Tuff Drilling defaults on Rs 120-cr loan, sparks political storm

Tuff Drilling, the Delhi-based contractor of Gujarat State Petroleum Corporation (GSPC), has defaulted on loans of over Rs 120 crore to three public sector banks.

The little-known supplier of rigs, Tuff and its Gujarat government-owned client GSPC, are at the centre of a political storm as the Opposition led by the Congress is demanding a detailed probe in to what they have codenamed the "new KG scam."

Congress leaders have alleged kickbacks and other irregularities, which merits a Joint Parliamentary panel probe. Tuff Drilling was awarded the contract to supply platform rigs to GSPC for its ambitious field development plan (FDP) in the offshore block it had won in the Krishna-Godavari (KG) basin.

 

According to suit filed cases reported by Credit Information Bureau of India (CIBIL), Tuff Drilling had dues of Rs 87.35 crore to Punjab National Bank's large corporate branch in New Delhi and Rs 14.73 crore to Corporation Bank's Bengaluru branch.

The CIBIL list, updated till December, named six directors as reported by the banks Om Prakash Yadav, Vivek Yadav, Vinay Yadav M G Mohan Kumar, Prakas Ladhani and S N Ladhani.

Separately, Tuff Drilling and two directors Om Prakash and Vivek Yadav were named willful defaulters by United Bank of India for a sum of Rs 21.5 crore in September 2015, according to watchoutinvestors.com, an independent public service portal supported by NSE, BSE and Sebi.

Ministry of Corporate Affairs (MCA) data showed that the company had not held AGMs since 2010 and has not filed balance sheet since.

Tuff, which had its registered office at the Jeevan Tara building on Parliament Street, had a paid up capital of Rs 30 crore, but its current status showed that it was under the process of liquidation. Charge documents filed with the MCA showed the three banks had a total exposure of close to Rs 200 crore created between 2008 and 2010. An email seeking comments sent to the official email id of the company did not elicit any response.

Between 2007 and 2009, several companies with similar names such as Tuff Energy, Tuff Infrastructure, Tuff Mining, were floated with the Yadavs as directors. While some were based out of Parliament Street, others had a Bangalore address. Unlike Tuff Drilling, these companies continued to be "active" but had paid up capital of Rs 1 lakh each.

In a press note issued in 2011, then opposition leader in Gujarat Assembly Shaktisinh Gohil mentions a Rs 3,930-crore Memorandum of Understanding signed between Gujarat government and Tuff Energy among 31 such deals inked in Vibrant Gujarat Summit 2009, which did not translate into "anything for the state and people of Gujarat." A press note by Gohil dated January 2011 had alleged, "Rather, these companies have used Vibrant Gujarat as a platform to inflate their share values and attract financial institutions for more funding."

Few months after inking the MOU, in March 2010, Tuff Drilling won the tender for platform rigs from GSPC. The CAG report on GSPC said, "For implementation of the FDP for the KG block (DDW), the Company issued (April 2009) tender for Platform rigs and the Company awarded (March 2010) the contract to Tuff Drilling (Consortium of Tuff Drilling Private Limited and Spartan Offshore Drilling)."

The CAG observed that the contractor did not have enough experience in the work it was awarded and the shortcomings were overlooked by GSPC.

"Tuff Drilling had not designed, engineered or constructed a modular platform rig on its own. Further, on the clarification sought by the Company while evaluating the bid documents, Tuff Drilling replied that their subcontractor had relevant experience, which was accepted by the company despite the tender condition for considering the experience of individual consortium members in case of Special Purpose Vehicle or joint venture companies."

The government auditor concluded that the technical qualification of Tuff Drilling was not according to the tender conditions. Further, Audit observed that the well head platform from which the platform rig was to operate was expected to be ready for drilling (RFD) by March 2011 and the rig was to be mobilized by that time.

As Tuff failed to mobilize the rig by the stipulated time (February 2011), the Company awarded (April 2011) the work to Nabors Drilling International (L-2 of the tender) and their rig was mobilized by February 2012.

"As the Well Head Platform was RFD by May 2011, the Company had to deploy a costlier Jack-Up rig for drilling the development wells during the period September 2011 to January 2012, which resulted in an additional expenditure of $6.812 million," the CAG report said.

An email sent to top GSPC officials seeking comments on the CAG report findings did not elicit any response.

According to the GSPC's management response recorded in the CAG report, the technical qualification was based on the experience of Spartan Offshore Drilling (SOD), a Consortium partner in designing, constructing and operating offshore rigs and that of the members of its senior management in modular rig construction. "It was also considered that the Consortium had constructed eight rigs and that the Consortium gave the option of buying back the rig at a reduced price," the management told CAG.

But, the CAG pointed out that the tender conditions stipulated experience in both operating offshore rigs and building and operating offshore modular platform rigs. "Neither of the Consortium partners had experience in designing, constructing and operating modular platform rig. The experience of individual members of senior management was not a consideration relevant to the tender and the eight rigs constructed by the Consortium as stated above were by a subcontractor and not a Consortium member," the CAG report said.