Railway deal crisis engulfs Bengal promoters

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(Representative photo)
(Representative photo)

The involvement of two Kolkata-based promoters in a big buck Railway contract has snowballed into a huge controversy because of the company’s dubious past.

Investigators have found that Kolkata promoters RK Bhalotia and Prateek Bhalotia and their old company, Riddhi Siddhi Udyog and a new company Sigma Rail Systems Private Limited could be in serious trouble because of their alleged violations of Railway guidelines to seek orders.

In fact, the allegations are serious enough to have created a ruckus amongst our lawmakers with at least four MPs raising the issues in various forums including Parliament. 

Helping the Bhalotias, the investigators found, were top officials of the Railway Board in the Indian Capital and also some senior officials of the Indian Railways in Kolkata.

The matter has turned serious.

Kaushalendra Kumar (JDU), Amol Kolhe (NCP) and Shatabdi Roy (AITC) have sent letters to new Railway Minister, Ashwini Vaishnaw within days of his assuming office. 

(Representative photo)

This correspondent has seen all the letters which highlights issues relating to the functioning of the Railway Board and its dealings with the Bhalotias. 

Jasvir Singh Gill (INC) has even gone ahead and submitted an unstarred question in the Lok Sabha on this matter. The MPs are in agreement that the functioning of the Research Designs and Standards Organisation (RDSO) is a matter of concern. Even more so because the companies in question deal with equipment that is vital for the safety of train operations.

So what is the crisis?

Top sources in Kolkata told this reporter that RK Bhalotia and his proprietorship concern, Riddhi Siddhi Udyog which is located at 238A, AJC Bose Road, Unit-5, Kolkata was a Category 1 single vendor for the supply of Block Brakes in the Mechanical Department of Indian Railway, for 40 years until 2014. Now what is interesting is that in 2014, both RK Bhalotia and his son were taken into custody for alleged charges of bribery and involvement of a honey trap, by the Kolkata office of the CBI. This news received wide coverage including the arrest of an Excise Commissioner in the day. An article highlighting the matter was even published in the Rail Samachar. Expectedly, the railways took stern action and the company was delisted through a letter dated 17.11.2014.

Three years later, the company and its promoters were charged U/s 120-B, 420, 468, 471, 201 IPC and section 13(2) r/w 13(1)(d) of the Prevention of Corruption Act, 1988, by the CBI.

(Representative photo)

Now, claim the sources, trouble started when the Bhalotias – realizing that their existing and old company was delisted – promptly formed a new company, M/s Sigma Rail Systems Private Limited in the year 2016 having registered office in the same address. As they were blacklisted in the mechanical department of the Railways, they started trying for a fresh registration as a Developmental Order Vendor in the Signalling & Telecommunication Department of the Railway. “They realised the high potential and prospect of the S&T products with the upcoming modernization in the signalling department of the Railways,” the sources further said.

On pen and paper, this should have been an uphill task for the Bhalotias due to the very strict existing policies as per the internal guidelines of the Railways. As per the Railway guidelines issued in 1971 vide clause 3(i) it is mentioned that every Ministry/Department/Office should maintain an up to date list of approved suppliers by taking into consideration their financial standard, capacity, past performance etc. This is not all.

If a company is banned by one ministry, it is bound to be banned by all ministries under Clause 16 of the Railway guidelines. The grounds on which such banning may be ordered are:

(ii) if the proprietor of the firm, its employee, partner or representative following prosecution by the CBI or under normal process of law for offences involving moral turpitude in relation to business dealings;

(iii) If there is strong justification for believing that the proprietor or employee or representative of the firm has been guilty of malpractices such as bribery, fraud etc.  

iii) As per clause 18(ii) – A banning order shall specify the names of all the partners, directors etc. of the firm and its allied concerns.

iv) As per clause 19 – No contract of any kind whatsoever shall be placed with a banned firm, including its allied firm by all Ministries. 
(Internal guidelines available with the RTI application no. 7117/2010 submitted by Sunil Kumar, Chief Public Information Officer-III, Railway Board)

(Representative photo)

But the Bhalotias proved equal to the challenge and even after their company was delisted, they managed to get a fresh registration for their company Sigma as a vendor for developmental orders vide letter dated 26.04.2019 for the supply of MSDAC (which is an automatic axle counter and a vital part of the automated Railway Signalling systems). The sources allege that the Bhalotias managed to climb this insurmountable obstacle with the full knowledge of the chairman Railway Board, Executive Directors and other senior officers.

Sources also told this reporter that Sigma got the above registration on the basis of its MOU with Croatia based M/s ALTPRO as its OEM (Original Equipment Manufacturer).

It is noteworthy that, Sigma, where both the father & son are promoter directors, is a company with negative net worth, loss making and having minimum paid up share capital of Rs.1,00,000/- and also having nil financial standard, capacity and past performance, in the year 2019.

“How could the Indian Railways agree for a fresh registration with a company of zero net worth and zero revenue. What kind of declarations were made by the Bhalotias?” asked the sources.

Letters seeking answers from the chairman, Railway Board and other top officials from this reporter remained unanswered.

The fresh registration, claimed sources, overlooked the main clauses and points of internal guidelines of the Railways even when the tainted proprietor is director and shareholder in the new company. Also, the fact that the address of the blacklisted company and the new company is the same, was overlooked.

The matter does not end here.

Once Sigma was registered in 2019, it is alleged that the company’s main concern was to plan and create a monopoly in S&T Directorate, RDSO and also ensure that the Railways overlook the vast proven track record of existing companies like Eldyne, Siemens, Frouscher, all having more than 20 years of experience of supplying MSDAC in the Railways. 

In short, Sigma was interested in an uninterrupted run with the supply of the MSDAC. In short, the Bhalotias wanted to make Sigma the sole monopoly in the S&T Directorate for the supply of its main product MSDAC, in the same manner as it was done by them in the mechanical department for the supply of Block Brakes earlier.

Letters seeking answers from the chairman, Railway Board and other top officials of the Railway Board from this reporter remained unanswered. Repeated attempts to reach the Bhalotias also proved futile.

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