification of supply belong to Government of Bihar. As such, the appropriate and competent authority to investigate into the matter was the State Vigilance Department. (b) The verification so far conducted by PDIL did not reveal any irregularity on the part of five suppliers out of 23 suppliers who are purported to have withdrawn concession on account of false certificates. (c) The Vigilance Bureau, Government of Bihar had already advised the Commissioner, Agricultural Production, Govt. of Bihar for instituting Departmental inquiries against the erring Public Servants of Govt. of Bihar. Since, the matter involved State Government servants and State Vigilance Bureau was already seized of the matter, a de novo inquiry by CBI would not be necessary. (d) As per CAG report and interim inquiry report of the Vigilance Bureau of Bihar, the State Government officials did not maintain any records and did not carry out inspection of sale centres of the said fertilizer products which needs further scrutiny at District and Sub-divisional level which would be an onerous task for the CBI. (d) The scrutiny so far had not revealed involvement of Central Government officials or inter-state ramification which has been cited as a reason to entrust the case to CBI. (f) Secretary, Department of Agriculture, Government of India has submitted before the Hon‟ble High Court that there were no irregularities found in the report of PDIL in availing concession by the manufacturer by the State of - 9 - Bihar during 1994-98. In the said affidavit, it has further been prayed “that under the observations of the Hon‟ble High Court an ad hoc committee may be constituted for verification correctness of the sale of decontrolled fertilizer sold in Bihar during the period in question. The committee may have representative of the State of Bihar in the Chair and if required, this committee could seek technical inputs from PDIL.” 5. It has been reported by the CBI that the counter affidavit of Department of Agriculture does not indicate involvement of Central Govt. officials or inter-state ramification in this case which has been cited as a reason by the State of Bihar to entrust this probe to CBI. It had further been pointed out that the State Vigilance Deptt. of Bihar is, however, not bound by any legal constraints to investigate even Central Government employees, if their involvement is found at any stage. 6. For the above reasons, CBI has prayed the Hon‟ble Court that the Govt. of Bihar be directed to carry out and conclude the enquiry in this matter in view of scarce resources of CBI and the agency being already overburdened. As regards the Hon‟ble High Court order dated 08.08.2007, CBI has informed that the Standing Counsel for the CBI appears to have made an erroneous submission to the extent that the Central Govt. has not notified in terms of section 5 of DSPE Act and unless it is done, the CBI would not be in a position to investigate the matter.” 12. The Government of India through the affidavit filed by the Deputy Secretary, have, however, suggested that an ad-hoc committee could be constituted for verification/certification of sales of the de-controlled fertilizer in Bihar during the period 1994 – 1998. The said committee may have the representative of the State Government of Bihar as a Chairman and, if necessary, the committee may seek technical inputs from the Project and Development India Limited (PDIL) 13. This is a classic case where the Investigation - 10 - Bureau, Vigilance Department, State of Bihar and premier investigating agency of the country namely, CBI are not desirous to conduct investigation into the alleged bungling in the implementation of Fertilizer Concession Scheme of the Government of India in the State of Bihar during the period 1994 – 1998. On the one hand, Vigilance Investigation Bureau of the State Government wants investigation into the subject matter being conducted by CBI as the entire subsidy amount belonged to the Government of India; 80% of which was released as advance by the Government of India to the manufacturers/importers and most of the manufacturers and some of whom are public undertakings located outside the State of Bihar. Investigation Bureau, Vigilance Department, Government of Bihar, feels that CBI is better equipped and has vast resources and expertise to investigate such scams and offences, while CBI feels that having scrutinized the matter twice (two scrutiny reports dated 27th February, 2003 and 4th November, 2003 containing the recommendations have been placed on record), the matter did not require investigation at its end. 14. During the course of examination, it is pertinent to notice that CBI found that the subsidy was released by the Government of India to the manufacturers/suppliers directly on the basis of certificates issued by the Department of Agriculture, Government of Bihar. In the opinion of the CBI, the basic issue relates to the appropriateness of issuance of certificate by the Department of - 11 - Agriculture, Government of Bihar and that needs to be undertaken by the Investigation Bureau. 15. Entrusting investigation of the subject matter to an unwilling investigating agency (CBI) in the absence of notification under section 5 of the Act of 1946 may not yield any fruitful result. It would have been better had the high officials of the State Government and the CBI put their heads together and taken a collective decision in respect of investigation into the subject controversy. At this distance of time, a court directive to CBI to undertake investigation into the matter may not be appropriate. Instead, we are persuaded to accede to the suggestion proposed by the Government of India in its affidavit dated 9th September, 2007 that an ad-hoc committee may be constituted for verification or certification of sale and distribution of de-controlled fertilizers in the State of Bihar during the period 1994 – 1998. In first instance, this appears to be better proposition, and, in our opinion, if the Committee is of the view that matter needs to be investigated by CBI, they may recommend the same. 16. We, accordingly, dispose of the writ petition by the following order : (i) The Secretary, Department of Fertilizer, Government of India in consultation with the Chief Secretary, Government of Bihar shall constitute a committee (not exceeding five members) for the purposes of verification or certification of sale and distribution of decontrolled fertilizers in the State of Bihar during the period 1994- - 12 - 1998. (ii) As to who is to chair the Committee shall also be decided jointly by the Secretary, Department of Fertilizer, Government of India and the Chief Secretary, Government of Bihar. (iii) During the course of verification/certification of sales of the de-controlled fertilizers during 1994-1998 or at the time of its conclusion, if the committee is of the view, that there has been large scale fraud and bungling in the implementation of Fertilizer Concessions Scheme of the Government of India in State of Bihar during the period 1994-1998, it may recommend investigation into the matter by CBI. We observe that upon such recommendation, the Government of India shall issue notification under section 5 of the Act of 1946 and entrust the investigation to CBI and upon such notification being published, CBI shall conduct investigation into the matter and take it to a logical conclusion. (iv) The Committee shall complete its task within six months of its constitution. I.A. No. 5139 of 2007 In what we have observed above, the interlocutory application does not require any further order, it stands disposed of. R. M. Lodha, CJ Kishore K. Mandal, J. Anil/