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IN THE SUPREME COURT OF INDIA

CIVIL ORIGINAL JURISDICTION

WRIT PETITION (C)  NO. 645  of 2007

Centre for Environment & Food Security   …Petitioner

Versus

Union of India & Ors.            …Respondents

ORDER

Swatanter Kumar, J. This Public Interest Litigation has been filed by  

the  petitioner  before  this  Court  for  issuance  of  appropriate  

directions to the respondents to ensure proper implementation  

of the Mahatma Gandhi National Rural Employment Guarantee  

Act,  2005  (for  short  the  ‘Act’)  and  the  schemes  framed  

thereunder.   The  Act  was  enacted  to  ensure  enhancement  of  

livelihood  security  of  households  in  the  rural  areas  of  the  

country by providing at least hundred days of guaranteed wage  

employment  in  every financial  year  to every household  whose  

adult members volunteer to do unskilled manual work and for  

matters  connected  therewith  and  incidental  thereto.  The  

authorities appointed under the Act are responsible to ensure  

proper  utilisation of  the  funds released by Union of  India for

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implementation of the schemes framed under the provisions of  

the Act.  The Central Government issued guidelines, viz., NREGA  

Operational  Guidelines  in  2008  for  proper  implementation.  

Petitioner  has  prayed  before  us  that  proper  investigation  is  

required to be conducted into cases of non-compliance with the  

provisions  of  the  Act,  schemes  framed  thereunder  and  the  

guidelines  issued  by  the  Central  Government  to  prevent  

diversion of funds specifically allocated for implementation of the  

schemes framed under the Act.  The petition has been pending  

before  this  Court  for  considerable  time  and  certain  

orders/directions have been issued by the Court from time to  

time.   The  Central  Government  as  well  as  various  State  

Governments had filed certain compliance affidavits with respect  

to the orders/directions issued by this Court.  However, it was  

felt by this Court that all was not well with the functioning of the  

various State Governments as well as the Centre for achieving  

the  objectives  of  the  Act.   Observing  discrepancies  in  the  

implementation of the provisions of the Act, this Court, on 16th  

December, 2010, passed a detailed order.  In the said order, it  

was noticed that it was in the interest of justice and in larger  

public  interest  that  this  Court  should  issue  appropriate  

directions to ensure proper and equitable functioning of the Act  

and  the  schemes  framed thereunder.   After  noticing  in  some

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detail various acts and omissions resulting into disobedience of  

the statutory mandate and patent lacuna in implementation of  

the schemes,  like  disbursement of  money to the unemployed,  

proper registration and utilisation of the funds by the concerned  

authorities  working  under  the  provisions  of  the  Act,  special  

reference was made to the failure on the part  of  the State of  

Orissa in implementing the scheme and various provisions of the  

Act.   The concerned authorities  under the State Governments  

and even in  the  Central  Government  have  failed to  discharge  

their  statutory duties  under  the  provisions  of  the  Act  on one  

hand  and  on  the  other  they  have  also  violated  the  

orders/directions  of  this  Court.   This  compelled  the  Court  to  

pass the following directions on 16th December, 2010:

“Thus, we are compelled to issue the following  directions  for  strict  compliance  by  the  concerned authorities:

1.    The compliance report shall be filed in the  form of  affidavit  which shall  be  sworn by  the  Additional  Secretary,  in-charge  for  compliance  of the provisions of the Act in the Ministry of  Rural Development, Government of India, New  Delhi and the Chief Secretary, State of Orissa  within three weeks from today.   

2.    The instances and figures referred to in the  survey report submitted by the petitioner shall  be specifically dealt with in that affidavit.   

3.     The  affidavit  should  be  filed  positively  within the stipulated time directed in this order  and  further  we  call  upon  both  the  Union  of

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India and the State Government to show cause  as to why there should not be a direction to the  CBI  to  investigate  this  matter  in  accordance  with law.   

     We also issue the direction that affidavits to  be filed by the respective authorities shall, inter  alia,  but  specifically  answer  the  following  points:   

(a)   What is the extent of funds released by  the Union of India to the State of Orissa for  implementation  of  the  schemes  under  the  provisions of the Act  

for each of the year between 2006 to 2010?   

(b)   To what extent and for what projects, the  released funds have  been utilized? Whether  state  of  Orissa  has  given  to  the  Central  Government  the  requisite  certificate  of  utilization?   

(c)    Findings  to  be  recorded  whether  any  amount  earmarked  for  any  of  the  schemes  under NREGA has been diverted to any other  Head of  Account including revenue account  by State of Orissa.   

(d)    How  many  applicants,  of  how  many  households,  have  been  actually  employed  and  have  been  paid  allowances  under  the  provisions of the Act?   

(e)    The  figures  in  terms  of  the  above  directions  shall  be  provided  for  the  period  from 2006 to 2010.   

(f)   Whether any social audit of the projects  under the Gram Sabha has been conducted  in terms of Section 17(2)? If yes, its detailed  findings for the above mentioned period.   

(g)    Whether  all  the  authorities/officers/officials, from the higher  levels  in  the  Central  Government  or  State  Governments  to  the  grass-root  levels  at

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District,  intermediary  and  Panchayats,  to  ensure  effective  implementation  of  the  schemes under  

the Act  have been appointed? If no, reasons  therefor.   

(h)   Whether the Union of India or the State  Government,  in  consultation  with  the  Comptroller and Auditor General of India or  otherwise, have conducted any general audit  of  accounts  of  the  schemes at  any level  in  terms of Section 24 of the Act? If the answer  is  in  the  affirmative,  then  details  thereof,  particularly, the objections, if any, raised by  the Auditors; if the answer is in the negative,  then reasons therefor.   

(i)    Whether  the  Central  Government  has  issued  any  directions  concerning  utilization  of funds under NREGA while disbursing the  amounts to  State  of  Orissa? Whether  these  have been complied with by State of Orissa?   

(j)    Whether  the  Central  Government  has  received any complaints about working of the  schemes,  utilization  of  funds,  providing  of  employment  and  payment  of  allowances  under the provisions of the Act? If so, what  action  has  been  taken  in  terms  of  Section  27(2)  of  the  Act?  It  should  be  stated  with  complete statistics and data.   

(k)   Whether the Union of India or the State  of Orissa have, till date, found even a single  official/functionary guilty of contravention in  terms of Section 25 of the Act and whether  any complaint has been filed in any Court of  competent  jurisdiction?  If  so,  the  result  thereof.   

(l)   The contents and the background of the  complaints  received  and  referred  in  `Annexure-R1'  to  the  affidavit  filed  by  the  Union  of  India  should  be  stated  precisely.

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Why  the  enquiry  reports  as  referred  to  in  `Annexure-R1' to the Affidavit of the Union of  India of July 2008, no final reports have been  prepared and submitted before this Court till  date.  Further,  it  shall  also  be  stated  as  to  why  the  findings  of  the  interim  reports  referred in  the said affidavit  have  not  been  placed  before  this  Court.  A  complete  summary  thereof  shall  be  annexed  to  the  Affidavit.”  

In furtherance to the above directions, the Union of India  

and the State of Orissa have filed their affidavits in those terms.  

From the affidavits filed, it was clear that there was temporary  

diversion of funds, no proper audit has been conducted in terms  

of Section 24 of the Act and utilization of funds was improper.

Not satisfied with the replies of the Central Government as  

well  as  the  State  of  Orissa,  this  Court  on  14th March,  2011  

noticed that there are particularly two aspects to be taken care  

of  at  this  stage;  one  is  concerned  with  the  corruption  in  the  

implementation of NREGA Scheme and the other is concerned  

with the implementation of the Operational Guidelines issued by  

the Central Government under Section 27 of the Act.  In the case  

of State of Orissa, it was brought to the notice of the Court that  

huge amount has been misappropriated and, consequently, the  

beneficiaries of the NREGA Scheme are deprived of their dues.

Learned  Additional  Solicitor  General,  appearing  for  the  

Union of India, informed this Court that the Central Government

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is  considering  the  possibility  of  handing  over  the  matter  to  

Central  Bureau  of  Investigation  (for  short  the  ‘CBI’)  for  

investigation in cases of misappropriation and prayed for time  

for seeking instructions from the concerned Government in this  

behalf.  This Court further directed the Government of Orissa to  

implement  the  Guidelines  issued  by  the  Central  Government  

with  regard  to  muster  rolls,  maintenance  of  job  

cards/applications  and  transfers  to  the  accounts  of  the  

beneficiaries.   It  must  be  noticed  at  this  stage  that  the  

Comptroller and Auditor General of India (for short the ‘CAG’)  

had prepared certain reports in regard to implementation of the  

schemes framed under the Act. Similar report was prepared by  

the  National  Institute  for  Rural  Development  (NIRD)  after  

conducting social audits in certain villages of Orissa on request  

of the Government of Orissa.  Both these reports have pointed  

out the irregularities in implementation of the provisions of the  

Act  and  the  schemes  framed  thereunder.  These  reports  have  

even been accepted by the State Government and it had directed  

all the Collectors and District Programme Controllers (DPCs) to  

take necessary follow-up action.  They had been instructed to  

submit exhaustive compliance/action-taken report in relation to  

the observations made by the CAG and NIRD in their respective  

reports and to conduct complete verification of all the allegations

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contained therein.

In the affidavit filed on behalf of the State of Orissa, it was  

admitted  that  certain  financial  and  other  irregularities  in  

implementation  of  the  schemes  have  been noticed.   Not  only  

this, it was also stated in the affidavits that certain departmental  

actions were also  initiated against  the erring officers/officials.  

This  Court  in  its  order  dated  16th December,  2010,  had  

specifically noticed that the interim compliance reports filed by  

the  Fact-Finding  Committee  constituted  by  the  State  

Government have not been taken to their logical ends and no  

action has been taken as per law.  All these facts compelled this  

Court  to  ask  the  Central  Government  to  hand-over  the  

investigation  into  all  these  incidences  of  irregularities  and  

discrepancies  where,  ex-facie,  criminal  offences  are  alleged  to  

have been committed.

Learned Additional Solicitor General had placed on record a  

copy of the letter dated 4th April, 2011 written by the Director,  

Mahatma Gandhi NREGA to the Director CBI requiring the latter  

to investigate the matter. Paragraphs 2 and 3 of the said letter  

read as under:

“2.  A  copy  of  the  aforesaid  Writ  Petition  is  enclosed,  in  which  the  petitioner  has  mainly  emphasized on the alleged irregularities in the  implementation  of  MGNREGS  in  the  State  of

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Orissa.  Annexure ‘A’ to the Writ petition is the  report of the petitioner titled “Rural Job Scam  Survey Report on Implementation of NREGA in  Orissa”.   In  the  wake  of  directive  from  the  Hon’ble Supreme Court, it has been decided to  refer the Orissa case to the Central Bureau of  Investigation.   A  copy  of  the  counter  affidavit  along with extracts of relevant Annexures filed  by  the  State  of  Orissa  before  the  Hon’ble  Supreme Court is enclosed.

3. you are requested to kindly have the matter  investigated  and  cause  to  initiate  criminal  proceedings  against  the  delinquent  officials  under  the relevant laws.   This may please be  accorded  priority.   This  is  issued  with  the  approval  of  the  Hon’ble  Minister  (Rural  Development).”

After issuance of this letter, the Panchayti Raj Department  

of Government of Orissa, issued a Notification dated 23rd April,  

2011 in regard to the orders of this Court.  The Government of  

Orissa,  referring  to  the  report  of  a  survey  conducted  by  the  

petitioner herein on performance of NREGA in 100 villages of six  

districts  in  Orissa  during  the  year  2006-2007,  accorded  its  

consent to CBI to probe into alleged large-scale irregularities and  

misappropriations  of  funds  under  the  NREGA scheme  in  the  

State of Orissa in exercise of its powers conferred under Section  

6  of  the  Delhi  Special  Police  Establishment  Act,  1946.   Vide  

letter of the same date, i.e. 23rd April, 2011, the Special Director,  

CBI,  wrote  to  Department  of  Personnel  and  Training  of  

Government  of  India  stating  that  the  matter  proposed  to  be

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entrusted to them involves field investigation in a large number  

of villages in remote parts of the State of Orissa and that the CBI  

is  severely  handicapped  in  respect  of  manpower  and  logistic  

resources.   It  was requested  that  their  requirement  for  man-

power and logistic resources may be brought to the notice of this  

Court for seeking appropriate direction in that regard.

During  the  course  of  hearing,  Mr.  Prashant  Bhushan,  

learned  counsel  appearing  for  the  petitioner  made  some  

averments that this investigation should be conducted all over  

the  State  and  reliance  should  not  only  be  placed  upon  the  

reports of CAG and NIRD but the investigating agency should  

also take into consideration the survey report prepared by the  

petitioner  (Annexure  ‘A’  to  the  writ  petition)  to  make  it  a  

comprehensive  and fruitful  investigation.   However,  Mr.  Venu  

Gopal, learned senior counsel appearing for the State of Orissa,  

contended that the CBI should not be called upon to conduct a  

fishing enquiry for the entire State in relation to implementation  

of the provisions of the Act and schemes framed thereunder as it  

would  seriously  hamper  progress  of  the  same  and  even  

demoralize  the  persons  working  under  the  scheme.   It  was  

suggested by him that such investigation should be confined to  

six districts of State of Orissa mentioned in the survey-report of  

the petitioner (Annexure ‘A’ to the writ petition) and should be

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limited for the purposes of examining whether there has been  

commission  of  any  criminal  offence  by  the  officers/officials  

functioning under the provisions of the Act.

Learned  Additional  Solicitor  General,  appearing  for  the  

Union  of  India,  argued  that  the  CBI  should  be  permitted  to  

conduct a free and fair  investigation all  over the State and it  

should  examine  and  take  into  consideration  all  the  three  

documents,  i.e.  the  survey  report  prepared  by  the  petitioner  

(Annexure ‘A’ to the writ petition), report of the CAG dated 31st  

March, 2009 and the report submitted by the NIRD.

Wide powers of investigation are vested in the CBI under  

the  provisions  of  the  Delhi  Special  Police  Establishment  Act,  

1946.  Another provision which has a significant bearing on the  

matters before  us is  Section 27(2)  of  the Act.   This provision  

specifically states that the Central Government may, on receipt  

of any complaint regarding the issue of improper utilization of  

funds granted under this Act in respect of any scheme, if prima  

facie satisfied that there is a case, cause an investigation into  

the complaint by any agency designated by it. Thus, the Central  

Government  has  full  power  to  refer  the  matter  to  CBI  for  

investigation  in  regard  to  the  complaints  received  by  it.   The  

State  Government  has  enquired  into  complaints  received  and  

even  engaged  NIRD  to  conduct  social-audits  and  submit  its

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report  to  the  State  Government.   The  Central  Government  is  

even vested with the power, in such cases, to stop release of the  

funds  to  the  scheme  and  institute  appropriate  remedial  

measures for its proper implementation.  Thus, it will be useful  

for  the  concerned  authorities  in  the  Central  Government  to  

ponder over the entire matter  and propose such directions or  

measures which the State Government should take in order to  

prevent  recurrence  of  the  events  that  have  taken  place  in  

number of States and particularly in the State of Orissa.  

Having heard the learned counsel appearing for the parties  

at some length and keeping in view the background of this case,  

particularly the factual matrix referred by us above, we consider  

it appropriate to issue the following directions :

1. The CBI will conduct free and fair investigation in regard to  

the  implementation  of  provisions  of  the  Act  and  the  

schemes framed thereunder without any impediment;

2. This investigation shall be restricted to 100 villages in six  

districts of Orissa as spelt out in the Notification issued by  

the State of Orissa dated 23rd April, 2011;

3.

4. The  investigating  agency  shall  refer  to  and  take  into  

consideration all the three documents, i.e. the survey report  

prepared by the petitioner (Annexure ‘A’ to the writ petition),

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report of the CAG dated 31st March, 2009 and the report  

submitted by NIRD to the State of Orissa.

5. The  CBI  shall  conduct  a  complete  and  comprehensive  

investigation  in  the  matter.   Whereupon,  it  shall  file  its  

report  in  regard  to  commission  of  criminal  offences  in  

implementation  of  the  schemes  or  otherwise  before  the  

court of competent jurisdiction for appropriate action.  The  

CBI shall  also place a copy thereof  on the record of this  

Court.

6. Other  irregularities  or  illegalities,  apart  from  the  

commission of criminal offences, which come to the notice  

of the CBI during the course of this investigation, shall be  

submitted to the Chief Secretary, State of Orissa in the form  

of separate report for appropriate action in accordance with  

law.

7. The investigation should be concluded as expeditiously as  

possible.  However, we would expect the CBI to file its first  

8. report  within  a  period  of  six  months  from  the  date  of  

pronouncement of this order.

9. The State Government of Orissa, all the State Departments  

and  concerned  authorities  of  the  Central  and  State

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Governments are hereby directed to fully cooperate with the  

CBI  so  as  to  facilitate  the  expeditious  completion  of  the  

investigation.  The  Ministry  of  Rural  Development,  

Government  of  India is  also directed to provide technical  

assistance  to  CBI  during  the  course  of  investigation  in  

regard to  all  the  matters  falling  within the  scope  of  that  

investigation.   Union  of  India  shall  also  furnish  the  

guidelines, directions and measures which are required to  

be taken by the State of Orissa.

10.Besides issuing the above directions, we hereby also direct  

that notice to be issued to the States of Uttar Pradesh and  

Madhya  Pradesh  to  respond  to  the  reports  filed  by  the  

petitioner  along  with  its  rejoinder  affidavit  dated  21st  

February,  2011  in  regard  to  implementation  of  

provisions/schemes under the Act in those States.

11.

12.Keeping  in  view  the  fact  that  there  has  been  persistent  

default  on  the  part  of  a  number  of  States  in  fully  

implementing the provisions of the Act, we hereby direct all  

the State Governments to file affidavits stating whether they  

have accepted and are duly implementing the Operational  

Guidelines issued by the Government of India,  within six

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weeks from today.  In the event, these Guidelines have not  

been accepted or are not being implemented, the affidavit  

shall  specifically  state  reasons  for  such  non-acceptance  

and/or  non-implementation  of  the  afore-stated  

directions/guidelines.

13.We  also  direct  the  Central  Government  to  consider  the  

entire  matter  objectively  within  the  framework  of  the  

provisions of the statute and place on record of this Court,  

before the next date of hearing, the directions or measures  

which  it  proposes  to  issue  to  all  the  States  to  prevent  

recurrence of what has happened in the State of Orissa.

With  the  above  orders,  we  direct  that  all  concerned  shall  

strictly adhere to and comply with the directions contained in this  

order.  We make it clear that in the event of default this Court would  

be  compelled  to  take  appropriate  action  against  the  defaulting  

officers/officials/authorities.

Stand over for eight weeks.

..……........................................CJI  [S.H. Kapadia]

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.………........................................J.  [K.S. Panicker Radhakrishnan]

..… …...........................................J.

      [Swatanter Kumar] New Delhi May 12, 2011