Nimmagadda Prasad, the high-profile investor and the founder of Matrix Laboratories Limited, who was arrested by the Central Bureau of Investigation (CBI) in the ongoing investigation into the alleged quid pro quo deals against Kadapa MP YS Jaganmohan Reddy, has been remanded to judicial custody on Wednesday.
The principal judge of the special CBI court, while sending Prasad along with KV Brahmananda Reddy, former special secretary in the Andhra Pradesh Infrastructure and Investments Department, to a 14-day judicial remand, said that he would decide on the request for police custody made by the CBI after hearing the counsel of both the accused on Thursday.
Prasad, one of the 73 accused figured in the FIR (first information report), is the first high-profile entrepreneur arrested so far by the investigating agency. The CBI has so far filed three chargesheets in connection with the case.
The CBI, in its remand report, alleged that Prasad invested about Rs 854 crore in the companies belonging to the Kadapa MP as a quid pro quo for the benefits received from the government headed by the latter's father and former chief minister YS Rajasekhara Reddy.
The alleged benefits relate to the proposed development of a large integrated port and industrial corridor project, called Vadarevu and Nizampatnam Port and Industrial Corridor project ( VANPIC) spanning across the two coastal districts of Guntur and Prakasam.
While the AP government signed an MoU with the government of Ras Al Khaima (RAK) in March 2008 for the development of the VANPIC project on a build, own, operate and transfer (BOOT) basis, the Prasad-promoted Matrix Enport Holdings Private Limited had joined the project as an Indian partner with a 49 per cent equity soon after signing the ‘government-to-government’ agreement.
Establishing the case of alleged quid pro quo deal, the CBI said that its investigation revealed several deviations in the concession agreement as compared to the Cabinet Memorandum approved earlier by the state Cabinet and also contained “several grave errors and lapses”.
While the whole of the port and industrial corridor project was supposed to be developed by the special purpose vehicle (SPV) called VANPIC Ports Private Limited with RAK and Prasad on a 51:49 share holding basis respectively, a parallel entity, VANPIC Projects Private Limited, which was created and controlled by Prasad had cornered about 13,000 acre of land so far in the name of the same project. according to the remand report.
Here, CBI also accused Prasad of exaggerating the expenditure regarding the payment of compensation to land owners/assignees in lieu of lands at about Rs 450 crore as against the actual payment of Rs 150 crore.
“This final destinations/beneficiaries of the remaining Rs 300 crore are to be ascertained,” the CBI said.
Further, yet another major deviation figured in the concession agreement, according to the CBI, had permitted the dilution of RAK's share holding to 26 per cent from the originally envisaged 51 per cent in the project, facilitating the entry of another private player Navayuga Engineering Company Limited into VANPIC Ports Private Limited.
Other deviations mentioned by the CBI include the missing of the word ‘mutual consent’ when it comes to the extension of the concession period beyond 33 years and dilution of equity after five years of commencement date (date of agreement) instead of the commercial operation date.
This apart, the concessionaire is not liable to pay the concession fee to the government in respect of any year where the project operator do not get net profit instead of gross profit and the concessionaire also gets absolute ownership of the land for industrial corridor in the project, which has originally been awarded on a BOOT basis.
Brahmananda Reddy, an Indian Railway Service (IRS) officer, who worked in the AP government as special secretary on deputation, has been arrested for allegedly facilitating these deviations. He signed the concession agreement on behalf of the state government in July 2008. All the alleged deviations took place through various government orders till 2009, the CBI remand report stated.
The above aspects are cited as a deviation from the Cabinet Memorandum which “only refers” to Vanpic Ports Private Limited consisting of RAK with 51 per cent stake through the investment company or the subsidiaries and Matrix Enport Holdings Private Limited with 49 per cent stake and terms the project as one single entity.
Further, it envisages the allotment of only 2,000 acre each for the development of the two ports with an estimated investment of Rs 2,700 crore and Rs 2,000 crore respectively.
