CBI case in Centaur sale this week

Former disinvestment minister Arun Shourie says he is prepared to face probe anytime

The Central Bureau of Investigation (CBI) has confirmed that it has received the first set of files and documents in the Centaur privatisation case and is likely to register a regular case this week.

The finance ministry submitted two sets of papers relating to the case in the middle and end of July and a note asking the agency to probe the multi-crore rupees deal, which came under attack from the then Opposition Congress and the Left parties.

Former Disinvestment Minister Arun Shourie, who signed the deal and has steadfastly defended it, has already made it clear that he is prepared to face the CBI probe "anywhere and anytime".

The difference between a regular case and a preliminary enquiry is that a regular case entails registering of a first information report (FIR) in a designated court and empowers the agency to search, seize and question the accused.

The entire set of the documents along with the notings has been sent to the directorate of prosecution of the agency for its opinion.

The CBI received a communication from the Union government last month to probe the sale of two hotels at the airport and Juhu in Mumbai executed by the National Democratic Alliance (NDA) government in 2002.

The files submitted to the CBI also contain the notings of the Comptroller and Auditor-General, which had said sale of two Centaur hotels took place without the benefit of competition and valuation and reserve prices in these transactions were not consistent with the practice followed by the disinvestment ministry in other cases.

The general allegation, which can form the basis of the CBI case, is that the sale transactions of two hotels, Juhu Centaur and Airport Centaur, were finalised on the basis of single bids without the benefit of competition.

Assumptions made during valuation of the properties and fixation of reserve price of the Airport Centaur were not consistent with the practice followed by the ministry in other cases. Repeated extensions and relaxation were allowed to the bidder of the Juhu Centaur to facilitate the sale, sources said and pointing out that the CAG had made similar observations.

According to CBI sources, the files said the expressions of interest were received in October 2000 from 20 parties for Juhu Centaur and 21 parties for Airport Centaur. In case of Juhu Centaur, three parties were disqualified, 16 withdrew leaving a solitary bidder, Tulip Hospitality Services Private Ltd, in the fray.

In case of Airport Centaur, four were disqualified, 13 withdrew and the remaining four carried out due diligence exercise. But only one bidder, Batra Hospitality Private Ltd, submitted the financial bid.

Juhu Centaur was sold in March 2002 for Rs 153 crore. Airport Centaur was sold in April 2002 for Rs 83 crore. While in the case of Airport Centaur, the audit noted inconsistency in fixing the reserve price, in Juhu Centaur, the audit noted certain inconsistencies in relaxations/deviations that were offered to the sole bidder, sources said. They also said the scrutiny of the financial strength of the bidder for the Juhu Centaur was "inadequate".

Accepting the financial bid without a clear indication of source of funds necessary to finance the deal was against the prescribed requirements of the financial bid package, they said citing the files submitted to the agency.

Referring to the CAG's observations, sources said the report also mentioned that the bidder was granted repeated extensions to deposit the entire purchase consideration and execute the agreement sell and escrow agreement by 22 December, 2001 and the ministry also did not encash the bank guarantee submitted by the bidder despite breach of terms and conditions time and again.