New Delhi: A special CBI court Tuesday asked the agency to file criminal cases against former Union minister Arun Shourie, retired IAS officer Pradip Baijal, and three others in connection with a corruption case relating to the sale of a luxury hotel in Rajasthan in 2002.
Shourie was the minister in-charge of the department of disinvestment in the finance ministry when the property, Laxmi Vilas Palace Hotel in Udaipur, owned by the public sector India Tourism Development Corporation (ITDC), was sold to Bharat Hotels Ltd, a private company.
The court’s order, accessed by ThePrint, rejected the CBI’s demand for closing the case, citing lack of evidence, and said that the allegations against them prima facie appeared to be true.
When was the hotel sold?
According to the FIR lodged in 2014, the government issued an advertisement in February 2001 for disinvestment of hotel properties of the ITDC, including Laxmi Vilas Palace Hotel.
In response, 15 parties showed interest in purchasing the property. Of these 15, three were disqualified and six withdrew from the bidding process.
From the remaining six parties, only Bharat Hotels submitted its financial bid on the scheduled date, i.e. 23 January 2002. The bid offered purchase of 99.97 per cent paid up equity in Udaipur Hotels Pvt Ltd for a sum of Rs 7.52 crore.
Laxmi Vilas Palace Hotel was, therefore, sold to Bharat Hotels on 24 January 2002 at that price.
What did the FIR say?
The FIR in the case was registered by the CBI on 13 August 2014. It said that from 1999 to 2002, “unknown public servants” of the Department of Disinvestment, Ministry of Finance, had in “connivance” with Bharat Hotels sold the hotel at a “throwaway price” of Rs 7.52 crore. This, it said, caused a loss of Rs 143.48 crore to the government exchequer.
The FIR did not name Shourie, but mentioned Baijal, who was the secretary of the Disinvestment Department at the time of the sale; Ashish Guha of the New Delhi-based financial advisory firm Lazard India Ltd, which was the financial advisor to the government at the time; asset valuer Kantilal Karamsey Vikamsey of Kanti Karamsey & Co; Bharat Hotels; and other unknown government officials and private people.
The FIR pointed to several alleged discrepancies in the entire process. For instance, it said that Kantilal Karamsey Vikamsey had “with malafide intention fraudulently and dishonestly” mentioned in his valuation report that a high tension line passed through the hotel, while this wasn’t true. This considerably reduced the cost of the land.
It also said that the hotel actually cost about Rs 285 crore, but was sold to Bharat hotels for a “paltry sum” of Rs 7.52 crore.
The FIR was filed under Sections 120B (criminal conspiracy) and 420 (cheating) of the Indian Penal Code along with provisions of the Prevention of Corruption Act, 1988.
After the registration of the FIR in the case, Shourie had defended the deal and said that correct procedures were followed for evaluation and sale of the hotel.
“Arun Jaitley is the common factor between the Cabinet Committee on Disinvestment (of 2002) and the present NDA government, where he handles the department of disinvestment. The committee had cleared the disinvestment after scrutinising all the documents and procedures,” he had said.
“I am absolutely certain that every procedure was followed. There was a vigilant law minister, and his ministry cleared the file three times,” he had added.
What did CBI say in its closure report?
The CBI’s closure report stated that the investigation of the case did not point out any criminality in the entire process.
It said that no irregularity was found in the appointment of Lazard India Pvt Ltd as the financial advisor and in selection of Kanti Karamsey & Co as the assert valuer.
The report said that the investigation did point towards the hotel being undervalued by Kanti Karamsey & Co. It, however, added that “there is absence of any evidence to establish that the same was done with an ulterior motive”.
This issue was referred to the Department of Investment and Public Asset Management, Ministry of Finance.
The report recommended closure of the case, saying: “In view of the facts and circumstances of the case, it is concluded that evidence worth launching prosecution was not found in the entire process of disinvestment of M/s Laxmi Vilas Palace Hotel, Udaipur.”
What did the court say about Shourie?
The court took note of Shourie’s journalistic background, and said that he has spoken about the Prevention of Corruption Act in several of his articles and interviews.
“But he has still done this act, which shows his double standards,” the judge said.
The order noted that, initially, it was decided that ITDC would appoint a valuer. However, later Shourie and Baijal took over the task of appointing a valuer and appointed Kanti Karamsey & Company.
It also pointed out that the valuer’s report was then accepted by Shourie and Baijal, leading to losses to the government and gains for Bharat Hotels.
The court, therefore, said that prime facie it appeared that Shourie and Baijal “misused their positions” and caused a loss of Rs 244 crore to the exchequer in the deal.
What did the court say about the case?
Special CBI judge Puran Kumar Sharma rejected the CBI’s closure report and directed the agency to file cases against Shourie, Baijal, Guha, Kantilal Karamsey Vikamsey of Kanti Karamsey & Co and Jyotsna Suri, the director of Bharat Hotels. It has summoned all the accused via arrest warrants.
In its order, the court questioned the intent behind the disinvestment of the hotel, pointing out that the authorities had laid a condition for the disinvestment that the property can only be used for hotel business by whoever takes it over.
It asked that when the government was aware that the hotel cannot be run, then why did it keep this condition that even after the bid, only hotel business can be conducted on the property.
“Therefore, the hotel could have been run at the said location, yet the government deliberately, in collusion with Bharat hotels, disinvested the hotel in the wrong manner,” the court asserted.
It has also ordered the district collector of Udaipur to take possession of the hotel while appointing the officer as the receiver of the property. The collector is also expected to ensure that the hotel is run by a central government institution with experience in this industry. The hotel’s accounts now need to be submitted to the court on a quarterly basis.