Nama Nageswara Rao assures cooperation to investigating agencies in Rs 1,064 crore funds diversion case

RS MP Nama Nageswara Rao said that he will cooperate with all investigating agencies regarding the allegations against him and his companies and hoped he would come out clean.

By Newsmeter Network  Published on  19 Jun 2021 8:58 AM GMT
Nama Nageswara Rao assures cooperation to investigating agencies in Rs 1,064 crore funds diversion case

Hyderabad: TRS MP Nama Nageswara Rao said that he will cooperate with all investigating agencies regarding the allegations against him and his companies and hoped he would come out clean. The Enforcement Directorate (ED) had issued summons the TRS MP in connection with a Rs 1,064 crore bank fraud case and has asked him to appear before it on 25 June. The ED had searched some of the offices of Madhucon Group, belonging to Nama Nageswara, for alleged fund diversion.

"Even if these are attempts to trouble me or the TRS party, I will be with my leader and my people," he said addressing the media at his Jubilee Hills residence on Saturday.

He said that Ranchi Expressway Limited, a company for special purpose vehicles floated by his family-owned group, Madhucon Group, is not the reason for the delay in the execution of the 163-km project from Ranchi to Jamshedpur of the National Highways Authority of India (NHAI). It started in 2011, with 30 per cent equity, 70 per cent debt.

As per the agreement with the NHAI, 80 per cent of the project site has to be handed over at the time of the agreement and the remaining site has to be handed over by 90 days. But on the contrary, 21 per cent of the site was handed over at the time of the agreement and the remaining site was not handed over even after seven years due to various reasons.

The company started working on the site which was in bits and pieces and 60.24 per cent of work was completed, 50.24 per cent of it was measured and 10 per cent unmeasured portion was pending. At this time, NHAI terminated the contract abruptly.

Of the Rs 1,650 crore value of the total project, Rs 463 crore was the company's share and the balance Rs 1,190 crores was to be funded by the banks. But banks funded Rs 652 crores and the company invested Rs 485 crores into the project till the day of termination.

The total amount was deposited in an escrow account, on which the bank had complete control and the company did not have any right, either its operation or the funds in it. Unlike other projects, where lenders directly transfer money to company accounts, banks cannot directly lend money in case of an escrow account. The money has to be first transferred into this account and the three independent consultors authorised by the government agency will verify and release the funds to the contract company.

In this case, the total site was not handed over to the contract company and more banks collected over Rs 378 crores as interest towards their funding. The NHAI did not invest a rupee into the project till the contract was terminated.

The NHAI while terminating the contract has admitted that the project was delayed as the site was not handed over on time and agreed for compensation from their side. In this regard, the contract company wrote to the NHAI board chairman for compensation. However, due to PILs and cases surrounding the project, NHAI stepped back.

Meanwhile, as per the arbitration terms laid down in the contract agreement, the company moved the arbitration tribunal and a three-member bench was also set up. The bench collected facts and also held a series of meetings.

"We have faith in the constitution, judiciary and the arbitration bench and hope to get justice there. Since the matter is under sub-judice, I won't be able to speak more on this," said Nama

The project awarded to Ranchi Expressway Limited was a Build Operate and Transfer (BOT) model in which the government agency will not invest any money and the entire project cost has to be mobilised by the contractor, but after the process had hit roadblocks, the government brought in a new policy and brought in Hybrid-Annuity Model (HAM) replacing BOT model.

In this model, the government agencies like the NHAI and banks will fund 40 per cent each and contractors will have 20 per cent share. This also mandates to handover the complete project site at the time of agreement. Regarding the SPV, there was no complaint from any bank or any other government agency, he said.

Speaking about the past record of the company, he said their company had executed various prestigious projects across the country and is also working on projects currently. "Seven per cent of the Golden Quadrilateral project taken up during Vajpayee's government and six per cent of independent India's first major railway project Konkan Railway from Mumbai to Mangalore and another project on the China border, which even BRO could not take up, were successfully executed by our company," he added.

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