Lavalin case: CBI to prosecute Vijayan

Thiruvananthapuram, Jun 8: Central Bureau of Investigation (CBI) has got the permission from the the Kerala governor R S Gavai to prosecute senior Communist Party of India (Marxist) leader Pinarayi Vijayan in Lavalin case.

Sources said to media that R S Gavai gave his consent after a request by the CBI. Vijayan, secretary of the CPI(M) is accused of favouring SNC lavalin in granting contracts to renovate two hydro power projects when he was the state's power minister in 1977.


The move also marks the bitter power struggle in the state of CPI(M) between Vijayan and chief minister V S Achuthanandan.

The CBI Report

In the progress report filed before the CBI Special court by the CBI Chennai unit DySP, V Ashok Kumar, it has been stated that Pinarayi Vijayan, the former Electricity Minister should be arraigned as the ninth accused.

Claus Trendl, Senior Vice President of the Canadian firm SNC-Lavalin, has been arraigned as the 11th accused and A. Francis, former Joint Secretary (power) as the tenth accused.

During the course of investigation, Vijayan's involvement came to light apart from the other accused, CBI said in its report. Vijayan, while serving as Electricity Minister between May 1996 and October 1998, colluded with K. Mohanachandran, Principal Secretary (Power) and joined criminal conspiracy which was already hatched in 1995 by R. Sivadasan, former KSEB chairman and others in the matter of awarding supply contracts of the projects to Lavalin, the CBI stated. Vijayan had led a high level delegation to Canada in October 1996 and held discussions with SNC-Lavalin and Export Development Corporation International Development agency regarding the contract and took a decision in awarding the supply contracts to Lavalin at a fixed rate basis. The main consideration in the award of the contract, which was signed by KSEB on February 10, 1997 without Government approval, was the grant offered for establishment of Malabar Cancer Centre (MCC) at Thalassery in Kannur district.

The E. Balanandan committee, appointed by the Kerala government, in its report had opined that the complete replacement of the machinery need not be carried out for the hydel projects and essential parts alone need to be replaced for which the estimated cost will be around Rs 100.5 crores. This recommendation was overlooked and the supply contract was signed just a week after Vijayan received the report. CBI said Vijayan along with the then Chief Minister, the late E. K. Nayanar and the late Dr. V. Rajagopal, former KSEB chairman, again visited Canada during June 1997 where the grant amount to establish the MCC was decided at Rs 100 crores.

The CBI stated that Vijayan along with the other accused had, 'fraudulently with dishonest intention' of showing undue favour to SNC Lavalin, entered into only a 'non binding' memorandum of understanding on April 25, 1998 for MCC instead of a legally valid memorandum of agreement which facilitated SNC-Lavalin to back out from the commitment later, thereby 'cheating the government'. K. Mohanachandran and A. Francis signed the MoU and no Government order was issued authorizing K. Mohanachandran to sign the same, but there was concurrence of Vijayan.

Lavalin, taking advantage of the non binding agreement, backed out of the commitment after spending only about Rs 12 crore through its consultants, thus not financing MCC to the tune of Rs 86.25 crore.

As part of the criminal conspiracy, Vijayan, K. Mohanachandran and A. Francis and others placed a crucial note for approval before the Countil of Ministers on March 3, 1998, after suppressing various facts, including the fact that MoU route was dispensed with the Union Government, full report of the National Hydroelectric Power Corporation was not highlighted and concurrence of Central Electricity Authority, and obtained cabinet approval. Vijayan also had close contacts with SNC-Lavalin officials and by abusing his official position had exerted 'high pressure' on the staff of KSEB and thereby favoured Lavalin in their official dealings with KSEB, CBI said. The investigations revealed that the supply contract for renovation and modernisation of the Panniyar, Shengulam and Pallivasal hydel projects was given to SNC Lavalin at an exorbitant rate and the per MW cost for the same was the highest. This caused a loss to the Government of Kerala with corresponding wrongful gain to Lavalin.


In 2009 Indian Union Lokshabha elections, In kerala the candidates who were highlighted by the LDF led government sufferered a huge loss... the UDF led opposition gained a 16 to 4 seats victory over LDF... The one of the cause of victory was the arrogance that shown by LDF government in protecting Pinaray vijayan..

CBI requested an order for prosecuting Vijayan and Government took a decision not to allow the prosecution later this was taken before the governor of kerala. on June 6,2009 the governor ordered CBI to start prosecution of Pinaray vijayan.

Some party members had started the demand for resignation of Pinaray vijayan from the post of CPI(M) Party secretary and to face the charges against him.

The history

The Kerala State Electricity Board (KSEB) signed a memorandum of understanding (MoU) with SNC-Lavalin in August 1995. This time G. Karthikeyan of the Congress Party was the Minister for Electricity. Under the provisions of the MoU, the funds for the renovation were to be arranged by SNC Lavalin from the Export Development Canada (EDC), Canada, and the Canadian International Development Agency (CIDA). The Board did so, ignoring the Central Electricity Authority's (CEA) recommendation that immediate replacement of the generating units at the Pallivasal power station was not called for as the plant was in fairly good condition. The Board undertook a feasibility study on the proposal only in September 1995, by a retired Chief Engineer of the KSEB, who later became a consultant to Lavalin.

Based on the consultant's report and further discussions, the Board signed contracts with SNC-Lavalin to provide technical services for management, engineering, procurement and construction supervision in February 1996, to ensure completion of the projects within three years. This time also G. Karthikeyan of the Congress Party was the Minister for Electricity. The consultancy agreements were converted into fixed price contracts for the supply of machinery and technical services as part of the renovation at a cost of 67.94 million Canadian dollars (Rs 169.03 crores) in February 1997. During this period Pinarai Vijayan was the Minister for Electricity.

The CAG found that Lavalin was only a consultant intermediary and not the original equipment manufacturer and that the supply of goods and services was made by other firms at a much higher cost leading to excess expenditure. According to the CAG, the absence of due professional care in negotiating the foreign loan proved to be detrimental to the financial interests of the Board. The Board also could not ensure the quality of renovation work in the absence of technology transfer and training of its engineers. Owing to various technical defects in the equipment, the generation of power could not be maintained even at the pre-renovation level and the Board had to spend on repairs.

According to the CAG, failure to exclude the fee for technical consultancy from fixed price contracts resulted in an avoidable payment of Rs 20.31 crores, and failure to negotiate and exclude the exposure fee from the loan agreement resulted in avoidable payment of Rs 9.48 crores and future liability of Rs 2.21 crores. In the opinion of the CAG, there was also an avoidable payment of Rs 1.20 crores as commitment fee despite there being committed but unavailed advance.

The CAG found that the Government did not receive Rs 89.32 crores out of the grant of Rs 98.30 crores that was promised for the Malabar Cancer Centre.

On 16 January 2007, Kerala High Court[6] ordered a CBI enquiry into the scandal.

On February 19, 2008, the CBI informed High court of Kerala that the investigation was progressing and said that former Electricity Ministers Pinarayi Vijayan and G. Karthikeyan would be examined at the appropriate time. [7]

On 21 January 2009, the CBI filed a progress report on the investigation in the Kerala High Court. Pinarayi Vijayan had been named as the 9th accused in the case.

What is this lavalin case?

Thanks keralatips

Consider that you are entering into a business deal with a company. Now the company says that it needs 400crores for the business deal. Then it says that out of those 400 crores it will give back 100 crores as a grant to build a cancer centre!

Yes, you read it right! Does it make any sense? What is cancer has to do with hydro electric plant renovation? These questions were asked by top IAS officers at the time, but they were labeled as insane!

There is one thing that unites all parties in Kerala - Corruption…

Sometimes I wonder what would be the state of Kerala or India if there were no courts!

CPI: Lavalin case has to be fought legally

A Day after the CBI filed the chargesheet against CPI(M) state secretary Pinarayi Vijayan in the SNC-Lavalin case, the CPI and RSP, both constituents of the Left Democratic Front in Kerala, said the case should be fought legally. 



The CPI’s decision would come as a relief for Chief Minister V S Achuthanandan, who has been battling alone against Vijayan. The move to jettison Vijayan is a departure from the earlier stand of the CPI, which had tacitly supported the CPI(M) in endorsing the advocate-general’s report against prosecuting the state secretary. 

During the state executive meeting held last week, the party’s central leadership had come down on state leaders for their failure to uphold the party’s professed stand against corruption. CPI state secretary Veliyam Bhargavan was then forced to comment that the Lavalin case could not be construed as politically motivated.

CPI sources said this shift in its stance should be seen as an attempt to bring the party out of the CPI(M)’s shadow. The CPI state leadership has faced severe criticism for toeing the line of the faction of the CPI(M) led by Vijayan. 



During Friday’s party secretariat meeting, two assistant secretaries wanted to take a stand in favour of Vijayan in the Lavalin issue. However, the trade union lobby, led by a senior AITUC functionary, was vehemently opposed to the idea, as it would be suicidal for the party already facing an identity crisis in the state. 


To do a balancing act, the official release said the Governor had shown undue haste in giving the sanction for prosecution. It was unbecoming of the Governor, said the release, to bypass the Cabinet and give the sanction report to the CBI.

CBI to grill Pinarayi in Lavalin case

Kerala’s biggest financial scam, the Rs 98 crore SNC Lavalin case, took a major turn on Monday with the CBI telling the high court that it has decided to interrogate state CPI(M) secretary Pinarayi Vijayan, and former Congress Power Minister G Karthikeyan. 



The CBI submission added that it was going to broadbase its investigations into the 12-year-old scandal to Canada, where SNC Lavalin is located. The Congess-led Opposition in the state has been insisting that Vijayan, now beginning his third consecutive term as the state CPI(M) chief after vanquishing the camp of factional rival and Chief Minister VS Achuthanandan last week, was the prime mover behind the scam in his role as the Power Minister in the E K Nayanar Government. 


The scandal had its genesis in a 1996 agreement that the Congress-led UDF Government got the Kerala State Electricity Board (KSEB) to sign with a Canadian power consulting company, SNC Lavalin, for replacing and modernising the obsolete generators in three hydroelectric projects at Pallivasal, Sengulam and Panniar.

Lavalin: Governor seeks more details on AG's opinion

Thiruvananthapuram (PTI): Kerala Governor R S Gavai has sought further details from the state government on the legal opinion of state Advocate General C P Sudhakara Prasad that there was no firm ground to grant permission to CBI to prosecute CPI(M) state secretary Pinarayi Vijayan in the SNC-Lavalin corruption case. 

The legal opinion from the AG and the minutes of the cabinet decision in the case forwarded by the state government and the related documents and reports received from CBI were being examined in detail, a Raj Bhavan press release said here. 

The clarifications sought for are awaited from the government, it said, adding that an appropriate decision would be taken as stipulated in the Constitutional provisions after considering all aspects. 

The statement was issued in the wake of the "conflicting news and views appearing in the media" regarding the matter of granting sanction to prosecute Mr. Vijayan in the case, it said. 

The SNC-Lavalin case relates to alleged corruption in awarding of contract for renovation of three hydro power stations in 1997 to Canadian firm SNC Lavalin, when Mr. Vijayan was state Power Minister. 

Four months back, CBI had written to Governor, seeking permission to prosecute Mr. Vijayan, who in turn, referred the matter to the state government. 

Considering the political ramifications, the government had referred the matter to the Advocate General.

Lavalin developing into CPI-M's Bofors

The Communist Party of India-Marxist (CPI-M) is in trouble in Kerala. Its state secretary, Pinarayi Vijayan, who is a member of the party politburo, has been named in a corruption case. At the grassroots level, it has suffered erosion of popular support, resulting in humiliating defeats in by-elections to local bodies.


In the four and a half decades of its existence, the party has never faced a situation of this kind before. Since the Kerala unit is the largest and the richest, the rot here can hurt the party nationally. 



Outwardly, the most serious of the twin challenges is the decision of the Central Bureau of Investigation (CBI) to prosecute Pinarayi Vijayan along with 10 others in the Lavalin case. The arraignment of a politburo member in a corruption case for the first time dents the party's clean image. 



However, from an organisational viewpoint, the revolt at the lower levels is a more daunting challenge. It points to breakdown of the traditional bounds of discipline. 



The corruption case is a fall-out of the State Electricity Board's Rs.3.75 billion deal with SNC Lavalin, a Canadian company, for modernising three ageing hydro-electric plants. Vijayan was electricity minister at the time and had led the team that went to Montreal to conclude the deal. 



As soon as the CBI approached the state government for permission to prosecute him and some former officials, Home Minister Kodiyeri Balakrishnan, who is also a politburo member, publicly charged the central agency with implicating him as reprisal for the party withdrawing its support to the United Progressive Alliance (UPA)government. 



The party state committee repeated the allegation in a resolution and declared it would meet the challenge politically. The politburo endorsed its stand. 



Chief Minister V.S. Achuthanandan, who has been involved in a losing sectarian fight with Vijayan, did not attend the state committee meeting which adopted the resolution. He flew to New Delhi apparently to convey his reservations on the issue to party general secretary Prakash Karat. His exertions did not lead to any re-thinking by the politburo. 



The politburo's ready endorsement of the state unit's stand on the issue is proof of its clout in the party. Kerala, with only about 3.10 percent of the country's population, accounts for 34.28 percent of the CPI-M's nationwide membership of 982,155. At the last count, membership in the state stood at 336,644 as against 321,682 in the more populous West Bengal, where the party has enjoyed an unbroken run of power for more than 30 years. 



There is a qualitative difference between the party units in the two states. In West Bengal, membership is comparatively stable, annual desertions being as low as 3.29 percent. Kerala has a drop-out rate of 10.62 percent, but the party continues to grow by attracting new members. A report presented at last year's party congress said more than 40 percent of the members in Kerala had joined after 2002. 



In the elections that preceded the party congress, Pinarayi Vijayan convincingly demonstrated his hold over the organisation at all levels. The state unit, which has several businesses under its control and proven ability to attract donations from commercial interests, is believed to be a big contributor to the party's national coffers. 



With the CPI-M giving the Lavalin case a political colour, it is certain to figure as a major issue in the Lok Sabha elections. It is already highlighting facts that serve its interests. It was a previous Congress-led government that signed the memorandum of understanding with the company and it was a subsequent Congress-led government that ordered the CBI inquiry. 



The opposition counters it with arguments that serve its own interests. It was the Comptroller and Auditor General who brought to light the Lavalin deal irregularities. The Congress-led government had only given Lavalin a consultancy contract. Vijayan gave it a contract for renovation and supply of equipment. 



The public's suspicion about corruption in the deal is based on the disappearance of nearly Rs.900 million which Lavalin was to have given to a cancer research society floated by the government. It is not clear if the CBI has any information on who got the money. 



While the party faithful may readily accept the charge that the CBI was acting under political motivation, the party leadership will have a hard time selling it to voters who know that the high court ordered the CBI investigation and has been supervising it. The agency had to raid a government office to get hold of some records which the state government withheld. 



Continuous desertion by long-time party members over the past few years is indicative of disillusionment at the lower levels with the leadership. In the Onchiyam area in Kozhikode district, those who left the party on their own or were thrown out have floated a parallel Marxist Party. 



When the CPI-M expelled M.R. Murali, a municipal councillor of Shoranur in Palakkad district, eight others quit the council with him. In the byelections that followed they routed all but one of the official nominees, reducing the party to a minority in the municipality, which it has ruled since the 1970s. 



In a panchayat byelection at Ambalapuzha in Alappuzha district, which was won by a CPI-M dissident, the party's official nominee ended up in third position. 



Last week, in a bid to stem the rot, Vijayan asked the party's area committee in Shoranur to win back the rebels

ABOUT SNC-LAVALIN

Lavalin case: Congress hopes to corner Kerala CPI-M

Thiruvananthapuram: As the infighting in the Kerala wing of the Communist Party of India-Marxist (CPI-M) becomes more pronounced in the wake of the Central Bureau of Investigation's request to prosecute state secretary Pinarayi Vijayan, the opposition Congress is watching with glee.


The Congress hopes the corruption case will help it electorally and prove to be CPI-M's undoing after the Left Front had swept the Lok Sabha elections in the state in 2004.


With the Vijayan caught up in the SNC-Lavalin corruption case, political climate has never been so good for the Congress.


The party is all set to make the corruption case a big issue for the Lok Sabha elections and is all set to launch 'The save Kerala campaign' with a specific focus on the Lavalin case.


"Transparency in public life is most important issue here. Unfortunately CPI-M and politburo is trying to shield the culprits and we shall expose that to the people," says Ramesh Chennithala, Kerala Pradesh Congress Committee President. 


The Auditor General has asked three weeks time to study the letter forwarded by the Governor seeking permission to prosecute Vijayan, something which many see as a ploy by the state government to help Vijayan complete his Nava-Kerala yatra (tour).


While Chief Minister VS Achuthanathan might have made his mind clear, the rest of his Cabinet is busy shielding the part secretary.


It's this that the Congress-led opposition will look to attack in the days to come.


"We agree to what the Chief Minister says. But that's not what his ministers are doing. Chief Minister should be able to restrain his ministers from making statements that support the accused in this case," says Ommen Chandy, senior Congress leader and leader of Opposition.


The Lok Sabha elections are just two months away and the Congress in Kerala perhaps for the first time will feel that they have a real issue on their hands which could very well put them on a sound wicket in the run up to the polls.