REPORTABLE  

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 350 OF 2006

V.S. Achuthanandan      .... Appellant(s)

Versus

R. Balakrishna Pillai & Ors.              .... Respondent(s)

J U D G M E N T  

P. Sathasivam, J.

1) The challenge in this appeal, by special leave, is to the  

legality  of  the  order  dated  31.10.2003  passed  by  the  High  

Court of Kerala at Ernakulam allowing Criminal Appeal Nos.  

822, 823 & 824 of 1999 filed by the accused setting aside the  

order  dated  10.11.1999  passed  by  the  Special  Judge  

Idamalayar Investigations, Ernakulam in C.C. No. 1 of 1991  

convicting all the accused for the offences punishable under  

Sections 120-B and 409 of  the Indian Penal Code (in short  

‘IPC’)  and  Sections  5(1)(c)  and  5(2)  of  the  Prevention  of  

Corruption Act, 1947 (Act 2 of 1947) (hereinafter referred to as  

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‘the  P.C.  Act’)  and  sentencing  them  to  undergo  rigorous  

imprisonment.  

2) Brief Facts:-

(a)  Idamalayar Hydro Electric Power Project, a multi-purpose  

power project in Kerala was conceived and completed in the  

year 1985.  The project report was approved by the Central  

Water and Power Commission in 1973.   

(b) After  the  completion  of  the  Dam,  the  remaining  

construction  work  relating  to  the  power  tunnel  and  surge  

shaft, which are integral part of the water conductor system of  

the project, was awarded on contract basis to one K.P. Poulose  

(A4), as per the decision of the Kerala State Electricity Board  

(hereinafter referred to as the “Board”), on 19.11.1982.  The  

work relating to power tunnel was awarded at 188% above the  

Probable Amount of Contract (PAC) and the work relating to  

surge  shaft  and  allied  works  at  162% above  the  estimated  

amount  with  many  special  conditions,  as  requested  by  the  

contractor, involving heavy financial implications/advantages  

to  him  at  the  expense  of  the  Board.   Further,  there  was  

inordinate delay in completion of the work.  

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(c) During the trial  run, on 15.07.1985,  several leaks and  

cracks were noticed in the tunnel lining which was a matter of  

great public concern and caused considerable anxiety and fear  

among the public and State as well.  Discussions and debates  

were  held  in  this  regard  in  the  State  Legislative  Assembly.  

There was a public outcry for a judicial probe in this matter.  

Extensive  rectification  work  to  remedy  the  defects  in  the  

tunnel  lining  and  surge  shaft  was  undertaken  at  a  

considerable cost which was to the tune of Rs. 1.75 crore.

(d) On 02.08.1985, the Public Undertaking Committee of the  

State Legislature inspected the site and submitted its report  

recommending  a  judicial  probe.   The  State  Government  

appointed  a  sitting  Judge  of  the  Kerala  High  Court  as  

Commissioner  of  Inquiry  to  conduct  the  probe.   The  

Commission  recorded  its  enquiry,  collected  considerable  

evidence  and  submitted  its  report  in  June,  1988.   The  

Commission  came  to  the  conclusion  that  materials  placed  

before  it  prima  facie disclosed  commission  of  offences  

punishable  under  I.P.C.  and  P.C  Act  against  persons  

responsible for the same and recommended for investigation  

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into  these  offences.   The  State  Government  accepted  the  

recommendations and constituted a special team, headed by  

Superintendent of Police for Investigation.  The report of the  

special  squad  was  filed  in  the  Court  of  Special  Judge  on  

14.12.1990 in Crime No. C.C. No. 1 of 1991.   

(e) During  pendency  of  the  case,  an  application  for  

withdrawal  of  the  prosecution  against  accused  No.  5  -  G.  

Gopalakrishna  Pillai,  who  was  the  Secretary  to  the  Kerala  

Government,  Irrigation and Power Department was made by  

the  then  Special  Public  Prosecutor  on  24.08.1992  under  

Section  321  of  the  Code  of  Criminal  Procedure  (in  short  

‘Cr.P.C.’) on the ground of absence of any material to sustain a  

successful prosecution of offences alleged against him.  At this  

stage,  the appellant herein -  V.S.  Achuthanandan,  the then  

Opposition  leader  in  the  Assembly,  in  public  interest,  filed  

statement of objections against the move for withdrawal of the  

case against G. Gopalakrishna Pillai  (A5).   After full  fledged  

enquiry, the application filed by the Special Public Prosecutor  

was dismissed by the Special Judge on 16.10.1992.  

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(f) On  03.02.1993,  Criminal  Revision  Petition  No.  762  of  

1992, filed by the State against the order of Special Judge was  

allowed  by  the  High  Court.   On  the  strength  of  the  

observations made in the order of the Kerala High Court, the  

State Government took the decision to withdraw the criminal  

case against all other accused.  

(g) The  appellant  challenged  the  above  order  of  the  High  

Court in Criminal Appeal No. 122 of 1994 before this Court  

which set aside the order of the High Court and restored the  

order of  the Special  Judge declining consent for  withdrawal  

[vide V.S. Achuthanandan vs. R. Balakrishna Pillai & Ors.,  

(1994)  4  SCC 299].   Subsequently,  the  matter  was  further  

proceeded in the Court of Special Judge.

(h) During trial,  Accused No.  22,  Paul  Mundakkal became  

insane and the case against him was allowed to split, Accused  

No.4 - K.P. Poulose, Contractor, died, Accused nos. 11 and 14  

to 21 were discharged by the Court of Special  Judge in the  

final report holding that there was no  prima facie case made  

against them.  

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(i) On  14.12.1995,  charges  were  framed  against  other  

accused for various offences under Sections 120-B, 409, 430  

and 201 IPC and Section 5(2) read with Section 5(1)(c) and (d)  

of the P.C. Act.  This order of the Special Judge was confirmed  

by the High Court, but found that the charge under the P.C.  

Act is not sustainable against A5 and A8 for want of proper  

sanction  as  per  the  orders  passed  in  Criminal  Revision  

Petitions filed by the accused in the High Court.  Charge was  

amended accordingly and the accused were rearranged as A1  

to A11.  In the meantime, A7 died.  

(j) The  Special  Court,  after  analyzing  the  oral  and  

documentary evidence on record, vide its judgment and order  

dated 10.11.1999 found R. Balakrishna Pillai (A1), P.K. Sajeev  

(A3)  and  Ramabhadran  Nair  (A6)  guilty  of  the  offences  

punishable  under  Section 120-B and 409 IPC and Sections  

5(1)(c) and 5(2) of the P.C. Act read with Section 120-B of IPC.  

They were sentenced to undergo rigorous imprisonment for a  

period of five years for the offence punishable under Section  

120-B  of  IPC  and  to  undergo  rigorous  imprisonment  for  a  

period of four years each under Section 409 IPC and Section  

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5(2) of the P.C. Act read with Section 120-B IPC and to pay a  

fine  of  Rs.10,000/-  each,  in  default,  to  undergo  simple  

imprisonment for one year each.    However, A1, A3 and A6  

were acquitted of the charges under Sections 161,  201 and  

430 IPC read with Section 5(1)(d) of the P.C. Act.  It was also  

directed that the sentences shall run concurrently.  Accused  

Nos. 2,4,5,8,9,10 and 11 were found not guilty of the offences  

and they were acquitted of all  the offences with which they  

were charged.

(k) Aggrieved by the order of conviction and sentence, all the  

three accused i.e.  (A1),  (A3)  and (A6)  filed separate  appeals  

before  the  High  Court  of  Kerala  at  Ernakulam.   By  the  

common  impugned  judgment  dated  31.10.2003,  the  High  

Court set aside the conviction and sentence of all  the three  

accused  and  acquitted  them  from  all  the  charges  levelled  

against them.  

(l) Questioning  the  order  of  acquittal,  the  appellant  -  

V.S.  Achuthanandan,  filed special  leave petition against  the  

common impugned judgment and, this Court, by order dated  

27.03.2006, granted leave to appeal.  

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3) Heard Mr.  Shanti  Bhushan, learned senior  counsel  for  

the  appellant,  Mr.  U.U.  Lalit,  learned  senior  counsel  for  

R.Balakrishna  Pillai  (A1),  Mr.  Amarendra  Sharan,  learned  

senior counsel for P.K. Sajeev (A3), Mr. S. Gopakumaran Nair,  

learned  senior  counsel  for  Ramabhadran Nair  (A6)  and Mr.  

R.S. Sodhi, learned senior counsel for the State of Kerala.    

Submissions:

4)   Mr.  Shanti  Bhushan,  learned  senior  counsel  for  the  

appellant after taking us through the entire materials relied on  

by  the  prosecution,  stand  taken  by  the  defence,  elaborate  

reasonings of the trial Court in convicting the accused and the  

reasonings of the High Court in acquitting them, raised the  

following submissions:-

i)  There was enough material to show that (A1) was very much  

interested  in  favour  of  (A3)  and  with  the  

connivance/assistance of the Board officials, more particularly  

through (A6) Member of the Board, made the Board to accept  

the tender offered by K.P. Poulose (A4) at an exorbitant rate  

with various special conditions.

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ii)  The criminal  breach of  trust  has been committed by the  

accused in the following ways:-

(a) By awarding both the works of Idamalayar at a very high  

and exorbitant rate with special conditions having heavy  

financial implications.

(b) By reducing the retention and security amount.

(c) By allowing the contractor to return only fifty per cent of  

the empty cement bags.

(d) By accepting the special condition for the sale of T & P  

items (tools & plants) which could not be sold as per the  

general conditions of the contract

iii)   Contrary to the  norms and circulars/procedures of  the  

Board, in order to favour K.P. Poulose (A4), who was a friend of  

(A1), the Board has accepted all the conditions just to favour  

(A1) and (A3).

5)   Mr.  U.  U.  Lalit,  Mr.  Amarendra  Sharan  and  Mr.  S.  

Gopakumaran Nair, learned senior counsel appearing for (A1),  

(A3) and (A6) respectively supporting the ultimate decision of  

the High Court submitted that:

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i)  The outcome of the contract in favour of K.P. Poulose (A4)  

was based on a “collective decision” by the Board and there  

was no external pressure from anyone including (A1).

ii)   All  the  decisions  taken  were  in  terms  of  rules/norms  

applicable  to  the  contract  including  accepting  special  

conditions.

iii)   Mere  acceptance  of  higher  rate  would  not  amount  to  

criminality.

iv)  There is no allegation that by awarding contract in favour  

of K.P. Poulose (A4), (A1) was monetarily benefited.   

v)  No material to show that there is any wrongful loss to the  

Board.

vi)  Inasmuch as the High Court acquitted all the accused in  

respect  of  all  the  charges  on  appreciation  of  oral  and  

documentary  evidence,  interference  by  this  Court  is  very  

limited.   In  the  absence  of  perversity  in  such  conclusion,  

normally,  this  Court  would  not  interfere  with  the  order  of  

acquittal.   

vii)  In any event, inasmuch as the State has not challenged  

the order of acquittal,  the present appellant being neither a  

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complainant or heir nor a party to any of the proceedings is  

not entitled to pursue the present appeal.   Accordingly,  the  

appeal  is  not  maintainable  and on this  ground liable  to  be  

dismissed without going into the merits of the claim.   

6)   We have  carefully  analysed the materials  placed by the  

prosecution, the defence, the decision and reasonings of the  

trial  Court  and  High  Court  and  considered  the  rival  

contentions.  

Interference by this Court in an order of acquittal

7)  Learned senior counsel for the respondents by drawing our  

attention to the reasoning of the High Court and in respect of  

all the charges leveled against acquitting them submitted that  

in the absence of perversity in the said decision, interference  

by  this  Court  exercising  extraordinary  jurisdiction  is  not  

warranted. It is settled principle that an Appellate Court has  

full power to review, re-appreciate and reconsider the evidence  

upon which the order of acquittal  is founded.  The Code of  

Criminal  Procedure  (in  short  ‘Cr.P.C’)  puts  no  limitation,  

restriction  or  condition  on  exercise  of  such  power  and  an  

Appellate Court is free to arrive at such conclusion, both on  

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questions of fact and of  law.  An Appellate Court,  however,  

must bear in mind that in case of acquittal, there is double  

presumption in favour of  the accused.   The presumption of  

innocence  is  available  to  a  person  and  in  the  criminal  

jurisprudence  that  every  person  shall  be  presumed  to  be  

innocent unless he is proved guilty by a competent court of  

law.  It is also settled law that if two reasonable conclusions  

are  possible  on  the  basis  of  the  evidence  on  record,  the  

Appellate  Court  should  not  disturb  the  finding  of  acquittal  

recorded by the trial Court.  Keeping the above principles in  

mind, let us discuss the charges leveled, materials placed by  

the prosecution in support of those charges, reasoning of the  

Special Court convicting the accused and impugned order of  

the High Court acquitting all the three accused in respect of  

the said charges.      

Statutory Provisions

8) The Electricity (Supply) Act, 1948 (in short ‘the Act’) was  

in force at the relevant time.  Section 5 of the Act mandates  

each  State  to  constitute  State  Electricity  Board  for  the  

management and supply of  electricity.   As per Section 78A,  

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which was inserted by Act 101 of 1956 and came into force  

w.e.f. 30.12.1956, in discharge of its functions, the Board shall  

be guided by such directions and questions of policy as may  

be given to it by the State Government.  As rightly pointed out  

by  Mr.  Shanti  Bhushan,  learned  senior  counsel  for  the  

appellant that except on policy matters, the State Government  

has no role in the affairs of the Board.  In view of the charges  

levelled  against  A1  who  was  the  Minister  for  Electricity,  

Government  of  Kerala,  we  adverted  to  these  statutory  

provisions.

A1’s interference in the affairs of the Board:

9) It  is the case of  the prosecution that A1 while he was  

holding  office  of  the  Minister  for  Electricity,  Government  of  

Kerala was interfering in the day-to-day affairs of the Board  

including  transfers,  promotions,  appointment  of  employees,  

granting electric connection to consumers by giving directions  

to  the  Board  officers.   It  is  also  alleged  that  A1  used  to  

interfere even in awarding of contracts of the Board during his  

period as Minister for Electricity.   One of the main charges  

leveled against A1 and others is that he, in his capacity, as  

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Minister  for  Electricity  intended  to  settle  contracts  of  the  

Board in the name of his favourites or persons of his choice at  

exorbitant rates with the ulterior object of making illegal profit  

either to himself or to his favourites.  With regard to the above  

claim,  the  prosecution  has  produced  evidence  through  

Kuriakose Chennakkadan (PW-64), Jagannad Prasad (PW-66),  

Managing  Partner,  C.S.  Company,  Kottayam,  Alexander  

Vellappally  (PW-138),  Managing  Director,  Asian  Tech  and  

Kamalasanan (PW-146), Managing Director of M/s We-Build.  

According to Kamalasanan (PW-146), though he was one of the  

tenderers for surge shaft work, quoted acceptable rates, could  

not get the contract work because of the interference of A1.  He  

deposed  that,  the  then  Chief  Engineer,  late  Bharathan  

recommended his work for acceptance by the Board, but he  

was further told by Shri Bharathan that he should meet A6  

and also to give 5% of PAC as procuring expenses and if the  

said  amount  is  not  given,  the  work  could  not  be  awarded,  

hence he met A6 who told him that the rate quoted by him is  

very low and advised him to settle whether it is workable or  

not.  He further deposed that at the time when A1 was the  

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Minister,  A6  was  a  Member  of  the  Board  who  was  very  

powerful having influence over the Minister.  According to him,  

the  voice  of  A1  is  reflected  through  A6  with  regard  to  the  

affairs of the Board.

10) Shri Alexander Vellappally (PW-138), Managing Director  

of Asian Tech, in his evidence deposed that he was asked by  

A1  to  quote  for  the  Lower  Periyar  Project  Headrace  Power  

Terminal  in 1980-81 when the pre-qualification system was  

introduced  in  the  Board.   The  tender  of  Shri  Alexander  

Vellappally  was  qualified  and  the  lowest  when  it  was  

evaluated.  However, he was informed that further steps for  

negotiation  and  discussion  regarding  the  acceptance  of  the  

tender  would  take  place  only  with  the  concurrence  of  the  

Minister.  He further deposed that he met A1 several times and  

also sent letters to him and one letter sent by him to A1 is  

marked as Ext. P-544.  According to him, though he was the  

lowest tenderer, the work was not awarded to him, but given to  

HCC.  He also explained that pre-qualification bid system was  

misused by the Board officers, more particularly, in the case of  

Lower Periyar Works.       

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11) The  next  witness  who  highlighted  the  above  issue  is  

Kuriakose  Chennakkadan  (PW-64).   According  to  him,  the  

Minister used to interfere in the award of contracts and when  

he met A6, he was asked to meet A1.  He also deposed that A1  

was  interested  for  one  K.P.Poulose  (A4).   His  work  was  

terminated and it was re-tendered and awarded to K.P.Poulose  

(A4).  

12) Jagannad Prasad (PW-66), Managing Partner of M/s C.S.  

Company deposed before the Court that while he was doing  

the  contract  work  of  a  tunnel  for  Kakkad  Hydro  Electric  

Project,  he  approached  the  Chief  Engineer  Bharathan,  who  

told  him  that  the  work  could  be  awarded  only  as  per  the  

directions of the Minister (A1).  He further deposed that he had  

executed a promissory note for Rs.5,30,000/- in favour of one  

Yackochan, who acted as a middle man for the commission  

payment.   He  informed  the  Court  that  this  contract  was  

terminated by the Board.  

13) It was highlighted on the side of the appellant that it was  

during that period, when A1 was Minister for Electricity, the  

tender process of Idamalayar Tunnel and its concrete lining  

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and surge shaft work was started.  It is relevant to note that  

R. Balakrishna Pillai (A1) was the Minister for Electricity from  

27.01.1980  to  21.10.1981,  26.05.1982  to  05.06.1985  and  

25.05.1986 to  25.03.1987.   The  tender  for  surge  shaft  was  

invited  and  awarded  to  one  E.M.  Varkey  at  21%  below  

estimated rate.  The estimated rate was Rs 74 lakhs for surge  

shaft.  However, the work was abandoned on 28.03.1981 due  

to labour strike.  Thereafter, tenders were invited again for the  

surge  shaft  and  four  persons  submitted  their  offers  for  

tenders.   The lowest rate was quoted by M/s We-Build Pvt.  

Ltd. and the next lowest rate was by E.M. Varkey at 57% above  

PAC.  It is pointed out that though the work was recommended  

to  be  awarded,  the  Board  decided  to  re-tender  the  work.  

Accordingly, the tenders were invited again and E. M. Varkey  

alone quoted for the work.  His tender was not accepted since  

he quoted exorbitant rate.  In the meanwhile, pre-qualification  

bid system was introduced in the Board which is evident from  

Ext. P-576 dated 24.09.1981, which was made applicable to  

Idamalayar  contract  works.   Thereafter,  tender  for  both the  

works were invited by Shri Bharathan, the then Chief Engineer  

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which is evident from Ext. P-46 dated 05.06.1981.  However,  

the tender was cancelled by him which is also clear from Ext  

P-47  dated  22.10.1981.   The  Chief  Engineer  extended  the  

validity of the tender upto 29.04.1982 and after his demise,  

the  then  Chief  Engineer  (PW-7)  extended  the  validity  upto  

30.06.1982. During that time, two tenders were received, one  

by K.P.Poulose and other by Kuriakose Chennakkadan (PW-

64),  quoting  special  conditions.   The  cover  containing  the  

conditions and deviations was opened on 30.06.1982, when  

K.P.Poulose  was  present  in  the  Board’s  Office.   However,  

Kuriakose, the other tenderer was not informed and later on  

09.09.1982, K.P.Poulose was pre-qualified and Kuriakose was  

disqualified which, according to him, was without notice.  The  

contract for the balance power tunnel and concrete lining work  

of Idamalayar works was ultimately awarded to K.P.Poulose at  

188% of the above estimated rate and the surge shaft work  

was also awarded to him at 162% above the estimated rate.  

14) It is clear from the above materials that the process of  

tendering  of  Idamalayar  works  was  interrupted  on  several  

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occasions mainly by the Board by cancelling the tenders and  

ordering re-tender and by extending the period of validity of  

tenders more than once.  It was on the last date of extension of  

the  validity  of  the  tender  i.e.  on  30.06.1982,  K.P.Poulose  

appeared  and  submitted  his  tender  with  special  conditions  

which  was  later  accepted  in  the  Board’s  meeting  dated  

19.11.1982.   The Special  Judge,  basing reliance on Board’s  

resolution (Ex. P550(a)), has rightly concluded that there was  

inordinate delay in awarding the work which reasoning was  

not accepted by the High Court.  The materials placed clearly  

show that it was nearly three years to take a decision.  It is  

also clear from the evidence of PWs 64, 66, 138 and 146 which  

clingingly  established  the  circumstances  under  which  A1  

conceived  the  idea  for  fixing  contract  of  the  Board  at  

exorbitant rate in order to derive monetary benefits.  From the  

above,  the  contrary  conclusion  arrived  by  the  High  Court,  

according to us, is not in terms of the evidence led in by the  

prosecution.              

19

Whether  Idamalayar  contract  was  awarded at  exorbitant  

rate causing loss to the Board

15) The basic stand of the prosecution is that A1 entered into  

criminal conspiracy to award the disputed contract involving  

heavy financial  gain to K.P.Poulose  (A4)  and the  conspiracy  

and  abuse  of  power  by  certain  officials  enabled  the  

conspirators  to  earn  a  pecuniary  advantage  of  

Rs.2,39,64,253/-, in addition to the financial loss caused to  

the Board.  It is the specific case of the prosecution that rate  

awarded  in  both  the  contracts  is  exorbitant.   It  is  not  in  

dispute that the contract was awarded at 188% above PAC in  

the case of tunnel work and 162% above PAC for the surge  

shaft  work.   Verification  of  Ext.  P-52(b)  shows  that  the  

sanctioned  estimate  for  the  tunnel  work  was  

Rs.1,17,20,633.90.  On the other hand, the accepted tender  

amount  as  per  the  award of  contract  was Rs.2,45,80,796/-  

which is clear from Ext P 52.  It is further seen as per Ext P-68  

agreement, the sanctioned estimate for surge shaft was Rs. 74  

lakhs and it was awarded for Rs.1,42,94,901/-  The estimate  

for floor concreting was Rs.479.5  per M3   and the estimated  

20

rate for sides and arches was Rs.476.20 per M3.  All the above  

details  were  highlighted  in  the  evidence  by  PW-151  a  

competent  Engineer.   Likewise,  the  rate  for  floor  concreting  

awarded to K.P.Poulose was Rs.825.47 per M3.   In fact,  the  

calculations made by PW-151 were not seriously disputed by  

the defence.  

16) In order to appreciate the stand that the estimated rate  

and  the  tender  quoted  by  K.P.Poulose  was  exorbitant  was  

demonstrated by Mr. Shanti Bhushan by taking us through  

the  estimated  cost  of  the  work  awarded  to  skilled  workers  

brought from Kulamavu and Moolamattom, who were awarded  

the tunnel driving work on piece rate basis.  It is seen that the  

tunnel driving work was awarded to them at the rate of Rs.  

1,250/- per M3 which was enhanced later, and finally, at the  

time, when the workers stopped the work, the rate was Rs.  

1,900/-  per  M3.   This  is  clear  from  the  settlement  

memorandum Ext.  P-212 signed between the  labourers and  

the Board.  This fact was highlighted in the oral evidence of  

PW-7,  Chief  Engineer  of  the  Board.   In  his  evidence,  he  

explained that the rate awarded to workers will be Rs. 2,500/-  

21

per M3 including cost of materials.  PW-156, the Investigating  

Officer,  also gave evidence on the  basis  of  records collected  

during his investigation.  Ext.P-52 agreement shows that the  

estimated rate for driving one meter tunnel was Rs. 4,090/-.  

Ext. P-19/Contract Certificate of the Power tunnel shows that  

the amount paid to the contractor for 24 meters tunnel driving  

was Rs. 2,39,961/-.   It  was highlighted that when the total  

work was done by the labourers at piece rate basis, they were  

given  Rs.  2,500/-  only  per  M3.   The  remuneration  for  24  

meters  driving  tunnel  would  come  to  only  Rs.60,000/-  the  

difference i.e. Rs.1,79,961 (2,39,961-60,000) would show that  

the tunnel driving work was given to K.P.Poulose (A4) at an  

excessive rate.

17) It is pointed out that there is enough material to show  

that the labourers, who did the tunnel work, were prepared to  

carryout the balance work of the tunnel at the estimated rate  

of Rs. 4,090/-.  At the relevant time, the representatives of the  

workers  made  a  representation  to  the  then  Minister  for  

Electricity,  namely,  R  Balakrishna  Pillai  (A1)  informing  him  

that they are prepared to do the tunnel work and allied works  

22

at  the  estimated  rate.   Divakaran  Kutty  (PW-24),  

Vadayattupara Radhakrishnan (PW-33), Sasidharan Nair (PW-

34) and Muraleedharan Pillai (PW-46) have given evidence that  

they represented before the Minister as well as the officials of  

the Board and informed their preparedness to do the work at  

the estimated rate  and also requested for  absorption in the  

Board’s service.  In this regard, Mr. Shanti Bhushan, learned  

senior counsel appearing for the appellant heavily relied on the  

evidence of PW-46 who had gone to meet A1 along with (late) N  

Sreekantan  Nair  and  submitted  a  Memorandum  Ext.P-287  

dated 01.06.1982.  It is relevant to note the response of the  

Minister (A1) for the above said request. PW-46 stated that A1  

told them that there is no question of giving the works to the  

workers and he wants to give the work to K.P.Poulose.  This  

instance  pointed  out  that  A1  had  personal  interest  in  

K.P.Poulose and had decided to entrust the contract to him,  

though at that time, the said K.P.Poulose did not submit the  

tender for the work.  We have already noted that K.P. Poulose  

submitted his tender only on 30.06.1982 i.e. a month after the  

memorandum  dated  01.06.1982  submitted  by  PW-46.   In  

23

support of the same, the evidence of PW-122, T.M. Prabha, the  

then President of the Kerala Construction Labour Union that  

he met A1 and gave representations and requested for award  

of work to the workers at estimated rate and also absorption of  

the workers in the Board’s service on permanent basis is also  

relevant.  Here again, it is relevant to note that PW-122 was  

also informed that there is no question of awarding work to  

workers,  but  the  work had to  be  given  to  K.P.Poulose.  The  

evidence of PWs-46 and 122 and the statement made by A1 to  

both of them clearly show that K.P. Poulose was the contractor  

chosen in advance by A1 and other accused who were also  

interested  in  him.   As  rightly  pointed  out  by  Mr.  Shanti  

Bhushan,  this  evidence  should  be  connected  with  the  

conspiracy to award the work to K.P.Poulose at exorbitant rate  

originated even prior to the submission of tenders to the work  

by K.P.Poulose and other tenderers.  The contrary conclusion  

arrived at by the High Court justifying the award at higher rate  

to  K.P.Poulose  cannot  be  legally  sustained.   The  Board  is  

empowered  with  the  authority  to  award  contracts  and  has  

discretion to accept and being an authority constituted under  

24

the Statute and a Pubic Undertaking is not expected to accept  

tenders at exorbitant rates with financial implications causing  

loss to the Board.  The Board is always expected to protect its  

financial interest while awarding contracts.  The Board mainly  

relied  on  the  labour  problem  that  was  prevailing  at  the  

relevant time.  In this regard, it is relevant to point out that  

the tender for the Idamalayar work was invited in March, 1982  

and four persons, namely, Kamalasanan (PW-146), Managing  

Director,  We-Build,  C.K.  Verghese,  E.M.Varkey  and  V.A.  

Thankachan  submitted  tenders  vide  Exts.  P78  series  dated  

21.03.1982.  It is true that the tunnel workers went on strike  

on  20.04.1981  and the  contractors  submitted  their  tenders  

when there was labour unrest.  However, the reason attributed  

for the delay cannot be accepted.  As rightly pointed out, there  

were  procedural  irregularities  and  omissions  by  the  Board  

authorities in the manner of dealing with tenders submitted by  

K.P.Poulose  and  Kuriakose,  which  ultimately  eliminated  

Kuriakose  from  the  scene,  keeping  K.P.Poulose  as  the  sole  

tenderer, qualified by pre-qualification Committee of the Board  

and hasty steps were taken by the Board in awarding contract  

25

in favour of  K.P.Poulose in the meeting held on 19.11.1982  

lead to the conclusion that the award of contract in favour of  

K.P.Poulose was an exorbitant one.  It is relevant to point out  

that the Special Judge, by adverting to Ext 550(a) expressed  

that the reasons stated by the Board in awarding contract in  

favour of K.P. Poulose at exorbitant rates are not acceptable.   

No serious discussion by the Board

18) It is pointed out and in fact taken us through evidence  

that  there  was no serious  discussion  in  the  Board  meeting  

held  on  19.11.1982  and  the  minutes  of  the  Meeting  were  

prepared as dictated by A7, the then Chairman of the Board. It  

is  the  responsibility  of  the  members,  more  particularly,  full  

time  members  of  the  Board,  who  were  responsible  for  the  

scrutiny  of  the  deviations  and  conditions  suggested  by  the  

contractor  which involved huge financial  implications to see  

that all transactions are beneficial to the Board and within the  

permissible limit.   Mr.  Lalit  and Mr.  Sharan, learned senior  

counsel  appearing  for  A1  and  A3  respectively  heavily  

contended that it was a collective decision of the Board and  

there was no external pressure from anyone including A1.  It is  

26

relevant  to  point  out  that  the  decision  ultimately  taken  for  

awarding the contract with special conditions, which we will  

discuss  in  the  later  paras,  as  suggested  by  the  contractor,  

involved huge financial implications at the risk and loss of the  

Board.  Though the High Court has concluded that the part-

time members who were signatory to Ex550(a) had approved  

the  minutes,  subsequently,  the  Special  Court  made  a  

distinction  between  the  responsibility  of  full-time  members  

and that of part-time members in the matters of awarding of  

contract.  It is true that all the members present subscribed  

their  signature  in  the  minutes  in  awarding  contract  to  

K.P.Poulose.   It  was  highlighted  that  in  evidence,  A8,  the  

Financial Adviser to the Board, in his report has stated that  

the rates awarded to the contractor are very high.  The letters  

sent by A8 were marked as Exs. P-415 and 416.  It is also  

relevant  to  point  out  that  the  then  Law  Secretary,  Shri  

Viswanathan  Nair  also  conveyed  his  opinion  during  the  

meeting  of  the  Board  that  the  rates  are  exorbitant.   These  

aspects  were  taken  note  of  by  the  Special  Court  while  

considering the culpability of the accused and the High Court  

27

was not serious about their views.  In other words, the High  

Court has concluded that the award of contract to K.P.Poulose  

was a collective decision of the Members of the Board.  The  

High Court also pointed out which was again highlighted by  

the  learned  senior  counsel  appearing  for  the  accused  that  

majority of the Members of the Board were highly qualified and  

responsible officers and it cannot be said that they were only  

mute witnesses to the decision of the Board.  In this regard, it  

is  relevant  to  point  out  that  the  Special  Court  has  rightly  

concluded that there was no serious discussion in the Board  

Meeting  dated  19.11.1982  when  the  question  of  award  of  

contract was taken up and the minutes of the meeting were  

prepared as dictated by A7, the then Chairman of the Board.  

The  then  Deputy  Secretary  of  the  Board,  R.  Sankaran was  

examined  as  PW-140,  also  admitted  this  aspect  and  stated  

that there was no serious discussion in the meeting held on  

19.11.1982.   He  explained  that  Ex.550(a)  minutes  of  the  

meeting  is  a  reproduction  of  the  dictation  given  by  the  

Chairman of the Board (A7).   

28

19) The High Court has pointed out that the prosecution has  

not produced any contemporaneous agreement for proving the  

rates  prevalent  during  the  relevant  period  of  award  of  the  

contract.   The  High  Court  found  that  the  contract  was  

awarded at 188% above PAC for the tunnel work and 162%  

above PAC for the surge shaft work.  It was pointed out from  

the  side  of  the  Board  that  the  estimate  rate  was  prepared  

taking into account the prevalent PWD rates for similar items  

of work like tunnel driving, concrete lining, earth work, cost of  

materials, labour charges, transportation charges of materials  

to worksite etc.  It is not in dispute that the contractor was  

also given opportunity to conduct site inspection and decide  

other aspects connected with the execution of the works for  

submitting his tender rate.  Though contractor can also quote  

special  conditions  involving  financial  implications  and other  

conditions  in  the  contract,  which  is  usually  settled  by  

negotiations, but the general conditions of contract shall not  

be  superseded  while  accepting  special  conditions  to  the  

detriment of the Board.  The Special Judge had noted that the  

rate quoted by N.K.Kuriakose (PW-30) for tunnel driving and  

29

surge shaft work was below 21.75% of the estimated rate and  

there was much difference in the rate quoted by K.P.Poulose  

and Kuriakose.  It is further seen that the work was awarded  

to Kuriakose at the rate of Rs. 1,092.3 per M3 for sides and  

arches.  The work awarded to Kuriakose was abandoned by  

him  since  the  Board  did  not  provide  him  with  necessary  

materials for proceeding with the work as per the agreement.  

He  adduced  evidence  for  the  said  abandonment  and  also  

suffered loss in that regard for which Board was subsequently  

held liable and he was paid compensation as per the Court  

orders.   The work was awarded to N.K.  Kuriakose in 1979.  

The Special Court has pointed out that even though there was  

an increase of 25% of the actual rate awarded to Kuriakose,  

still there was wide difference between the rates at which the  

two works were awarded and on this ground also, the Special  

Court held that the works for floor concreting and for sides  

and  arches  were  awarded  to  K.P.Poulose  at  a  higher  rate.  

However, the High Court disagreed with the conclusion of the  

Special Court.  In this regard, it is useful to refer Ext.P174(2),  

which  is  a  report  with  regard  to  the  rate  of  award  of  

30

Idamalayar  contract.   It  was  stated  in  the  report  that  the  

estimate was prepared with the scheduled rate of 1980 which  

had been enhanced by 25% on labour to obtain 1982 schedule  

and  the  work  was  awarded  after  the  enhancement  of  the  

scheduled  rates.   It  is  further  seen  that  the  estimate  was  

prepared with the scheduled rate of 1980 for the purpose of  

obtaining the rate of 1982 i.e. increase of 25% in the rate was  

given in 1980.  The High Court  has justified the increase of  

25%  by  pointing  out  the  increase  mentioned  in  Ext.P299  

which relates to contractor’s profit of 10%, overhead charges of  

10% and 5% for labour benefits.  Though the High Court has  

agreed  with  the  25%  increase  in  the  rate  of  1980-82,  no  

acceptable evidence was adduced over-riding the documentary  

evidence furnished by Ext.P-299 and P174(2).  

Award of contract to K.P. Poulose (A4)

20) It is the argument of Mr. Shanti Bhushan, learned senior  

counsel for the appellant that the tendering process adopted  

by the Board was with a view to eliminate other tenderers and  

to choose  the tenderer  of  their  choice,  namely,  K.P.Poulose.  

This  was  elaborated  by  pointing  out  that  Kuriakose  was  

31

disqualified  without  giving  him  adequate  opportunity  to  

present before the pre-qualification Committee and ultimately  

K.P.Poulose was declared as qualified.  In the said meeting,  

only A6 and A7 were present and A8, and another member of  

the pre-qualificaton Committee was not present.  Pursuant to  

the  decision  that  Full  Board  meeting  should  be  held  on  

19.11.1982  to  decide  the  question  of  award  of  Idamalayar  

contract,  PW-7  was  directed  to  issue  notice  to  all  the  

tenderers.  The materials relied on by the prosecution shows  

that on 18.11.1982, notices were issued to HCC, E.M.Varkey,  

Sunny  K.  Peter  and  K.P.Poulose.   It  is  seen  that  only  

K.P.Poulose was present on 19.11.1982.  Sunny K. Peter PW-4  

sent a telegram on 19.11.1982 stating that he is not physically  

well.  HCC conveyed their inability to the Board by their letter  

which  was  received  in  the  office  of  the  Chief  Engineer  on  

22.11.1982 stating that there was no sufficient time given to  

attend the Board Meeting on 19.11.1982.  Without verifying  

the  fact  that  whether  all  the  other  tenderers  were  ready,  a  

decision was taken on 19.11.1982 itself by accepting the offer  

of K.P.Poulose with special conditions.  As rightly pointed out,  

32

the Board being a statutory authority, ought to have waited for  

a  reply  from the  other  tenderers  to  ascertain  whether  they  

actually  received  notices  and  reason  for  their  inability  to  

attend.  It was demonstrated that it was a pre-planned attempt  

to award the work to K.P.Poulose alone and the notices issued  

to other tenderers were in the form of an ultimatum.  It was  

also pointed out that for the negotiation on 04.11.1982, i.e.  

prior to 19.11.1982, held by PW-7, with the tenderers, in the  

office of the Board only K.P.Poulose and Sunny K. Peter were  

present.  It is further seen that E.M. Varkey and HCC were not  

invited.  The fact remains that PW-7 did not invite E.M.Varkey  

who  quoted  less  rate  and  HCC,  a  reputed  construction  

company for the second negotiation.  Though a telegram was  

sent on behalf of E.M.Varkey, one of the tenderers that since  

he was away and request was made to fix another date, it was  

recorded that  the  tenderer  had already  lost  his  opportunity  

offered.  This has been demonstrated by the appellant that the  

Board was not prepared to allow the request of E.M. Varkey for  

a  discussion.   It  is  useful  to  refer  here  that  the  pre-

qualification  Committee,  headed  by  A7,  gave  chances  to  

33

K.P.Poulose to correct the errors and mistakes in the tender  

form submitted by him for the impugned works, on the other  

hand,  such  concession  was  not  afforded  to  the  other  

tenderers,  more  particularly,  E.M.  Varkey.   Both  Sunny  K.  

Peter  and  Kuriakose  were  examined  as  PWs-4  and  22  

respectively.  The evidence of Kuriakose shows that he was an  

experienced contractor, quoted 124% above PAC for the work  

and submitted his tender on 30.06.1982.  According to him,  

he was not invited for any discussion.  He was disqualified on  

09.09.1982 and was not invited for being present for opening  

his deviations and conditions in the tender.  In the same way,  

the evidence of Sunny K. Peter PW-4 also highlighted how he  

was  discriminated,  though he  has quoted  only  135% above  

PAC,  he  was  not  given  opportunity  to  consider  the  

reasonableness of the rates quoted by him.  According to him,  

he  received  notice  only  at  2.40  p.m.  on  18.11.1982  and  

because  of  his  illness,  he  could  not  attend  the  meeting  on  

19.11.1982.  The fact remains, the Board has not considered  

his request and finalised the contract on 19.11.1982 in favour  

of K.P.Poulose.                             

34

21) Another aspect highlighted by the learned counsel for the  

appellant  relates  to  the  conduct  of  A1  with  regard  to  

settlement of labour dispute.  The evidence shows that there  

was labour strike in the tunnel area which started in April,  

1981  and  continued  from  the  time  of  inviting  tenders  on  

05.06.1981  till  the  time  of  award  of  contract.   It  was  

highlighted that there was no effort on the part of A1 to settle  

the labour dispute before tendering process was initiated.  We  

have highlighted the Memorandum submitted by the labourers  

to A1 on several occasions requesting for settlement of labour  

problems.  It was not settled and the matter was kept alive till  

the  tender  was  fixed  in  the  name  of  K.P.Poulose  on  

19.11.1982.  It was only after the award of the contract, A1  

took initiative to settle the labour dispute, more particularly,  

when he came to know that K.P.Poulose cannot enter the site  

because of the obstruction of the workers to begin the contract  

work.  It is relevant to point out that PW-7 informed A1 and A6  

more  than  once  that  in  case  the  labour  dispute  could  be  

settled  in  advance,  the  contract  could  be  awarded  at  a  

35

reasonable rate.  The evidence of PW-7 clearly shows that his  

request was not accepted by A1 and A6.   

22)  The evidence discussed above show that the rate quoted  

by  Sunny  K.  Peter  (PW-4)  vide  his  evidence  in  Court,  was  

135%  above  PAC,  which  was  less  than  188%  above  PAC,  

quoted by K.P. Poulose and approved by the Board.  The High  

Court failed to take note of the importance of evidence of PW-4  

and  justified  the  action  of  the  Board  in  not  pursuing  the  

tender submitted by Sunny K Peter (PW-4) with a lesser rate  

on the ground that his tender is liable to be rejected since he  

wanted  an  arbitration  clause  in  the  agreement.   Further,  

though PW-4 has quoted lesser rate than K.P. Poulose, in his  

evidence,  he  has  highlighted  that  he  was  not  given  an  

opportunity to consider the reasonableness of the rate quoted  

by him i.e. 135% above PAC.  The High Court has not only  

ignored his assertion but found that the rate quoted by him for  

the surge shaft work is not a lesser rate when compared to one  

quoted by K.P.  Poulose  i.e.,  188% above PAC.   Though the  

Special Court has correctly found that Sunny K. Peter quoted  

less than the rate quoted by K.P. Poulose, the High Court, on  

36

erroneous  assumption  found  fault  with  the  finding  of  the  

Special Court which correctly appreciated prosecution case.

Acceptance of Special Conditions & Concessions

23)  With regard to allegation of the prosecution that certain  

Special  Conditions  were  accepted  by  the  Board  (Ex.  P588)  

involving  huge  financial  commitments  favourable  to  the  

contractor causing loss to the Board, it is relevant to mention  

that one of  the special  conditions, is condition No.  4 which  

relates to tools and plants sold to the contractor in violation of  

the  General  Conditions  of  the  contract.   These  special  

conditions along with other conditions were accepted by the  

Board superseding corresponding agreement provisions.   Ex  

P52 (c) is the general conditions of contract and instructions to  

the contractors issued by the Board.  Among various clauses,  

Clause E1-091 in Ex. P52(c) deals with tools and plants issued  

to  the  contractors.   This  clause  provides  that  the  Board  is  

bound to make available  to the contractors  only such tools  

and plants listed in the Schedule attached thereto, that too  

subject to availability.  Such items of tools and plants which  

are listed in Ex. P52 agreement marked as Ex. P52(d) shows 8  

37

items  of  tools  and  plants  which  can  be  hired  out  to  the  

contractors  if  requested  on  the  specified  rates.  In  Ex.  P58,  

deviations and conditions submitted by the contractor as Item  

No 4, stated that such tools and plants listed in Ex. P52(d)  

shall be sold to him on outright sale at book value deducting  

depreciation and the cost may be recovered on prorata basis  

from  his  bills.   The  full  Board,  in  its  decision  dated  

19.11.1982, had accepted the above special condition of the  

contractor.  It is relevant to point out that these items includes  

tipper  wagons  loco,  louder,  existing  truck  lines  and  pipes,  

items which can only be hired to the contractor as per clause  

E1-091 of the General Conditions of the contract.   It  is the  

case of the prosecution that it was the decision of the Board to  

sell those items of tools and plants which includes very costly  

foreign imported materials.  The official examined on the side  

of the prosecution pointed out that there is no provision in the  

general conditions of the contract enabling the Board to effect  

sale  of  those  tools  and plants  to  the  contractor.   However,  

certain materials belonging to the Board mentioned in Clause  

E1-093 and not covered by the list mentioned in Clause E1-

38

091 could be sold to the contractors if available to the Board.  

The evidence led in clearly shows that the sale of materials  

listed in Clause E1-093 supersedes the general conditions of  

contract.   In other words,  it  is clear from the evidence that  

those  materials  which  were  not  mentioned  in  the  Special  

Conditions were sold to the contractor on outright sale.  In this  

regard,  it  is  useful  to  refer  the  evidence  of  Udayabhanu  

Kandeth PW-136, Auditor attached to the Accountant General  

Office which shows that 126 items of tools and plants were  

sold to the contractor of which the cost of 117 items was Rs.  

16.5 lakhs.  The Auditor of the Board, who was examined as  

PW-130, also explained about the sale of tools and plants to  

the contractor, which was not provided in the agreement.  It is  

clear from the evidence that the sale of tools and plants which  

could only be hired to the contractor as per the list in E1-091  

was against the objections raised by A8, the Financial Advisor  

and Chief Accounts Officer of the Board during the relevant  

period.   In  his  report,  A8  had  noted  that  the  financial  

implications involved in the sale of items of tools and plants  

were not considered either by the Board or by the officers of  

39

the Board at the time when the full Board decided to sanction  

the  above  special  condition  No.  4  of  the  contract.   These  

aspects  have  been  duly  considered  by  the  Special  Court,  

namely, that the tools and plants which are only to be hired as  

per  Clause  E1-091  to  the  contractor,  however,  the  Board  

permitted outright sale which is detrimental to the financial  

interest  of  the  Board.   These  important  aspects  have  been  

overlooked by the High Court while upsetting the decision of  

the Special Court.   

24)  In addition to the same, the prosecution has led in further  

evidence to show that the contractor was favored in several  

aspects.   PW-128,  V.  Ramanarayanan,  Superintending  

Engineer,  in  his  evidence  has stated that  pental  placer,  an  

imported item not included in the list for issue on hire, was  

sold to the contractor, the sale value of which was Rs. 4 lakhs  

and according to him only lump sum recoveries were made  

from the CC bills of the contractor, instead of prorata recovery  

as provided in the agreement.  This also caused loss of interest  

on the sale price  of  materials.   He further deposed that 30  

items of  spares were issued to the contractor costing Rs.  6  

40

lakhs and when he calculated the total value of spares and  

materials  issued  to  the  contractor  it  came  around  Rs.  36  

lakhs, out of which, only a portion was recovered by the Board  

from the contractor vide Ex P517-P519.  This witness has also  

pointed out that there were several items sold to the contractor  

without obtaining sanction of the Board.   

Return of empty cement bags by the Contractor

25) Another  special  condition  sanctioned  by  the  Board  in  

favour of the Contractor relates to the return of empty cement  

bags.  This special condition provided that the Contractor shall  

return only 50% of empty cement bags in good condition.  Ext.  

P-33, Audit Enquiry Report of Idamalayar Project Circle states  

that the Contractor had to return 65,100 empty cement bags,  

the  value  of  which was calculated  at  more  than Rs.1  lakh.  

According to the Auditor, because of the special condition, the  

Board had sustained a loss of Rs.1,08,879.75.  The Financial  

Advisor and Chief Accounts Officer, who arrayed as A8, had  

stated in Ext. P-416 that without evaluating the exact financial  

implications,  sanction  was  accorded  by  the  Board  to  the  

special condition regarding return of empty cement bags to the  

41

advantage of the Contractor for getting financial gain.  Though  

it is stated that the condition only provides for return of 50%  

empty cement bags in good condition and for the remaining,  

the rate provided by the general conditions of contract could  

be realised from the Contractor, the fact remains, the special  

condition  which we  are  concerned  does  not  provide  for  the  

realisation of value of the remaining unreturned cement bags.

26) With  regard  to  special  conditions,  the  High  Court  has  

held that inasmuch as there is a provision in tender to enable  

the Contractor to get special conditions, it cannot be said that  

the special conditions and deviations of the Contractor should  

not be accepted.  Here, the High Court has missed the real  

issue as to whether all special conditions as requested by the  

Contractor  can  be  sanctioned  by  the  Board  in  violation  of  

general conditions of contract, which is the standing order of  

the Board applicable to all contracts and the policy adopted by  

the Board.  Simply because there is a provision to enable the  

contractor to suggest special conditions advantageous to him,  

it does not mean that the Contractor can suggest any special  

condition which involved financial implication to the detriment  

42

of the Board.   As correctly found by the Special Court, the  

special condition No.4 relating to sale of tools and plants is a  

favour  done  by  the  Board  to  the  Contractor  for  obtaining  

financial gains at the risk of Board’s loss.  The Special Court  

has substantiated its finding on the point based on evidence  

furnished by the auditors.  However, the High Court relying on  

Ext  D-28  provided  for  recovery  of  balance  50%  of  empty  

cement bags not returned or returned in damaged condition  

and  recovery  will  be  effected  as  stipulated  in  the  tender  

condition, erroneously concluded no loss could be sustained to  

the Board.  It is relevant to point out that the special condition  

No.10 clearly states that the contractor is bound to return only  

50% empty cement bags in good condition.  To make it clear,  

this condition supersedes the corresponding general condition  

of the contract.  Therefore, the Contractor is bound to return  

50% of empty cement bags in good condition and there is no  

need to pay the price of balance 50%.  Accordingly, the Board  

can  act  only  on  the  basis  of  the  special  condition  No.10  

regarding the return of empty cement bags and is not entitled  

to  recover  the  value  of  balance  50% of  unreturned  cement  

43

bags.  The contrary conclusion arrived at by the High Court  

relating to return of empty cement bags cannot be accepted.

Fixation of security and retention:

27) Yet  another  special  condition  involving  financial  

implications sanctioned to the Contractor is with regard to the  

fixation of security and retention amount.  Special Condition  

No.1 of Ext.P-588 deals with this subject.  It is the prosecution  

case that  restriction of  security  and retention amount is  in  

violation of the provisions contained in the general conditions  

of the contract and it is a favour shown to the Contractor to  

make illegal gains at the expense of the Board.  Clause E1-008  

of Ext. P52(c) is the provision relating to security deposit of the  

Contractor which states that for major works where the cost of  

construction exceeds Rs.25 lakhs, the security deposit should  

be 2% of the PAC.  In the case on hand, the PAC of Idamalayar  

contract works exceeds Rs.25 lakhs.  There is no dispute for  

the same.  The security for both works should be fixed at 2%  

of  the  PAC.   Clause  E1-011  of  ExtP-52  is  the  general  

conditions of contract and instruction to the tenderers dealing  

with  retention  of  the  money  from  the  bills  payable  to  the  

44

Contractor.   As  per  this  clause,  from  each  bill  of  the  

Contractor  10%  should  be  deducted  towards  additional  

security.  However, the retention was not to exceed 5% of the  

PAC where cost of work exceeds Rs.25 lakhs.  Therefore, 5% of  

PAC  is  to  be  retained  as  retention  amount  for  both  these  

works.   In  this  regard,  it  is  relevant  to  refer  the  special  

condition.  In  the  case  of  tunnel  work,  the  retention  and  

security is limited to Rs.5 lakhs which is clear from Ext.P-71.  

Likewise, in the case of surge shaft, security is limited to Rs.1  

lakh as evidenced by Ext.P-69.  This is also strengthened from  

the evidence of PW-8 who was the Executive Engineer in the  

Idamalayar  project.   He explained that  the  security  amount  

and retention amount due from the contractor would come to  

Rs.12 lakhs.  Inasmuch as the PAC for both works would come  

to Rs.2,45,80,796/-, the retention amount in the case of surge  

shaft work would come to Rs.7.2 lakhs, which is 5% of the  

PAC.   PW-8  has  explained  that  the  restriction  of  retention  

amount is  a benefit  shown to the  Contractor.   In Ext.P-65,  

report  of  PW-7,  also  calculated  financial  loss  that  will  be  

sustained  by  the  Board  in  limiting  security  and  retention  

45

amount  of  the  Contractor.   In  the  same  report,  PW-7  also  

mentioned the loss of interest for the same.  It is also pointed  

out that due to restricting the security and retention amount  

as  per  the  special  condition  No.1,  sanctioned  to  the  

Contractor, the liquidated damages payable by the contractor  

shall not exceed the whole amount of retention plus security  

deposit.  The result of restriction of security and retention is  

that the liquidated damages payable by the Contractor is also  

automatically restricted accordingly.  In that event, the Board  

is  not  entitled  to  recover  any  amount  by  way  of  liquidated  

damages  even  if  the  Contractor  is  guilty  of  negligence  or  

default.  All these aspects have been properly scrutinized by  

the Special  Court.   No doubt,  the High Court  relied on the  

evidence of Madhavan Potti (PW-5) that acceptance of special  

conditions in a contract is a normal procedure.  In the same  

way, the High Court has also placed reliance on the evidence  

of  Ramanarayanan  (PW-21)  that  reduction  of  security  and  

retention amount is also a normal procedure.  A perusal of  

Kerala State Electricity Board Tender Regulations show that  

the reduction of security deposit is permissible only in the case  

46

of established firm/Company and that the security deposit of a  

new contractor shall not be reduced.  The course adopted by  

the Board is contrary to the condition contained in Regulation  

No.25(c) of the Board’s Regulations.  Though the High Court  

has  observed  that  in  all  major  contracts,  it  is  an accepted  

practice to put a ceiling on the security and retention amount  

and there is no acceptable evidence to support such a finding,  

we are unable to accept the observation of the High Court that  

“for  the  success  of  execution  of  major  contract  works,  

small favours are inevitable”.  We conclude that the above  

observation of the High Court is based on a general opinion  

not supported by any material or evidence on record.

Criminal Conspiracy

28) On  this  aspect,  the  Special  Court  has  analysed  the  

evidence of witnesses and considered the documents produced  

and marked by the prosecution and concluded that there is  

sufficient evidence for finding that a criminal conspiracy was  

hatched out at the instance of  A1 (R.Balakrishna Pillai,  the  

then Minister for Electricity) and P.K. Sajeev (A3) who was a  

close associate and political ally of A1.  This was strengthened  

47

by  the  evidence  of  I.K.  Prabhakaran,  Assistant  Engineer,  

Quality Control, Idamalayar project who was examined as PW-

21  and  other  witnesses.   Nobody  has  challenged  the  

relationship  between  A1  and  A3.   It  is  the  case  of  the  

prosecution that a conspiracy was hatched out at the instance  

of  A1  and  others  with  the  illegal  object  of  getting  the  

Idamalayar  project  fixed  on  one  among  themselves  at  

exorbitant rates and make illegal profits.  It is also the definite  

case of the prosecution that though the work was awarded in  

the name of K.P.Poulouse, one of the accused, it was actually  

executed  by  A3  and  another  accused  Paul  Mundakkal  

(deceased).  It has come in evidence that the amount of work  

was invested and payments  were  made by Paul  Mundakkal  

and  A3.   As  rightly  observed  by  the  Special  Court,  the  

relationship between A1 and A3 is a relevant factor in arriving  

at  the  circumstances  leading  to  the  formation  of  the  

conspiracy.  The evidence led in normally show that A3 was an  

intimate friend of A1 and very closely moving with him who  

was  the  Minister  for  Electricity  during  the  relevant  period.  

PW-21,  in  his  evidence,  has  stated  that  A3  was  an  active  

48

member and leader of Kerala Congress Party led by A1 at the  

time when works were allotted.  PW-3, who was a watchman of  

the Inspection Bungalow at Idamalayar was examined on the  

side  of  the  prosecution has stated  that  A1 and A3 used to  

come  and  stayed  in  the  Inspection  Bungalow.   He  further  

asserted that  it  was A3 and the  deceased Paul  Mundakkal,  

who  were  supervising  the  work  at  site.   In  addition  to  the  

evidence of PW-3, the evidence of PWs 6, 7 and 8 who were  

Engineers  at  the  relevant  time  at  Idamalayar  worksite  and  

supervising execution of  works corroborated  the evidence of  

PW-3.  PWs 24, 25 and 26 also supported the above claim of  

the prosecution.  PW-25, one of the workers at Idamalayar also  

deposed  that  he  was  working  with  A6,  who  was  managing  

Idamalayar  works.   PW-26,  another  worker  also stated  that  

when he went to the house of A3, he saw A1 in his house.  

29) The  prosecution  has  established  the  relationship  and  

friendship between A1 and A3 by placing acceptable evidence.  

The  nomination  of  A3  to  Board’s  Consultative  Council  was  

made at the instance of A1.  Under Section 16 of the Electricity  

(Supply)  Act,  1948,  the  Constituting  Authority  is  the  State  

49

Government.  The evidence led in by the prosecution shows  

that A1 took initiative to include the name of A3 in the list of  

nominees  for  constituting  the  Consultative  Council.   The  

evidence of PWs 18, 27 and 51 and Ext.180(c) establish the  

case of the prosecution.  The evidence further shows that the  

mandatory requirements contemplated under Section 16 of the  

Act regarding the constitution of Consultative Council was not  

adhered to by A1 who wanted to include A3 in the panel which  

states  that  the  State  Government  may  constitute  the  

Consultative Council considering all representatives of power  

generating companies and other persons in consultation with  

the  representative  bodies  of  various  interests,  namely,  

industry,  commerce,  agriculture,  transport  etc.   It  makes  it  

clear  that  consultation  with  the  representative  bodies  of  

various  interests  is  a  mandatory  condition  precedent  for  

appointment of a Member by the Government in the Board’s  

Consultative Committee.  But in the case on hand, from the  

evidence, it is clear that there was no such consultation by the  

Government  before  making  nomination  of  A3  who  was  the  

Secretary of Kothamangalam Bus Owners Association.  It was  

50

pointed  out  that  usually  the  representatives  of  State  Level  

Organisers  representing  various  interests  alone  were  

nominated  after  consultation  by  the  Government  with  such  

bodies.  Admittedly, A3 was not representing any State Level  

Bus Owners Association.  This is evident from the evidence of  

PWs  31  and  16.   It  has  also  come  in  evidence  that  on  

30.07.1983,  in  a  Conference  held  on Idamalayar  Inspection  

Bungalow,  attended  by  various  officers  of  the  Board  and  

others connected with the execution of Idamalayar work, A1  

declared in public that A3 was his bosom friend and requested  

everybody to cooperate with him for the successful completion  

of the project work.           

30)  The prosecution has established the relationship of  A1  

and  K.P  Poulose  even  before  awarding  of  contract.   In  

November  1982  itself,  A1  had  chosen  K.P.  Poulose  as  

prospective contractor for execution of the work which fact is  

spoken  to  by  T.M.  Prabha  (PW-122)  and  also  by  

Muraleedharan Pillai  (PW-46).   We have already adverted to  

the  evidence  of  PW-46  in  detail  in  the  earlier  paragraphs.  

Their evidence shows that when they met A1 requesting for the  

51

award of the tunnel driving work to the workers at Idamalayar,  

who were brought from Idukki, Kulamavu etc, A1 told them  

that the execution of the Idamalayar work is proposed to be  

given to K.P. Poulose.  This was on 29.06.1981 i.e. well prior to  

the execution of the contract, and indicate that there was prior  

contract between A1 and K.P. Poulose regarding the award of  

contract work at Idamalayer.   

31)  The role played by A3 in fixing the contract to K.P. Poulose  

is also relevant to infer the formation of agreement between  

himself and A1, the Minister for Electricity. In addition to the  

same, the prosecution has adduced acceptable evidence that a  

company by name Hydro Power Construction Company was  

registered as a partnership firm with K.P. Poulose as Managing  

Partner  and  A3  and  Paul  Mundakkal  as  Working  Partners.  

Further,  close  relatives  of  K.P.  Poulose,  A3  and  Paul  

Mundakkal were parties to the partnership deed.  The object of  

the partnership was to execute the Idamalayar tunnel  work  

and also the surge shaft work in the name of the Company.  

The said firm was an assessee under the income tax Act which  

is evident from Ex. P245, the income-tax assessment of the  

52

firm in the year 1984-85 and 1985-86.  K.P. Poulose, A3 and  

Paul Mundakkal were submitting income tax returns and this  

is  evident  from  the  evidence  of  PW-123,  an  Income-tax  

practitioner.  In addition to the same, when A3 was questioned  

under Section 313 Cr.P.C., he admitted that he invested good  

amount for the work and visited the site to watch the progress  

of  the  work.   The  fact  that  A1,  while  as  a  Minister  for  

Electricity,  interfered with the award of the contracts of the  

Board were spoken to by PW-64, PW-66, PW-138 and PW-146  

which we have already discussed in the earlier paragraphs.  It  

is also clear that A1 was awaiting for a probable contractor of  

his  choice  to undertake the Idamalayar works at exorbitant  

rates.    

32)  There was labour agitation prevailing at Idamalayar work  

site.  The workers brought from Moolamattom, Kulamavu etc.  

went on strike demanding execution of the work on piece rate  

basis  and  also  for  absorption  in  permanent  service  of  the  

Board.  At the time, when the tendering process of the work  

was started by the Chief Engineer, Bharathan, strike situation  

was pending at Idamalayar which continued till the work was  

53

awarded in 1982.  It is in evidence that after execution of the  

agreement of the Idamalayar work by K.P. Poulose, there was  

obstruction  from  the  striking  workers  preventing  him  from  

entering  the  worksite  and  consequently  A1  interfered  and  

settled the labour dispute by awarding a compensation of Rs.  

11 lakhs to the striking workers and the worksite was made  

clear free of any labour unrest.  It is the prosecution’s case  

that  this  was  done  to  help  the  contractor,  a  party  to  the  

conspiracy for execution of the work and make illegal profit  

therefrom.  The evidence of PW-7, Chief Engineer and other  

witnesses  stated  that  the  awarding  of  Idamalayar  work  at  

exorbitant  rate  could  have  been avoided in  case  the  labour  

issue was settled earlier.  The prosecution has also highlighted  

labour unrest at Idamalayar which was kept pending at the  

instance of A1 and other interested parties so as to make it  

appear that no contractor will come forward to undertake the  

contract,  so much so that there is  possibility  of  choosing a  

contractor  of  their  choice  for  the  execution  of  the  work  at  

exorbitant rate.

54

33)  The prosecution has also highlighted that to achieve the  

illegal  object  of  finding  the  contract  in  the  name  of  K.P.  

Poulose  at  exorbitant  rate,  the  pre-qualification  system was  

introduced  by  the  Board  vide  order  Ex.  P576  dated  

24.09.1981.  This was after tendering process has started for  

the  Idamalayar  work.   One  Alexander  Vellappally,  who  was  

examined  as  PW-138,  explained  before  the  Court  that  pre-

qualification  bid  system  was  misused  by  the  Board  to  

safeguard  vested  interest  by  choosing  contractors  of  their  

choice.   From  the  proceedings  initiated  by  the  Board  on  

19.11.1982,  passing a resolution to award the work to K.P.  

Poulose,  a  scheme  of  pre-qualification  bid  was  successfully  

operated by the Board authorities at the instance of  A1 for  

paving the way clear to K.P. Poulose to get the work at a very  

high rate.   

34)  With regard to the relationship between A1 and A3, the  

prosecution has relied on the evidence of PW-19, receptionist  

of the Paramount Tourist Home who has stated that A3 was  

occupying a room on 17.11.1982 and 19.11.1982 on rent at  

Paramount  Tourist  Home.   Exs.  P185,  186  and  187  are  

55

registers maintained in the Tourist Home and relevant entries  

therein were marked and proved by PW-19.  According to him,  

A3,  took  a  room  in  the  Tourist  Home  at  11:50  a.m.  on  

17.11.1982 and vacated the room on 5:00 p.m. on 19.11.1982.  

The Special Court noted the significance of his stay during the  

above period at Thiruvananthapuram.  A3, in all probability,  

was at Thiruvananthapuram to meet A1 and also to meet PW-

7,  Chief  Engineer,  A6  and A7,  to  work out  the  scheme for  

getting the contract in favour of K.P. Poulose at a higher rate  

after avoiding other tenderers.  It  is further evident that A3  

took the  room on 17.11.1982 when the  Full  Board meeting  

was considering the tender of K.P. Poulose and left the room  

on 5:00 p.m. on 19.11.1982 after the tender was awarded to  

K.P. Poulose.  The close intimacy of A3 with A1 is well known  

and his influence over A1 might have persuaded A6 and A7 to  

fix the contract on K.P. Poulose.   PW-7, Chief Engineer has  

deposed before the Court that A3 met him on 04.11.1982 and  

requested him to make a recommendation for  awarding the  

contract to K.P. Poulose.  A3 also told PW-7 that when A1 was  

talking over phone to PW-7, while in the office of the Chairman  

56

of the Board, the witness was present in the chamber of A1  

and asked PW-7 what was the difficulty in recommending the  

contract  even after  A1 directed  him to  do  so.   The  Special  

Court, after analysing the evidence in detail found that A3 is  

the man behind the manuring for getting the contract awarded  

to K.P. Poulose.  K.P. Poulose, however, was only a benamidar  

and A3 and Paul Mundakkal were the beneficiaries though the  

work  was  awarded  in  the  name  of  K.P.  Poulose.   The  

prosecution  has  also  highlighted  and  proved  that  A1  was  

awaiting for a better contractor, who would quote higher rate,  

when PW-146 Kamalasanan, Managing Partner, We-Build was  

not willing to quote a higher rate as desired by A1.  The role  

played by A6 in the matter of hatching out the conspiracy and  

the fulfillment of  the unlawful  object  is proved by evidence,  

particularly,  from  the  evidence  of  PW-7.   From  the  above  

materials, it is clear that a criminal conspiracy among A1, A3  

and A6 can be inferred.  A1, as Minister for Electricity is all in  

all dealing with the efforts of the Board including the awarding  

or cancellation of the contracts.  The officers and the Board  

members were under his pressure and fear which clearly seen  

57

from the statements of prosecution witnesses, namely, PWs 8,  

36, 60, 62, 138, 140, 64, 66 etc.  It is also relevant to point out  

that A6 and A7 avoided considering the request of PW-4 in his  

telegram sent to the Board.  We have already adverted to the  

fact that it was Sunny K. Peter, PW-4, who quoted a lesser rate  

than  K.P.  Poulose.   He  quoted  only  135% above  PAC.   By  

arranging the Board meeting on 19.11.1982, with short notice  

of  less  than  24  hours,  the  intention  was  to  avoid  other  

tenderers and to achieve the object of conspiracy to award the  

contract to K.P. Poulose who alone was present on 17.11.1982  

and 19.11.1982.  The request of E.M. Varkey for fixing another  

date  for  participating  in  the  discussion  for  award  of  the  

contract was also rejected.  From these materials, as rightly  

concluded by the Special Court, it leads to a conclusion that  

several out of way methods were adopted by the Board at the  

instance of A1 for achieving the object of conspiracy.   

35)  As  rightly  pointed  out  by  the  Special  Court,  the  

confirmation  of  Hydro  Power  Construction  Company  

consisting  of  A3,  A4  and  Paul  Mundakkal  and  their  close  

associates and relations for execution of Idamalayar contract  

58

work, A3 supervising the execution of the contract work and  

the  visit  of  A4  at  the  worksite  only  on  rare  occasions,  the  

payment of wages to the labourers by A3 and Paul Mundakkal  

are  all  proved  various  circumstances  that  the  conspiracy  

among the accused continued to operate even after the award  

of  the  contract.   The  High  Court  failed  to  consider  various  

instances and materials placed by the prosecution in respect  

of charge relating to conspiracy.  According to the High Court,  

“the proved circumstances are not sufficient to hold that  

there was conspiracy as alleged by the prosecution or as  

found by the Special Court.” Before us, it was demonstrated  

that several material aspects have not been considered by the  

High Court, for example, the stay of A3 at Paramount Tourist  

Home,  Thiruvananthapuram  on  the  crucial  dates  i.e.,  on  

17.11.1982  to  19.11.1982  has  not  been  considered  by  the  

High Court in the correct perspective.  As pointed out by the  

appellant,  the  High  Court  ought  to  have  found  that  the  

evidence relating to A3 at Paramount Tourist Home is only to  

bring out one of the circumstances leading to the formation of  

criminal conspiracy hatched out by the accused.  In fact, A3  

59

has admitted his stay in his Section 313 Cr.P.C. statement at  

Thiruvananthapuram on those  dates,  hence,  finding  by  the  

High  Court  on  this  aspect,  faulting  with  the  Special  Court  

cannot  be  sustained.   Even  though,  the  High  Court  has  

admitted that A1 and A3 belonged to the same political party  

and close relationship exists between the two, the nomination  

of A3 in the Consultative Council of the Board as evidenced by  

Ex.P-180 was unfortunately not recognised by the High Court  

as a material evidence proved by the prosecution.  Insofar as  

claim  of  PW-3  that  it  was  he  who  settled  the  bill  in  the  

inspection bungalow, the perusal  of his entire oral evidence  

clearly supports the case pleaded by the prosecution insofar as  

the close association between A1 and A3 during their visit to  

the worksite.   PW-7,  former Chief  Engineer,  a  most reliable  

witness was examined in the presence of A3 on 04.11.1982 in  

the  Board’s  office.  There  is  no  necessity  to  corroborate  or  

further material in addition to the oral evidence of PW-7.  As  

rightly analysed and concluded by the Special Court, there is  

no infirmity in the evidence of PW-7 merely because there is no  

documentary evidence in respect of the presence of A3 at the  

60

Board’s meeting.  The evidence of PW-7 cannot be ignored.    

36)  The  High  Court  very  much  accepted  the  stand  of  the  

accused that it was a collective decision of the Board, we have  

already  discussed  the  reasons  stated  in  Ex  P-550(a)  for  

awarding contract in favour of K.P. Poulose at exorbitant rate.  

The reasons relied on by the Board exposes the omission and  

negligence  on  its  part  in  fixing  the  contract  with  PW-146  

Kamalasanan or E.M. Varkey or with Kuriakose PW-22 or PW-

4 Sunny K. Peter, who quoted lower rates then K.P. Poulose.  

Even  before  us,  learned  senior  counsel  appearing  for  the  

accused  reiterated  that  it  was  a  collective  decision  of  the  

members of the Board to award the contract in favour of K.P.  

Poulose.   We have already  highlighted  the  reasoning  of  the  

Special Court relating to the important fact that contract  was  

awarded at exorbitant rate, reduction in retention and security  

amount,  return  of  50%  empty  cement  bags  and  also  

acceptance  of  special  conditions  for  the  sale  of  tools  and  

plants.   In  the  instant  case,  all  the  ingredients  of  criminal  

conspiracy are satisfied for convicting A1, A3 and A6 for the  

offence charged against them.   

61

Special mention about PW-7, retired Chief Engineer of the  

Board & PW-46

37) The  High  Court  as  well  as  learned  senior  counsel  

appearing for the accused commented the evidence of PW-7 by  

saying  that  there  are  inherent  improbabilities  and  

inconsistencies and his evidence is not cogent and convincing  

whereas  among  several  witnesses  examined,  prosecution  

heavily  relied  on  the  statement  of  PW-7,  a  retired  Chief  

Engineer.  He retired from service on March 1985.  He joined  

the service of the Board on July 1954 as Junior Engineer and  

prior to that he was in the Electricity Department.  It has come  

in evidence that he gained vast experience since he worked in  

various projects such as Chakulam project, Neriyamangalam,  

Idukki, Kakakd and Idamalayar project.  It is also seen from  

his evidence that he participated in four major projects.  He  

first examined on the side of the prosecution on 28.03.1996  

and at that time he was 66 years old.  In this background, let  

us test  his  evidence as discussed in the  earlier  part  of  our  

order.  The prosecution heavily relied on his evidence and, in  

fact, Mr Shanti Bhushan in support of his argument mainly  

62

relied on the evidence of PW-7.  By his rich experience and  

worked as a Chief Engineer at the relevant time, namely, when  

Idamalayar project was commissioned, PW-7 furnished all the  

details with reference to various documents such as his report,  

opinion, minutes of the meeting of the Board with reference to  

Idamalayar  project.   No doubt,  all  the  three  senior  counsel  

appearing for the accused A1, A3 and A6 severely criticized his  

conduct in not answering many of the questions in his cross  

examination.   It  is  true  that  in  chief-examination,  PW-7  

highlighted various aspects with reference to documents such  

as  opinion,  report  and  Board’s  proceedings  and  minutes  

thereon.  From the perusal of his cross-examination, it cannot  

be concluded that he didn’t  answer  or  elaborate  any of  the  

question put by the counsel for accused.  It is true that for  

certain questions he answered that he has to verify from the  

records  and  for  certain  questions  he  didn’t  answer  or  

answered stating that  “he do not remember”.  It is relevant  

to point out that he retired from service in March 1985 and he  

was called upon to give evidence only in March 1996 nearly  

after 15 years of the commissioning of the Idamalayar project.  

63

If we consider all these aspects, there is no reason to reject his  

entire evidence as claimed by the respondents/accused.  In his  

evidence, he has mentioned that on the submission of tender  

by K.P. Poulose, it was noted that he quoted 189% above PAC.  

Agreement submitted by K.P. Poulose has been marked as Ex.  

P-52 and in that Paul Mundakkal was signed as witness.  It is  

further  seen that  as Chief  Engineer,  he sent  letters  to K.P.  

Poulose and Kuriakose who was another persons submitting  

tenders on 28.07.1982.  He made a note that the tender is not  

in proper form and it contains many mistakes and requested  

them to rectify the mistakes within a time schedule.  In this  

regard, it is useful to refer his categorical statement which, he  

deposed before the Court that “I considered it as a special  

case because the engineer member Mr. Ramabhadran Nair  

(A6)  informed me that  Mr.  Balakrishna Pillai  (A1)  has  a  

special  interest  to  award  this  work to  Mr.  K.P.  Poulose  

(A4), hence the mistakes happened in the tender should be  

rectified  with  K.P.Poulose  himself  and  make  a  

circumstance to award the work to K.P. Poulose…”  About  

the  disqualification  of  tender  offered  by  Kuriakose,  PW-7  

64

deposed the decision was taken by a committee because he  

could not rectify the mistakes as directed by him.  In respect of  

a question put to PW-7 about the response of A6 and A7, he  

answered “they stated that they are happy in disqualifying  

Mr. Kuriakose”.  It is also seen from his evidence that after  

noting that the rate quoted by K.P. Poulose is higher rate, he  

forwarded the said information for remarks of FA and CAO.  

He  also  asserted  that  A6  told  him  that  A1-Minister  

Balakrishna Pillai is very much particular to award both the  

works to K.P. Poulose.  It is further seen that he highlighted  

that  without  solving  the  problem  of  tunnel  workers  no  

contractor can do the work.  According to him, because of this  

reason he informed A6 to take steps to solve the problem of  

workers and in fact PW-7 met A6 at his office on 04.11.1982 at  

11:00 a.m.  When the issue relating to labour problem was  

under  discussion,  according  to  PW-7,  the  P.A.  of  Board  

Chairman Sankaran Nair  approched him and informed that  

Minister  Balakrishna  Pillai  is  willing  to  talk  to  me  through  

telephone  of  the  Board’s  Chairman.   In  view  of  the  same,  

according  to  PW-7,  he  suddenly  entered  into  the  cabin  of  

65

Board’s  Chairman  which  is  the  next  room  and  took  the  

telephone.   He  introduced  himself  through  the  phone  and  

according  to  PW-7  “A1  asked  him  why  you  were  not  

recommended the tenders of Idamalayar tunnel and surge  

shaft to the Board.  I replied to A1 I am going to talk about  

it  with  the  contractor  today  and  I  am  having  same  

problem  in  this  matter.   There  is  only  one  tender  

submitted by  K.P. Poulose, the rate is very exorbitant, if  

the work is awarded without solving the problem of tunnel  

workers, K.P. Poulose cannot start the work.  A1 replied  

that you don’t look upon it, K.P. Poulose will purchase all  

these workers, we granted this higher rate for that also,  

hence you recommend the Board to award both the works  

to K.P. Poulose without any delay.  Then the conversation  

was concluded.  I immediately visited the room of A6.  I  

told to A6 about the call  of  Minister  and my reply and  

difficulties.  At that time A6 told him that the Minister  

directly asked you, so you do it as he say.”  The following  

statement is also relevant about the conduct of A1 and how  

much he was interested in awarding contract in favour of K.P.  

66

Paulose.  PW-7 deposed “the face of A1 shows much anger.  

He explained A1 that if tenders are invited after solving  

the problem of tunnel workers, rate will be reduced, that is  

profitable to the Board.  A1 replied with higher anger that  

I  know how to look after the Board,  I  do not want any  

advice  from your  people,  are  you  approaching  me  with  

intimate talks, after this, I had no talk anything about it.”  

It  is  further  seen  that  thereafter  a  note  was  sent  by  

Sreedharan  Pillai  and  Unnikrishnan  to  recommend  for  

awarding both the works to K.P. Poulose.  According to him, he  

received all the documents as per the direction of A1.  Though,  

several reports and minutes of the Board meeting were pressed  

into service by the respondents/accused in order to strengthen  

their case that all important decisions accepting the contract  

in favour of K.P. Poulose including several special conditions  

etc.,  it  is  clear  that  due  to  the  pressure  of  A6,  the  then  

member of  the Board,  who was close to A1,  as well  as  the  

desire of A1 in awarding the contract in favour of K.P. Poulose  

with higher rate, PW-7 had no other option except to execute  

the directions of A6 and A1.        

67

38) Another incident which is relevant about the performance  

of  PW-7 and response from A1 and A6,  in his evidence,  he  

explained that since the progress of both the works were very  

slow,  he  inspected  the  site  on  23.09.1983.   Due  to  slow  

progress  in  the  works,  he  castigated  Paul  Mundakkal  who  

conducted the works.  After few days, A3 and Paul Mundakkal  

came to his house and A3 told him that he is disturbing them  

without any reason by way of sending letters and reports, A3  

further warned that if it continues, it will be harmful to them.  

He  also  informed  him  that  the  Minister  agreed  to  avoid  

concrete lining works of surge shaft but only PW-7 opposed it.  

He also assured that if PW-7 gives his consent, they are ready  

to give anything.  He further explained that he informed them  

that it is impossible for him because the technical design is his  

duty,  being  a  Chief  Engineer.   After  few  days  from  this  

incident, on 13.10.1983, he was transferred and appointed as  

an  Advisor  of  Electricity  Board  in  respect  of  Hydroelectric  

Projects.  He further explained that such a Post was not there  

and his transfer order was signed and taken on 13.10.1983 at  

8.00  p.m.  in  a  lodge  where  he  was  residing  at  

68

Thiruvananthapuram.   He  highlighted  that  for  the  post  of  

Advisor,  except  chair,  table,  no  other  facilities  including  

telephone  facility,  official  vehicle  steno  and  typist  were  

provided.  After him, A2 was appointed as Idamalayar Chief  

Engineer.  He also informed the Court that he believed that he  

was  transferred  due  to  the  difference  of  opinion  with  P.K.  

Poulouse, A3 and Paul Mundakkal  

39) As regards the decision of the Board and his role, he has  

stated that the Chief  Engineer has no right  to question the  

Board’s  decision.   However,  he  clarified  that  when  he  was  

asked to give his opinion or report, he is bound by the said  

direction.  ExP-65 is the note submitted by him in connection  

with  the  work.   P-64  is  the  note  submitted  by  him  in  

connection  with  the  surge  shaft  work  which  is  also  dated  

06.11.1982.  Thereafter, in 1982, he was transferred  

40) With  regard  to  his  financial  and  family  position,  he  

answered that  he  built  two-storied  building  having  built-up  

area of 2700 sq. ft. in 1965 after taking loan from the Board  

and he sold this building and property after his retirement.  He  

69

is having six daughters.  He constructed a shop room having  

15 ft. length and 12 ft width.   

41) The analysis of  the evidence of PW-7 coupled with the  

other  prosecution  witnesses  and  other  notes  and  report  

prepared  for  the  Board  clearly  indicate  that  though  he  

reminded that certain things are not permissible, because of  

the fact that the beneficiaries of the contract are known to A1  

and A6,  he has no other  option except  to prepare  notes  in  

such a way and ultimately the Board accepted the same.

42) We have  already  pointed out  the  statements  of  PW-46  

who was a member of RSP, a political party.  According to him,  

the workers of Idamalayar have a Union.  The name of the said  

Union is Kerala Construction Labour Union and he was the  

General  Secretary  of  that  Union.   In  his  evidence,  he  has  

informed the Court that the labourers who were doing tunnel  

work in Idamalayar  became jobless from 10.04.1981.   They  

were skilled labourers and had good experience from projects  

like  Idukki,  Kulanam etc.   He,  as the  President  and others  

decided to file a memorandum before the Minister Balakrishna  

Pillai.   The memorandum was prepared in the letter  pad of  

70

Kerala Construction Labour Union.  PW-46 and Srikantan Nair  

signed  the  said  memorandum.   It  has  also  come  in  his  

evidence that at the time of submission of his memorandum  

PW-46 and others requested the Minister to give work to the  

poor labourers at least on piece rate basis for which A1 replied  

“no question of giving work to the labourers.  It was given  

as  contract  to  K.P.  Poulouse….”   The  prosecution  has  

highlighted the above statement of PW-46 to the effect that A1  

decided  and  determined  to  award  Idamalayar  contract  to  

group  of  persons  headed  by  K.P.Poulouse  and  not  to  the  

workers who prepared to work on piece-rate basis.  

About  maintainability  of  the  appeal  by  the  present  appellant: 43) Mr. Lalit  and Mr. Saran at the end of their arguments  

submitted that the appellant being a third party unconnected  

with the Board or the State is not entitled to challenge the  

decision of the High Court acquitting the accused from all the  

charges levelled against them.  In support of the above claim,  

they  very  much  relied  on  the  decision  of  this  Court  dated  

23.07.2010  rendered  in  SLP  Criminal  No  2506  of  2009  –  

71

National Commission for Women vs.  State of Delhi and  

Another 2010 11 Scale 17.  In this case, one Sunita then aged  

21  years,  committed  suicide  by  consuming  Aluminium  

Phosphide tablets on 14.04.2003.  She left behind a suicide  

note wherein it was stated that she had taken tuitions from  

the  accused,  Amit,  at  her  residence  in  Rajgarh Colony  and  

during that period she had developed a deep friendship with  

him leading to physical relations as well.   The accused also  

held out a promise of marriage but later backed off.  She also  

stated in her suicide note that not only the accused continued  

to have sexual relation with her but also compelled her to have  

sexual relation with others as well, which was the reason for  

committing the suicide.   The trial Judge relied on the dying  

declaration, which was the suicide note, convicted the accused  

under Section 306 IPC and sentenced him to undergo rigorous  

imprisonment for 10 years with a fine of Rs.5000/-  and also  

imprisonment  for  life  under  Section  376  IPC and  a  fine  of  

Rs.5000/-.   Questioning  the  above  order  of  conviction  and  

sentence,  the  accused  preferred  an  appeal  before  the  High  

Court.   The  High  Court  ultimately  found  that  as  the  case  

72

under Section 306 was not made out confirmed the conviction  

under  Section 376 IPC.  Taking note  that  the  accused had  

already undergone imprisonment  for  5 years and 6 months  

and his entitlement for remission on account of his conduct in  

jail, his term of imprisonment for life has been modified to one  

that of period already undergone.   Neither the State nor the  

complainant or her relatives has chosen to file an appeal to  

this  Court.   However,  National  Commission  for  Women  (in  

short ‘NCW’) filed a special leave petition against the order of  

the High Court reducing the term of life imprisonment to that  

of period already undergone in respect of the conviction and  

sentence awarded by the High court under Section 376.  The  

question in that case was whether the NCW is competent or  

entitled to file an appeal in this Court against the conviction  

and sentence imposed by the High Court.  This Court, after  

adverting to the relevant provisions namely, Section 377 Cr.PC  

and other decisions and finding that neither the State, which  

is the complainant, nor the heirs of the deceased have chosen  

to file a petition in the High Court or in this Court dismissed  

the SLP filed by NCW as not maintainable  and revoked the  

73

permission  to  file  SLP  vide  this  Court’s  order  dated  

02.04.2009.   

44)  In  the  above  referred  NCW’s  case,  admittedly  the  

complainant was the State and neither the State nor the heirs  

of the deceased filed any appeal/petition before the High Court  

for  enhancement  of  punishment  or  challenged the  same by  

way of SLP before this Court.   

45)  In  our  case,  certain  special  features  exist.   Though we  

discussed earlier, it is apt to quote once again.  During the  

pendency of the trial before the special Judge, an application  

for  withdrawal  of  the  prosecution  only  against  G.  

Gopalakrishna Pillai - accused No.5 was made by the Special  

Public  Prosecutor  on 24.08.1992 under  Section  321 Cr.P.C.  

which was registered as Criminal Appeal No. 79 of 1992 in CC  

No. 1 of 1991.  The main ground for such withdrawal was that  

with the available material successful prosecution against G.  

Gopalakrishna  Pillai  –  accused  No.  5  cannot  be  launched,  

hence, the trial against him will be unnecessary and the State  

also is of that opinion that the prosecution of A-5 may not be  

sustainable.   With  this  information,  the  Special  Public  

74

Prosecutor requested that by virtue of provisions contained in  

Section 321 of the CrP.C, necessary consent may be granted to  

withdraw  the  prosecution  against  the  5th accused  –  G.  

Gopalkrishna Pillai and the said accused may be discharged.  

The Special  Judge  considered the issue  at  length and after  

analyzing the entire material and finding that there are enough  

materials to proceed against A-5 refused to give consent for  

withdrawal.  This was taken up by way of revision before the  

High  Court.   The  High  Court  set  aside  the  aforesaid  order  

passed by the Special Judge in the revision filed by the State  

of  Kerala represented by the Superintendent of  Police.   The  

said order of the High Court was challenged by the present  

appellant namely, V.S. Achuthanandan, to this Court by way  

of special leave petition.  After granting leave, the said special  

leave petition was converted into Criminal Appeal No. 122 of  

1994.   After  adverting  to  the  elaborate  reasonings  of  the  

special Judge and the conclusion of the High Court, this Court  

concluded  that  “there  was no ground available  to  the  High  

Court to set aside the well reasoned and justified order of the  

learned Special Judge rejecting the application of the Special  

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Public Prosecutor and declining to give consent for withdrawal  

of prosecution.  We may also add that there is nothing in the  

impugned order of  the High Court which provides any legal  

basis  for  interfering  with  the  aforesaid  order  made  by  the  

Special Judge.  The High Court’s order must obviously be set  

aside.”  By setting aside the order of the High Court, this Court  

restored the order of the Special Judge and declined to give  

consent for withdrawal of the prosecution and permitted the  

Special  Judge  to  proceed further.   It  is  not  in  dispute  that  

when the very same appellant, namely, V.S. Achuthanandan  

filed special leave petition and later leave was granted, the very  

same respondent-accused parties in the said appeal did not  

raise any objection as to the maintainability of the appeal at  

the  instance  of  V.S.  Achuthanandan.   Further  though  the  

State has not filed any appeal against the impugned order of  

acquittal  by  the  High  Court  being  arrayed  as  one  of  the  

respondents  reported  by  a  senior  counsel  to  highlight  its  

stand, in fact, Mr. R.S. Sodhi, learned senior counsel for the  

State highlighted and supported the ultimate conviction and  

sentence  imposed  by  the  Special  Judge  and  informed  this  

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Court  that  if  this  Court  permits,  they  are  ready  to  file  an  

appeal with an application for condonation of   delay.  While  

appreciating the prayer made by Mr. R.S. Sodhi, we are not  

inclined to entertain such request at this stage.  However, the  

fact remains that taking note of the importance of the issue,  

allegations  against  the  Minister  and  higher  officials  of  the  

Board in respect of award of contract with the ulterior motive,  

the appellant approached this Court on earlier occasion when  

the  State  wanted  to  close  the  prosecution  against  all  the  

accused including the Minister based on the order of the High  

Court in respect of G. Gopalakrishna Pillai, A-5.  Further when  

the very same appellant filed special leave petition before this  

Court and later  leave was granted by this Court neither of  

these  respondents  raised  any  objection  as  to  the  

maintainability of the petition.  On the other hand, a Bench of  

three Judges accepted the appellant’s claim and set aside the  

order  of  the  High Court  based on which the Special  Judge  

proceeded further and ultimately convicted and sentenced A-1,  

A-3 and A-6.  In view of these factual details, learned senior  

counsel  for  the  respondents-accused  were  not  serious  in  

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projecting  the  issue relating to  maintainability  as their  first  

objection.  We hold that the decision in  NCW’s case (supra)  

which was disposed of at the special leave petition stage is not  

applicable to the case on hand.   

46) For the same reasons, the decision of this Court in  Lalu  

Prasad Yadav & Anr. Vs. State of Bihar & Anr., (2010) 5  

SCC 1 is also not applicable to the case on hand since in the  

said decision, the question was whether the State Government  

(of Bihar) has competence to file an appeal from the judgment  

dated  18.12.2006  passed  by  the  Special  Judge,  CBI  (AHD),  

Patna, acquitting the accused persons when the case has been  

investigated  by the  Delhi  Special  Police  Establishment  (CBI)  

and this Court held that the appeal at the instance of the State  

Government  is  not  maintainable.   In  view  of  the  special  

circumstances highlighted in the case on hand, we reiterate  

that  the  present  appeal  by  the  appellant  –  V.S.  

Achuthanandan  against  the  order  of  acquittal  by  the  High  

Court is maintainable. Our view has been strengthened by a  

decision of this Court in K. Anbazhagan vs. Superintendent  

of  Police  and Others (2004)  3  SCC  767.   Accordingly  we  

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reject the contention raised by the learned senior counsel for  

the respondents.   

Conclusion

47) The analysis of the materials placed by the prosecution,  

the plea of defence by the accused, the decision of the Special  

Court and the reasoning of the High Court, we are satisfied  

that  the  prosecution  has  established  the  following  aspects  

insofar as the accused (A1), (A3) and (A6) are concerned:-

a) By awarding both the works of Idamalayar at a very  

high  and  exorbitant  rate  with  special  conditions  

having heavy financial implications.

b)  By reducing the retention and security amount.

c) By allowing the contractor to return only fifty per  

cent of the empty cement bags.

Having arrived at such conclusion, we are of the view that the  

High  Court  failed  to  appreciate  in  its  proper  sense  the  

materials placed by the prosecution and brushed aside several  

important  items  of  evidence  adduced  by  the  prosecution.  

Equally, we are unable to accept the conclusion of the High  

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Court, namely, “the proved circumstances are not sufficient  

to  hold  that  there  was  conspiracy  as  alleged  by  the  

prosecution”.  On the other hand, we are satisfied that the  

Special  Court  after  framing  various  points  for  consideration  

and after  thorough discussion has accepted the case of  the  

prosecution  insofar  as  the  work  of  driving  the  surge  shaft,  

lining the surge shaft, balance driving the power tunnel and  

other allied works of Idamalayar Hydro Electric Power Project  

at a higher or exorbitant rates to the contractor K.P. Poulose  

and the accused persons have abused their official positions.  

The  Special  Court  has  also  accepted  the  prosecution  case  

founding  that  A1  along  with  K.P.  Poulose,  Paul  Mundakkal  

and other accused persons entered into criminal  conspiracy  

and rightly convicted them.  In our considered view, the High  

Court  committed  a  grave  error  in  acquitting  the  accused  

without  adverting  to  the  reliable  and  acceptable  evidence  

adduced by the prosecution.     

48) Now, coming to the sentence part,  it  is relevant to note  

that  the  contract  was  awarded  to  K.P.  Poulose,  (since  

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deceased) the fourth accused, as early as on 19.11.1982.  After  

various agitations, discussions in the Assembly, appointment  

of a Commission by the Government and based on the report  

of  the  Commission,  the  State  Government  initiated  a  

prosecution which resulted in C.C. No. 01 of 1991 and trial  

prolonged upto November  19,  1999.   Thereafter,  the  matter  

was  kept  pending  at  the  High Court  from 1999 to  October  

2003, when the High Court pronounced its order acquitting all  

the accused and the matter was taken up to this Court by the  

present appellant initially by way of special leave petition in  

2005, leave was granted in 2006 and it was kept pending till  

this date, we feel that all the three accused have undergone  

agony of these proceedings for nearly two decades, we are of  

the  opinion that  ends of  justice  would be met  by awarding  

rigorous imprisonment for one year with fine of Rs. 10,000/-  

each,  and  the  same  shall  be  paid  within  eight  weeks,  in  

default, to undergo simple imprisonment for one month each.

49)  Before winding up, it is our duty to point out in all the  

cases  in  which  charges  relating  to  corruption  by  public  

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servants are involved, normally, take longer time to reach its  

finality.  The facts and figures, in the case on hand, which we  

have already mentioned clearly show that the contract relates  

to  the  year  1982  and  the  State  Government  initiated  

prosecution in 1991, however,  the trial  prolonged for nearly  

nine years and the Special Court passed an order convicting  

the accused only on 19.11.1999.  When the matter was taken  

up by way of appeal by the accused to the High Court even in  

1999  itself,  the  decision  was  rendered  by  the  High  Court  

acquitting all the accused only in 2003.  In the same manner,  

though the appellant challenged the order of the High Court  

acquitting all the accused before this Court even in 2005, it  

has  reached  its  finality  only  in  2011 by  the  present  order.  

Though the issue was handled by a Special Court constituted  

for the sole purpose of finding out the truth or otherwise of the  

prosecution  case,  the  fact  remains  it  had taken  nearly  two  

decades to reach its finality.  We are conscious of the fact that  

the  Government  of  India,  Department  of  Law  &  Justice  is  

making  all  efforts  for  expeditious  disposal  of  cases  of  this  

nature  by  constituting  Special  courts,  however,  the  fact  

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remains that it takes longer time to reach its destination.  We  

are of the view that when a matter of this nature is entrusted  

to a Special Court or a regular Court, it is but proper on the  

part of the court concerned to give priority to the same and  

conclude the trial within a reasonable time.  The High Court,  

having  overall  control  and  supervisory  jurisdiction  under  

Article 227 of the Constitution of India is expected to monitor  

and even call for a quarterly report from the court concerned  

for speedy disposal.  Inasmuch as the accused is entitled to  

speedy justice, it is the duty of all in charge of dispensation of  

justice  to  see  that  the  issue  reaches  its  end  as  early  as  

possible.           

50) Considering all the materials and in the light of the above  

discussion,  we  agree  with  the  conclusion  arrived  at  by  the  

Special Court and hold that the High Court has committed an  

error  in  acquitting  the  accused  persons.   Accordingly,  

R. Balakrishna Pillai (A1), P.K. Sajeev (A3) and Ramabhadran  

Nair (A6) are awarded rigorous imprisonment for one year with  

fine of Rs. 10,000/- each, and the same shall be paid within  

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eight  weeks,  in default,  to undergo simple imprisonment for  

one month each.  All the three accused are entitled remission  

for  the  period  already  undergone,  if  any,  by  them.   The  

criminal appeal is allowed to the extent indicated above.

...…………………………………J.  (P. SATHASIVAM)  

....…………………………………J.  (DR. B.S. CHAUHAN)

NEW DELHI; FEBRUARY 10, 2011

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