Published on: February 12, 2025
On 12th February, a Public Interest Litigation (PIL) was filed in the Bombay High Court by Hyderabad-based journalist V. Ravi Prakash, represented by senior advocate Prashant Bhushan. The PIL seeks an investigation by the CBI or the creation of an SIT to probe the alleged fraudulent bank guarantees (BGs) accepted by the Mumbai Metropolitan Region Development Authority (MMRDA) from the private company Megha Engineering Infrastructure Ltd. (MEIL), involved in the construction of the Twin Underground Tunnel between Thane and Borivali, worth around Rs 16,600 crore. The PIL was presented before the division bench of Chief Justice Alok Aradhe and Justice Bharati H. Dangre. The matter is expected to be heard next week.
The Allegation of Fraudulent Bank Guarantees
The petitioner, senior journalist V. Ravi Prakash, alleges that fraudulent Bank Guarantees (BGs) were issued by a foreign entity in favor of MMRDA, on behalf of MEIL. Through his investigative reports, Prakash exposed these alleged misdeeds of MEIL using fraudulent BGs. The fraudulent guarantees were reportedly issued by Euro Exim Bank, which is not recognized by the Reserve Bank of India (RBI) as a foreign bank.
What is a Bank Guarantee?
A Bank Guarantee is a financial instrument that offers assurance from an issuing bank to a beneficiary, stating that in case the client (on whose behalf the guarantee is issued) fails to fulfill the terms of the agreement, the bank will compensate the beneficiary. This ensures that the buyer will comply with the terms, or the bank will cover the loss if not fulfilled.
Legal and Procedural Concerns
The PIL highlights that a notification issued by the state Public Works Department in September 2017 stipulated that performance security should only be provided in the form of BGs issued by nationalized or scheduled banks. The 2018 circular from the Finance Account Division further reiterates that BGs from nationalized banks should be the only acceptable form. The petition claims that the BGs provided by MEIL for the Twin Tunnel project were fraudulent and created with the intent to bypass these regulations.
Further Allegations Against MEIL
The petition alleges that MEIL submitted six fraudulent BGs for the Thane-Borivali Twin Tunnel project. It claims that these BGs were a mere sham, created to deceive the authorities and gain public funds without providing any real security. MEIL, which is known as the second-largest donor of electoral bonds, has been under scrutiny for alleged donations to political parties, especially the Bharatiya Janata Party (BJP), in what appears to be a quid pro quo arrangement.
Calls for Action and Investigation
Besides filing the PIL, Prakash has submitted complaints to the Reserve Bank of India (RBI), Central Bureau of Investigation (CBI), Comptroller and Auditor General (CAG), and the Ministry of Finance, regarding the fraudulent BGs involving State Bank of India (SBI) and Union Bank of India. Despite these complaints, no significant action has been taken yet. The petition claims that the authorities were aware of the fraudulent nature of the BGs but still proceeded to release a sum of Rs 1,668.74 crore to MEIL in an illegal manner. The PIL urges the court to order an investigation into the matter and calls for the immediate termination of the contract with MEIL. It also asks for the appointment of an independent agency such as the CBI, Enforcement Directorate (ED), or another relevant body to investigate the entire tender process and uncover any systemic corruption or collusion between MMRDA officials and MEIL.