State Represented By CBI/SPE, Cochin By Inspector Of Police vs Jayaraman Gopal & Ors.

“That, Sri. J.Gopal (A-1), Sri.S.M.George (A-2), Sri.Saju M.Joseph (A-3), and Sri. D.Rejith(A-4) who were working as public servants in HOCL, Kochi during the period December 2002 to March, 2003, entered into a Criminal Conspiracy between January 2003 to March 2003, with M/s Meteor Pvt. Ltd. (A-5) represented by Sri. P.M.John(A-6), Chairman and Mrs. Tara John(A-7), Managing Director, to obtain pecuniary advantage to themselves and to cheat Hindustan Organic Chemicals Ltd., Kochi, and in pursuance of which, they imported "Cumene" during March, 2003 by flouting the tender formalities and violating the Purchase Policy of HOCL, which is based on the Purchase Manual (Purchase Policy and Procedures) Part-I Order No.11/2001 dt. 13.07.2000 of HOCL, and thereafter imported 2200 Mts of Cumene @ US $ 688/Mt vide P.O. No. MAT 02/659A-10171. dt 18-02-2003 from M/s Kolmar Petrochemicals AG, Switzerland through A-5.

That, A-1, A-2, A-3 and A-4 in pursuance of the Criminal Conspiracy amongst themselves, so as to import Cumene, did not change the deteriorated Solid Phosphoric Acid Catalyst (SPA Catalyst) of the Cumene Power Plant of HOCL, Kochi in December 2002, even though the written request on 20-12-2002 was made by the Deputy General Manager(Production), for the change of the SPA Catalyst, to coincide with the shut down of the Kochi Refineries Ltd., which ultimately resulted in the low production of Cumene at HOCL.

That, A-1 invited tender for supply of 4000 Mts of Cumene on 31-01-2003, with the delivery by first week of April 2003 and sent the Tender notice to 13 parties and invited their rates for supply of Cumene at Cochin during the first week of April 2003. Only 3 firms had submitted their offers by 06-02-2003, which included A-5 which quoted on 06-02-2003 for the supply of 4000 M.T. +/-10% in two part, with the validity of their offer upto 07.02.03 viz. 2000 MT at US $ 663/MT CIF New Mangalore and delivery by March 2003 or USD 690/MT at CIF Kochi and 2000 MT, and delivery by first week of April, 2003 at $ 690/MT CIF New Mangalore or $ 715/MT CIF Kochi. M/s Inter Trade Exim, Mumbai quoted for 4000 M.T. at USD 594.50 CIF, Kochi, with delivery in April, 2003, while the offer from M/s Haresh Kumar and Company, Mumbai for 4000 M.T. of Cumene was at US $ 675 per M.T. CIF Kochi and arrival during the first half of April, 2003. The fourth and fifth offers were rejected due to late receipt and also these parties had regretted their inability to supply as per the delivery schedule. The Purchase Committee held its Board Meeting on 06.02.2003 requesting M/s Intertrade Exim, Mumbai regarding the confirmation of the nomination of the vessel by which the Cumene would be shipped and the details of the manufacturer.

That, a letter was received by A-3 and A-1, both of the Purchase Committee of HOCL, Kochi, from A-5 on 06-02-2003 by fax, intimating their protest on behalf of their Principal M/s Kolmar Petrochemicals Ltd., USA for accepting the offer of M/s Inter Trade Exim, Mumbai with the delivery schedule (i.e. anywhere in April, 2003) which was not as per the Notice Inviting Tender, which required the delivery of Cumene during first Week of April, 2003. M/s Intertrade Exim, Mumbai. vide Fax dt.07-02-2003 intimated HOCL, Kochi, that they were unable to confirm any vessel for shipment and therefore requested to extend the validity of the offer up to 11th Feb. 2003. A-3 addressed a letter to A-5 requesting to extend the validity of their offer till 14.02.2003 and similarly addressed to M/s Haresh Kumar and Company, Mumbai intimating them that their delivery date is not as per the Notice Inviting Tender and requested them to confirm that Cumene will be supplied by 1st Week of April, 2003, with an extension of the validity till 14.03.2003. M/s Inter Trade, Exim Mumbai vide their letter 07.02.03 extended their offer for sale of Cumene to 11.02.2003, while Haresh Kumar and Company, Mumbai informed that they would reply before 11-2-2003.

That A-5 vide their letter of 07.02.03 informed that they are agreeable to extend the validity of offer upto 12.02.2003 for the 1st consignment of 2000 M.T. of Cumene, but the new rate quoted for the supply of Cumene was US $ 676.50 per M.T., and thereby the increase in their offer, and for the second consignment of Cumene, A-5 did not give any commitment. M/s Inter trade Exim, Mumbai vide their letter of 11.03.03 intimated HOCL their inability to provide the vessel details as their Principals (M/s Tricon Energy, USA) could not confirm the delivery at Kochi by 1st Week of April, 2003, but extended the validity of offer upto 5.00 Р.М. оn 06.02.2003.

That A-3 then addressed a fax message to M/s Inter Trade Exim, Mumbai accepting their offer of 4000 M.T.+/- 10% at US $ 594.50 per M.T. with Liquidated Damage Clause and Delivery Schedule before 30th April, 2003, but M/s Inter Trade Exim, Mumbai vide his letter dt.12-02-2003 informed HOCL, Kochi regarding inability to accept the Letter of Indent due to non-availability of the vessels.

That, in pursuance of the Criminal conspiracy between A-1, A-2, A-3, A-4 and A-5 and in order to exclude M/s Haresh Kumar and Co., Mumbai, A-3 dishonestly and by abusing his official position and in order to favour A-5, had addressed a letter only to A-5, which was ranked as L-3, asking them to match offer price of M/s Inter Trade Exim, Mumbai at US 594.50 per M.T. of Cumene for 2000 M.T. of Cumene and to extend the validity of the offer upto 15.02.2003, while no such letter was originated by A-3 to M/s Haresh Kumar & Company, Mumbai, the firm which was ranked as L-2.

That in pursuance of conspiracy A-1 did not consider the intimation dt. 13.2.2003 of Mr.M.A.Pillai about the worst condition of the SPA Catalyst and the urgent need to replace the SPA Catalyst in view of the falling production from 180 tones per day to 120-130 MT.

That on 15.2.2003, in furtherance of the criminal conspiracy, A-5 falsely intimated through their Regional Manager their inability to match the L-1 price of US $ 594.5 per M.T. CIF, Kochi for the first lot of 2000 M.T. +/- 10%, of Cumene, by mentioning that there is a steep increase in the price of Benzene and Propylene for the last two weeks, and was prepared for "spot sale" on board the vessel M.T. Stolt Vinland, which had already sailed on 21-01-2003 from Corpus Christii, USA, and was arriving at New Mangalore in the first week of March, 2003 at US $ 688 per M.T. and that in furtherance of criminal conspiracy, A-3 issued the Letter of Intent on 17-02-2003 and the Purchase Order, so as to open the Letter of Credit, by the Principals (Kolmar Petrochemical AG) and thereafter to forward the detailed contract to HOCL.

That, on 17.02.03 in pursuance of the Criminal Conspiracy between A-1 to A-4 with A-5 represented by A-6 and A-7, A-3 dishonestly and fraudulently and in also by violating NIT and the tender norms floated by HOCL, Kochi accepted the higher price of US $ 688/MT offered by A-5 as "Spot Purchase" and in pursuance of that A-3 sent a letter and fax message to A-5 for the supply of the first lot of 2000 Mts of Cumene @ US $ 663 per MT, which was arriving at New Mangalore during March 2003 and another letter dt. 11.02.2003 and the fax message dt.15.02.2003 with regard to the purchase of the "spot parcel" of 2000 M.T +/- 10% on the Ship Stolt Vinland at the enhanced rate of US $ 688 per MT.

That, in furtherance of the above said criminal conspiracy A-1, A-2, A-3, A-4 and A-5 represented A-6 & A-7, and in order to favour A-5 and to avoid M/s Haresh Kumar & Company, Mumbai, so as to ensure that the Purchase Order was given to A-5, A-3 did not send the letter to M/s Haresh Kumar and Company, Mumbai- the L-2 firm, to match the price of L-1, but placed the Letter of Indent to A-5 company, at a higher price and also accepted the "spot parcel" of 2000 M.T +/- 10% on the Ship Stolt Vinland at the enhanced rate of US $ 688 per MT. The negotiations are permissible as per the Purchase Policy to bring down the prices, but not for increasing the price.

That on 17.3.03 in furtherance of the Criminal Conspiracy, A-1, A-2, A-3 and A-4 convened the Purchase Committe meeting to place Purchase Order on A-5 at the price of US $ 688 per M.T. CIF, New Mangalore for supply of 2000 Μ.Τ. +/- 10% of Cumene for a total value of Rs.8,31,78,180/-without intimating the same to Shri M.A. Pillai who was also one of the member of the Purchase Committee.

That, in furtherance of the Criminal conspiracy the Purchase Committee consisting of A-1, A-2, A-3 and A-4 had shown reason of threat of war imposed by U.S.A. and the increase in the prices of crude and derivatives, and hence the increase in price of Cumene from the date of opening of the tender, being the reasons for accepting the increased price of A-5 company from US $ 663 to US $676.50 per MT and then to US $688 per MT, and by relying ICIS-LOR pricing of 07-March-2003 which was irrelevant, as the Purchase Order issued to A-5 was dtd 18-02-2003. The pricing of ICIS-LOR Weekly Price Report of Cumene during 14-02-2003 to 21-02-2003 was not considered and the ICIS-LOR Weekly Price Report for the period 02.01.2003 to 28.03.2003 would reveal that during the period from 24.01.2003 to 21.02.2003, the price of Cumene was constant and stood at 578.71 US $ per M.T.

That accused persons in furtherance of the Criminal conspiracy amongst themselves, though they had the knowledge of the poor performance of the SPA Catayst of the Cumene Power plant, which resulted in the poor production of Cumene, A-1, A-3 and A-4 agreed to replace the SPA catalyst only on 17-03-2003 by awarding Purchase Order to A-5 at US $ 688 M.T., as against the initial offer for 2000 M.T. of Cumene for US $ 663 per M.T., which was later increased to US $ 676.50 per M.T., further finally revising the price to US $ 688 per M.T., which was finally approved by A-1, as per Part-I order No.3/2000 dt.02.02.2000.

That on 18.2.03 in pursuance of the criminal conspiracy between A-1, A-2, A-3 and A-4 with A 5, the Purchase Order No.MAT/02/659A-10171 was signed by A-3 and A-4 for purchase of 2000 M.T. of Cumene at US $ 688 per M.T. amounting to US $ 13,76,000 on behalf of Kolmar Petrochemicals AG, Switzerland, without any proceedings of the Purchase committee and also without informing Sri. M.A.Pillai, DGM(Prodn.) and so also the said purchase has not been reported to the Board of HOCL, which is in violation of Purchase Policy Item No.5.5 of Purchase Manual and Clause No.6.2, since the Purchase Committee deliberated the issuance of the Purchase Order only on 17.03.2003, which is after the placement of the Purchase Order on Kolmar Petrochemicals AG, Switzerland through A-5 on 18.02.2003.

That the Cumene purchased from A-5 through Kolmar Petrochemicals AG, Switzerland, at the enhanced price of US $ 688 per M.T. for 2200Mts from Kolmar Petrochemicals AG, Switzerland, through A-5, which was on board the ship “Stolt Vinland”, that had sailed from Corpus Christii on 21-01-2003 with one consignment of 2500Mts of Cumene already sold to HOCL through M/s Inter Trade Exim, Mumbai for US $530 per Mt, and another consignment of 7503.647 Mts of Cumene which was sold by Kolmar Petrochemicals AG at an average price of US $ 593.65 per Mts to Schnectady Herdilla, Mumbai, as on 12-02-2003,

That, in pursuance of the Criminal conspiracy between A-1, A-2, A-3 and A-4 with A-5 to give undue favour A-5 and to facilitate in the purchase of 2200 Mts of Cumene from the lot of 7000 Mts of Cumene already sold to Schnectady Herdilla, Mumbai, which was on board the ship “Stolt Vinland", the date of delivery of Cumene at New Mangalore was altered to the first week of March 2003, as it was in the knowledge of A-1, A-2, A-3 and A-4, that the ship "Stolt Vinland" had sailed from Corpus Christii on 21-01-2003 and would arrive at New Mangalore, by the first week of March 2003, and thereby one lot of 2200 M.T. of Cumene was purchased from Kolmar Petrochemicals AG, Switzerland by HOCL at US $ 688 per MT, on 17-02-2003 vide P.O. No. MAT 02/659A-10171. dt 18-02-2003, while the pricing of US $ 571 per MT was charged by Kolmar Petrochemicals AG, Switzerland for the Cumene sold to Schnectady Herdilla, Mumbai, and thereby caused a wrongful loss to the HOCL, Kochi. That the total profit earned out of the sale of 6364 tones of Acetone and 10133 tones of Phenol produced during January, 03 to 15 April, 2003, using the imported Cumene (2500 Mts + 2200 Mts) and in-house produced Cumene was Rs.7561 lakhs, while the cost of production of Phenol and Acetone at HOCL, Kochi works out to Rs.6475 lakhs, during the period January, 03 to 15th April, 03, and thereby the profit earned by HOCL, out of the sale of Phenol and Acetone is Rs.1086 lakhs (7561-6475). That if the SPA Catalyst was changed as planned in the month of Jan.2003, and also repeatedly informed and requested by DGM(Prodn.), then only 1767 Mts of Cumene needed to have been imported for achieving the output of 6364 M. tones of Acetone and 10133 M. tones of Phenol, as was produced by importing the two consignments of Cumene, and thereby the non-necessity of the import of 2200 Mts of Cumene- 2nd import from A-5, and thereby the undue favour to A-5.

That, A-1, A-2, A-3, A-4 and A-5 thus caused a wrongful loss to the tune of Rs.10,15,48,765/- to HOCL and undue pecuniary gain to A-5 represented by A-7 and A-8 and to themselves and thereby committed offences punishable u/s 120B IPC r/w 420 IPC and U/s 13(2) r/w 13(1)(d) of Prevention of Corruption Act, 1988 and U/s 420 IPC and sec.13(2) r/w 13(1)(d) of PC Act, 1988.”

“24.

The basis for finding fault with the accused according to the prosecution is the statement given by Shri. M.A.Pillai who has been shown as CW5. He is the DGM(Production) of HOCL. His statement is that catalyst performance has started deteriorating from December 2002 beginning itself which was reported by him to A1 as per letter dated 20.12.2002. He also recommended to proceed with the unloading of the catalyst since the catalyst performance had deteriorated very badly, as soon as the LPG stock got exhausted. He would say that if the catalyst was changed during January 2003 as proposed by him the need of importing the second consignment of 2200MT of cumene could have been avoided.

25.

Thus, CW5 has given statement to the effect that there was compulsion from his part to change the catalyst, that it was not acceded to by A1 to A4 which resulted in the purchase of cumene from A5 at high price. If this version of CW5 get support from documents, it could have stated that there is a definite prima facie case to the aforesaid allegations against the accused. Hence I have to verify whether there was a purposeful delay committed by A1 to A4 for replacement of the catalyst as alleged by CW5.

26.

For deciding the said aspect I may refer to some documents produced by the prosecution, Page 22 of the document described as D1 file forms the fax message sent by Kochi Refineries Limited to the General Manager, HOCL Ambalamugal, that is to A1. This message is dated 24.09.2002. In this message it is stated by Kochi Refineries Ltd. that they have planned to take the annual shut down of FCCU for a month starting first week of January 2003, that during the said period they will not be able to supply LPG to HOCL. In this message there is an endorsement by A1 dated 25.09.2002 "that HOCL may have to take decision to import one parcel of cumene (4000MT) to reach Cochin port atleast by 3rd week of December 2002 and may have to open L/C by end of October 2002 and are initiating necessary action to procure cumene ". This endorsement is seen marked to the CMD.

27.

The above document shows the action taken immediately by A1 on knowing about the proposal for shutting down the plant by KRL. If even after knowing about the shutting down of the KRL A1 had kept silent without initiating any action one could have attributed malfides on him. But situation herein is not like that as already stated by me.

28.

Now I may come to some other documents produced by the prosecution. Document indexed as D6 file contains a lot of details with respect to the action taken regarding the replacement of the catalyst. Page 60 of the said file is a letter by A1 to CW5 dated 20.12.2002 in reply to the letter by CW5 regarding the replacement of the SPA catalyst. In this letter A1 had informed CW5 that the subject of replacing the SPA catalyst was deliberated with the concerned Head of Departments on 20th December 2002 and the matter was also discussed with the CMD regarding the scenario of stock out situation for Phenol and Acetone during the catalyst replacement, that the CMD informed that due to anti-dumping duty of phenol hearing, which is in progress and also to protect the market and customers interests, CMD expressed that if the catalyst replacement can be postponed to a later date by running the plant with the existing catalyst for another 3 or 4 months thereby continuing the phenol production by supplementing the cumene required by imported cumene. As per this letter A1 also informed that necessary action has been taken to procure one more parcel of imported cumene.

29.

Along with this letter the minutes of tender committee meeting held on 20.12.2002 regarding the purchase of imported cumene which finds on page 27 of Exhibit D6 file also has to be verified. This minutes would show that whatever is written in the letter contained in page 60 of D6 file have been approved by the tender committee. Incidentally CW5 is a member to this committee and signatory to the minutes referred in page 27 of D6 file.

30.

Now I may refer to page 59 of D6 file. This is the minutes of the meeting held on 27.12.2002 in the GM's office in connection with the cumene reactor catalyst changing. Decision (b) in the said meeting reads as below:-

"(b)

Since the market for phenol and acetone is good and the price continues to be attractive, (Rs.46,000/- and Rs.40,000/- PMT for phenol and acetone respectively), it is decided to defer the replacement of SPA CATALYST for the time being and run the phenol plant with imported cumene till the LPG supply resumes from Kochi Refineries Ltd."

34.

In that view of the matter there is some merit in the contention of the Learned counsel for the accused that if the charge levelled against the accused is as spoken by CW5, he also ought have been shown in the very same position of A1 to A 4 and his idea now is to pretend ignorance by casting burden or liability on the shoulders of A1 to A4.

35.

Now I may refer to a letter dated 13.01.2003 by A1 to the CMD which forms page 10 of document indexed as D1 file. Copies of that letter form pages 11 and 12 of D1 file. In paragraph 2 of this letter it is addressed by A1 to CMD that since the replacement of SPA catalyst in the cumene reactor was postponed, there is an anticipation of cumene production of around 120 to 150 MT per day and when they restart the cumene plant, against the normal production of 170 to 180 MT per day there is a shortfall of 30 to 40 MT of cumene per day and therefore they are forced to reduce the phenol plant load from 120 to 100 MT per day till the imported cumene reaches the site. The copy of this letter is seen given to CW5 also. CW5 cannot pretend that he had not received a copy of this letter. This better would indicate the decision taken for postponing the replacement of SPA catalyst and the decision to import cumene.

36.

I may now refer to the minutes of tender committee held on 31.01.2003 regarding the purchase of cumene. The same forms page 1 of document indexed as D7 file. It is seen from this that even though an order with M/s. Tricon Enercy Ltd. for supply of 4000 MT of cumene was placed they have loaded only 2500 MT which is expected around 10th March 2003 and that cumene will be used for phenol production till the 1st week of April 2003. This meeting also would show that the catalyst change is planned after the 1st week of April 2003, that the cumene plant shut down will be a for a period of 30 days and during the said period the requirement of cumene is around 5400 MT and one parcel imported cumene of 4000MT + or 10% to enable to continue the phenol production during cumene shut down is required which should be available latest by 10th April 2003 and the committee had decided to float enquiry for 4000MT to meet the shut down requirement.

37.

This minutes would show that there was a decision of replacement of the catalyst change and shutting down of the cumene plant at that time after 1st week of April 2003. This shows that the decision taken earlier for deferring the replacement of the SPA catalyst is correct. CW5 is a signatory to this meeting and approved to the decisions in this meeting. Hence he cannot now turn around and say that it was against his wishes that the decision to replace the catalyst was deferred.

38.

This meeting would also show the decision of the committee which included CW5 to import 4000 MT of cumene to enable HOCL to continue the phenol production during the cumene shut down, which cumene will be made available by 10th April 2003 and decision to float enquiries for the purchase of the said cumene to meet the shut down requirement.

39.

I may now refer to a letter given by Shri.M.A.Pillai, CW5 to the GM on 13.02.2003 on the performance of the cumene catalyst. This is page 76 of the document indexed as D7 file. In this letter CW5 was intimating A1 that “we were planned to change the catalyst in the month of April 2003 and tried to run the plant with our best ability at a reduced load to meet market requirement. However, in the last few days we have observed that the performance of catalyst is deteriorating and we are facing lot of problems in cumene section.” He also requested as per this letter to take appropriate action for change of catalyst and procurement of sufficient quantity of imported cumene at the earliest so that the cumene plant can be stopped for change of catalyst and continue the phenol production.

40.

I may say that this letter speaks volumes. From this it is clear that CW5 was actually a consenting party to the decision that the change of catalyst would be had in the month of April 2003 or to the decision to defer the change of catalyst on some other day and it need not be in consonance with shut down of KRL. This letter also would show that because of the sudden starting of signs of deteriorating of the performance of the catalyst a stage had reached that the catalyst required to be changed at the earliest and it cannot be waited till April 2003. This letter would further show that CW5 was also actually compelling A1 to take appropriate action to procure sufficient quantity of imported cumene at the earliest.

41.

In view of these situations, it is really idle for CW5 now to contend before the investigating officer that if the catalyst was changed during January 2003, the need for importing cumene could have been avoided. This would then show that the allegations against A1 to A4 that because of their inaction in getting the change of catalyst at the appropriate time, there was necessity to import cumene at an exorbitant rate resulting loss to HOCL are not at all prima facie well founded. I may also add that the said allegation appears to be totally groundless.

42.

I have already referred about Page 76 of the D7 file. It is a letter dated 13.02.2003 given by CW5. The same showed that the necessity of Importing of cumene arose much before the expected period. Hence it was decided to import cumene. By this letter CW5 informed A1 to take appropriate action for change of catalyst and procurement of sufficient quantity of cumene by import at the earliest. Page 1 of D7 file is the minutes of the tender committee meeting held on 31.01.2003 regarding the purchase of cumene. A1 to A4 and CW5 attended the said meeting. I have already referred about this minute also. The same would show that the committee had decided to float enquiries for the purchase of 4000MT +/- 10% cumene to meet the shut down requirement of HOCL, when the shutting down would be from the 1st week of April 2003 for a period of 30 days. The said meeting also would show that cumene should be available atleast by 10th April 2003. That minutes would show that up to that date the plant could be operated with the cumene available by way of the import already made.

43.

Subsequent to this meeting on the very same day, that is on 31.01.2003, A3 invited quotations for the purchase of 4000MT +/- 10% cumene required during 1 week of April 2003 by enclosing detailed terms and conditions with a request to submit the offer as to reach before 3 p.m on 06.02.2003. Page 6 of D7 file is the office copy of this letter inviting quotations which show that 13 companies were asked to submit their quotations. Page 7 to 9 and 13 to 23 in Exhibit D7 file show individual letters to these 13 companies signed by A3.

44.

Page 26 of the D7 file is a office note from the Deputy Manager (P&A) to the Materials Engineer, that is to A3, dated 06.02.2003 stating that as per the enquiry inviting quotations, quotations were received from 4 parties namely M/s.Hareshkumar & Company, M/s. Intertrade Exim, M/s. Meteor Pvt. Ltd., that is A5 herein and M/s. Heralds Trading Co. Ltd., On perusal of file what I find is that M/s. Heralds Trading Co. Ltd., had not actually given a quotation whereas expressing their inability to supply. So actually there were only 3 quotations, that is from M/s. Hareshkumar & Company, M/s. Intertrade Exim, M/s, Meteor Pvt. Ltd..

45.

Page 37 of D7 file is the offer given by M/s.Hareshkumar & Company, quoting the price as USD 675/MT, CIF Cochin and the proposed date of supply is mentioned as 1st half of April 2003.

46.

Page 31 and 30 together of D7 file is the offer given by M/s. Meteor Pvt. Ltd. that is the 5th accused herein. It is stated that the required quantity would be supplied in two lots of 2000 MT each and first lot would be received in March 2003 and the second lot would be received in the 1st week of April 2003 either at Kochi or New Mangalore port. It is also stated in this offer that cumene is shipped in the vessel by name STOLT WINLAND, that the price for the 1st lot is USD 663/MT CIF New Mangalore or USD 690/MT CIF Cochin and the 2nd lot is priced USD 690/MT at New Mangalore or USD 715/MT CIF at Cochin. It was also requested that if the offer is acceptable the same may be accepted by 5 p.m on 07.02.2003.

47.

Page 33 is the offer given by M/s. Intertrade Exim. The price quoted in this offer is USD 594.50/MT CIF Cochin and delivery would be done "Any April 2003". This offer also was valid till 07.02.2003.

48.

Thus, the lowest quotation was by M/s. Intertrade Exim. The same is described as L1. Page 39 of D7 file is the minutes of the meeting held on 06.02.2003 in connection with the import of cumene against the invitation of tender. A1 to A4 were present in this meeting. This minutes would show that since the lowest price was quoted by M/s. Intertrade Exim, it was decided to accept their offer and requested to confirm the following aspects before 4 p.m. on 07.02.2003.

(1)

Nomination of the vessel - Vessel particulars should be informed with the name of the vessel, port of loading, discharge port and ETA Kochi

(2)

The details of the manufacturer / supplier

(3)

M/s. Intertrade informed that they will confirm the above details before 4 p.m. on 7^th Feb 2003.

49.

The above would show that HOCL had decided to accept the offer of M/s. Intertrade subject to the condition of nomination of the vessel, the manufacturer of cumene and date of delivery. The decision of the above meeting was conveyed to Intertrade Exim. Page 67 is a letter dated 11.02.2003 to A3 from Intertrade Exim. This appears to be a reply to the request made to M/s. Intertrade Exim on the points shown above in the meeting held on 06.02.2003. In this, Intertrade Exim had very categorically stated that their Principals cannot confirm delivery of the material by 1st week of April 2003, that since the principals have not fixed the vessel yet, they cannot nominate the vessel and provide vessel particulars as requested by HOCL and that they cannot confirm the producers/suppliers of material.

50.

To this letter of M/s. Intertrade Exim which was sent by tax, on 11.02.2003 itself on behalf of HOCL, A3 sent a reply stating that price of USD 594.5 PMT CIF Cochin will be accepted subject to delivery of material on or before 30th April 2003, that in case of delay beyond 30th April 2003 liquidated damages have to be paid and also requested to confirm the vessel particulars and the details of manufacturers /suppliers as to place the purchase order. This letter forms page 69 of D7 file.

51.

To this letter a reply was received by A3 stating that by the time M/s. Intertrade Exim had sent a letter of indent of HOCL for supply of cumene to the Principals in US, the vessel which they were planning to supply the material in the month of April 2003 was booked by others and the principals have informed Intertrade Exim that they will not be able to supply the materials in the month of April and therefore they expressed their inability to accept the letter of indent.

52.

From the above it is crystal clear that the offer made by Intertrade Exim was actually withdrawn by them itself. Moreover, by this letter Intertrade Exim informed HOCL about their inability to honour the said offer.

53.

If so, the option available to HOCL was either to accept L2 offer by M/s. Hareshkumar & Co. or the L3 offer by A5. I have already referred about these offers. It is true on comparison of these two offers, the price quoted by Mis. Hareshkumar & Co. is a bit less than the price quoted by A5.

54.

I have already said that M/s. Hareshkumar & Co. did not nominate the vessel particulars, expected loading at load port, the delivery at the discharge port etc. and in their offer the details of manufacturers / suppliers from where cumene would be procured also was not shown. Hence A3 on behalf of HOCL sent a letter to M/s. Hareshkumar & Co., to confirm the ability to supply the material by 1st week of April 2003 to confirm the vessel nomination by supplying the vessel particulars, expected loading at load port and delivery at discharge port etc. and confirm the details of manufacturers/suppliers from where cumene is sourced with a further request to reach the confirmation before 2 p.m. on 10th February 2003. This letter forms page 55 of D7 file. M/s. Hareshkumar & Co. sent a reply to the same to extend the validity of offer till 17 Hrs on 14.03.2003. Page 57 of D7 file forms this letter. On 10.02.2003, A3 on behalf of HOCL sent a letter by fax to M/s. Hareshkumar & Co., reminding to sent a reply the reply before 2 p.m. on 11.02.2003 and no more extension of time will be given. It is further stated that if HOCL did not receive the reply by the above time, it would be presumed that M/s. Hareshkumar & Co. is not interested in the above matter.

55.

Page 74 of D7 file is the letter from M/s. Hareshkumar & Co. to HOCL stating that the request for nomination of vessel and other particulars shall be forwarded only on acceptance of their offer. I may say that this kind of offer is not acceptable to anybody. Unless the vessel by which cumene will be shipped is informed, it may not be possible to HOCL to verify the quantity that would be supplied and the possible time at which time the vessel would reach at the discharge port and at which time the vessel would be loaded and from which port etc. Hence this letter itself had made M/s. Hareshkumar & Co. to a situation that their offer will not be acceptable by HOCL. If so, I cannot find any fault with the officers of HOCL in not accepting these sort of offers which is imperfect, incomplete etc. Supposing this type of offer is accepted and there was failure on the part of M/s. Hareshkumar & Co. to deliver the cumene at any particular port or on any particular date, much loss would have caused to HOCL and A1 to A4 would have been fastened with the liability for causing such a loss. If so, the non-acceptance of this sort of offer by M/s. Hareshkumar & Co. is a very wise decision taken by the officers of HOCL including A1 to A4.

56.

What was the option then left with A1 to A4 is the next aspect to be considered. Once the L1 of Intertrade Exim and L2 of M/s. Hareshkumar & Co. could not be accepted for the reasons already supplied by me earlier, the only option was to accept L3 offer given by A5. Here I may refer to a decision of the tender committee dated 17.03.2003. This forms page 87 and 88 of D7 file. This decision is elaborate on all aspects of cumene purchase. I have touched on various aspects covered by this decision on the basis of documents available in the D7 file. This would show that since the price offered by M/s. Intertrade Exim was very competitive when compared with the prices prevailed at that time, the said offer was accepted on conditions. But M/s. Intertrade has informed that they could not get a potential vessel to carry cargo to Cochin for delivery in April 2003. In this decision it is stated that A5 had mentioned in their original offer itself about their commitment to ship cumene in two lots in March 2003 and in 1st week of April 2003.The spot offer of M/s. Meteor is the only source of cumene available for an early delivery and inspite of the increases in price made by them from the tender price the rates are competitive compared to the price of phenol and acetone and that there has been demands for this parcel of A5 from the manufacturers of Bombay and any delay in taking decision would have resulted loosing the parcel which would further result in non production of phenol and erosion of the market share of HOCL. It was by considering all these aspects, decision for the purchase of cumene from M/s. Kolmar Petrochemicals, the principal of A5 at USD 688/MT CIF New Mangalore was taken.

57.

Considering the aspects of the case which I have discussed in the earlier paragraph with reference to the various documents in D7 file, I repeat that there was urgent necessity for HOCL to procure cumene by import which was approved by CW5 also. The possibility of procuring then was only from A5 through their principal M/s.Kolmar Petrochemicals even though the price offered by them was high as compared to the prices offered by other two companies. Since the other two companies have either withdrawn their offers or not responding properly as already stated by me the only option available for HOCL was to place order with A5 for procuring cumene. Hence I repeat that I cannot attach any sort of illegality in the decision dated 17.03.2003 which I have referred earlier.

58.

The comparative statement for import of cumene with respect to the three offers also find place in pages 85 and 86 of D7 file. This statement definitely would show the offer by A5 was on a higher rate but they were definite about the date of delivery as compared to the indefinite dates supplied by M/s. Hareshkumar & co and Intertrade Exim

59.

In this context what has to be verified is was there any actual loss resulted to HOCL by purchase of cumene at the above rate from A5. Supposing heavy loss was resulted to HOCL and huge profit was obtained by A5 from this purchase the prosecution could have argued that there was some sort of illegal agreement amongst A1 to A7 for procuring profit to A5 to A7. Here I may refer to the statements of CW6. He is the Manager (Finance), HOCL. He stated that Import shall be made on the basis of realistic consumption levels and the available stocks. The letters by A1 to CMD, CW5 to A1 and the decisions would show that realistic consumption level was noticed by all and available stock also was taken into consideration and when a compulsory situation arose that import alone was the only source of obtaining cumene it was decided to brought cumene by import. CW6 also referred about the meeting of the tender committee dated 27.12.2002 deciding to postpone the change of catalyst and the decision to float enquiries for import of cumene as to reach by 10th April 2003. In his further statement he would say with reference to the daily production for the period from January 2003 to March 2003 the imported cumene was utilized for the production of phenol and acetone, that the cost of production of phenol and acetone using the imported cumene was Rs.2365.5 lakhs and the total realisation of the sale value of this phenol and acetone was Rs.2610.05 lakhs resulting in a profit of Rs.245 lakhs for the company. If this is the version of CW6, the charge that in view of the purchase of cumene from A5, HOCL has sustained a loss of crores of rupees cannot be accepted. Thus, from the version of CW6 there is a prima facie evidence available in this case to show that due to the action of A1 to A4 much loss was not at all resulted to HOCL. If loss was not resulted to HOCL, it is not possible to draw a conclusion that there was any sort of illegal agreement between A1 to A7 to result any profit to A5 to A7 and loss to HOCL. If so, the plea of conspiracy levelled against the accused has to be stated as without any proper grounds.

60.

One allegation against A1 to A4 is that the contract was given to A5 to A7 without observing the guidelines given in Purchase Manual. It is contended that as per the guidelines in the Purchase Manual which is document No. 33, the concurrence of the Board was required. It is true a perusal of document No. 33 would show that previously the committee for import has to function under the control of Director (Marketing). However, that position was changed and as per order No. 3/2000 which is document No. 34, the Board was reconstituted consisting of Factory Manager, Production Manager, Head of Materials and Head of Unit Finance which will work under the chairmanship of General Manager. The General Manager, no doubt was A1 and production manager was CW5. The Factory Manager was A2, the Head of material was A3 and Head of unit finance was A4. In the decision dated 17.03.2003, which I have already referred, except the Production Manager all the other persons have subscribed signature. Even though the name of Production Manager is written therein, the signature of CW5 does not find a place therein. However, since the committee has worked under the chairmanship of Chairman and A1 is a signatory to this meeting, it cannot be contended that the decision in this meeting was not a collective discussion. In any view of the matter, in the light of document No.34 which I have referred, there is no necessity to obtain the sanction of the Board of HOCL for import of cumene which is a subject matter in this case. Thus, this allegation raised against A1 to A4 therefore has no legs to stand.

61.

It is contended that there was inducement by A5 to A7 on A1 to A4 with respect to obtaining of order for import. In this context I may refer to page 43 of document indexed as D14 file. This is the commercial invoice given by M/s.Kolmar Petrochemicals dated 21.02.2003 with respect to 2200MT of cumene which is shipped in the vessel by name STOLT WINLAND. On receipt of the same the purchase order dated 18.02.2003 was given to Kolmar Petrochemicals by HOCL. This purchase order forms page 94 of D7 file. This will show that the contract by HOCL was directly with Kolmar Petrochemicals only and A5 was only an agent in between them.

62.

Document No.15 is the agency agreement pursuant to which M/s. Kolmar Petrochemicals has appointed A5 as its agent. There is a specific clause in Document No. 15 that agent shall not without the written consent of Kolmar Petrochemicals offer for sale products in India for a third party and the agent was to provide information on companies in India as customers of Kolmar Petrochemicals. This agency agreement along with the invoice and the purchase order would show that what A5 was doing was only offering service to M/s. Kolmar Petrochemicals with respect to the customer, namely HOCL, what A5 was quoting was only the price of Kolmar Petrochemicals and not any independent price of them. Hence it is not at all possible to tell that A5 to A7 had in any way acted in a manner to induce A1 to A4 to import products for the higher price in order to obtain undue advantage for them and to cause loss to HOCL.

63.

There is a definite evidence to show the price of cumene was not at all constant or consistent rather the same was varying frequently. As already stated, in the opening part of this order, HOCL was relying on ICIS-LOR report with respect to the price of cumene. Document indexed as D19 file shows the ICIS-LOR report regarding the price of cumene at USD during various periods. Page 25 of this file is the summary of the price. This will show that from 24.01.2003 to 21.02.2003 the price of cumene was 578.71 USD, the price before that was 529.11 USD and the price thereafter upto 21.03.2003 was 688.94 MT and from 28.03.2003 the price was 716.50 USD. From this it is evident that as on the date of import of cumene as per the purchase order the price was 688.94 USD. From this also it is not possible to conclude that the purchase of cumene or the import of cumene as per the purchase order to M/s. Kolmar Petrochemicals was at an exorbitant price as wanted to be canvassed by the prosecution. From this also what could be gathered is that there is no resulting of any loss to HOCL by the act of A1 to A4 was wanted to be highlighted. At best it could have been stated that had there been a purchase of cumene somewhere during January or in the early weeks of February, price would have been lass and more profit could have been earned by the company. As already stated, the necessity for import arose only after escalation of price of cumene and by the time actual import took place there was further escalation of price. The escalation of price was beyond the control of A1 to A4 and therefore they cannot be faulted for parting with more money of HOCL for the imported articles. Moreover, in the FIR which is produced as document No. 38, there is an averment that customs did not accept the invoice value of A6 stating that the same was under invoiced and therefore HOCL had to pay customs duly at the rate of USD 688 per MT for the consignments. This averment is an indication to show that the price at USD 688 per MT was the real price at the time of delivery of the cumene at the New Mangalore Port.

64.

I may also add something about the sanction. The CMD is the sanctioning authority. It was he who directed the deferring of the change of catalyst to the month of April 2003. He was properly informed by A1 about all the acts done for procuring cumene at the appropriate time. He also had verified all the records in this case and about the necessity arose for the Importing of cumene. He also had noticed the versions of CW6 that no loss was actually resulted to the HOCL. Still I fail to understand as to how he happened to give sanction for prosecuting A1 to A4 for the offences under the Prevention of Corruption Act.

65.

In view of the above discussion, I have to say that what the prosecution could bring out from the records available in this case is only a suspicion against A1 to A4 that there was conspiracy by them with A5 to A7 and by their acts there was resulting of loss to HOCL. No grave suspicion about any conspiracy or about any criminal misconduct could be brought in by the prosecution. No grave suspicion about the indulging of any sort of inducement by A5 to A7 on A1 to A4 or any act of deception committed by any of the accused could be brought out.”

Chronology — Relevant dates

Why the impugned discharge order is perverse and unsustainable

¹⁾ Wrong legal test applied by the trial court. Under Sections 239–240 Cr.P.C., discharge is permissible only when the charge is groundless. The Court may sift the material, but cannot decide credibility, choose the defence version, or ask whether conviction is certain. Grave suspicion is sufficient.

²⁾ The impugned order conducts a mini-trial. It rejects CW-5’s version by assessing his conduct and credibility. It accepts explanations concerning spot sale, high-seas sale, commercial practice, price fluctuation and agency. These are matters for evidence and cross-examination.

³⁾ The order does not deal with the strongest price/cargo material in the final report. The charge-sheet states that Stolt Vinland was already carrying cumene sold at much lower rates; it specifically alleges that the 2200 MT sold to HOCL at US$688 came from a lot sold by Kolmar to Schenectady Herdilla at about US$571/MT. This is not merely an abstract market-index comparison.

⁴⁾ The false representation is specific. A-5 stated on 15.02.2003 that prices of benzene/propylene had steeply increased and offered US$688. The prosecution relies on contemporaneous ICIS-LOR material to say cumene remained at US$578.71 from 24.01.2003 to 21.02.2003. The truth of the representation cannot be finally decided at discharge.

⁵⁾ The timing itself requires trial. Letter of Intent is dated 17.02.2003. Purchase Order is dated 18.02.2003. Detailed Purchase Committee meeting/reasons was much thereafter on 17.03.2003. The prosecution sttes that the order was placed without prior Purchase Committee proceedings, without CW5 (M.A. Pillai), and without the required Board reporting. A post-facto explanation cannot be accepted as conclusive at discharge.

⁶⁾ L-2 was not out of the field. The final report alleges that A-3 approached only A5/L-3 to match L-1 and did not give the same opportunity to Haresh Kumar & Co./L-2. Whether this was bona fide procurement or deliberate exclusion is a trial issue.

⁷⁾ Overall profit does not erase the alleged offence. Profit on phenol/acetone is not the same question as whether an unnecessary import was engineered or a pecuniary advantage was obtained by abuse of official position. Under old Section 13(1)(d), obtaining pecuniary advantage for another by abusing official position is itself material.

⁸⁾ Conspiracy must be viewed cumulatively. The court cannot separately explain away each circumstance and then say there is no direct proof of agreement. Conspiracy is ordinarily inferred from coordinated acts and surrounding circumstances.

⁹⁾ Non-prosecution of another person is not exoneration of the accused before court. If evidence later implicates another person, Section 319 Cr.P.C. supplies the remedy. The omission cannot convert otherwise incriminating material against the existing accused into a groundless charge.

¹⁰⁾ A-1, A-2 and A-4 had filed no discharge applications. Their counsel adopted the arguments of others. Yet they were discharged without an accused-specific analysis and without the prosecution having notice of a separate discharge case on their individual roles.