Swindling of public exchequer in hundreds of Crores by a middleman

    Indian Agent imported from Foreign Principal at @CHF 6400 & charged @CHF 8600

    Existence of the unholy nexus between the Indian Agent and Railway officials

    Then DG/RDSO maintained complete silence with regard to approval of another alternate source

    There is a clear cut proof of criminal nexus between overseas suppliers, middleman & RDSO Officials

    Resulted into looting and rooting the national exchequers by hundreds of Crores paid to the middleman as commission

    Swindling of public exchequer in hundreds of Crores by a middle man claiming to an Indian Agent (of overseas suppliers) against contracts placed by Indian Railways for imported stores - a case of criminal conspiracy and criminal nexus between middle man, their overseas suppliers & the then DG/RDSO. All related documentary avidences in passession of 'Railway Samachar'.

    This is a complaint against an Indian Agent of overseas suppliers of various items. There is a clear cut proof of criminal nexus between overseas suppliers, their middleman & with officials of RDSO, which has resulted into looting and rooting the national exchequers by hundreds of Crores paid to the middleman as commission. The facts in brief are as follows:

    M/s PPS International, having office at Sector-50 Noida, claims to be an Indian Agent of following overseas suppliers for various imported items required by the Indian Railway and different Metro Railways in the country:

    i) M/s Secheron, Switzerland, ii) M/s Halster Rail, Switzerland, iii) M/s Gimota AG, Switzerland, iv) M/s Arthur Flury, Switzerland, v) M/s B+Z Elektronik, Switzerland, vi) M/s Televic Rail NV, Switzerland, vii) Pfisterer, Italy, viii) Tesmec, Italy, ix) ISGEV, Italy, x) Mahle Behr, Germany, xi) Mafelec, France, xii) Tillay Industries Inc, Canada.

    M/s Arthur Flury Switzerland is a single RDSO approved supplier for supply of PTFE short neutral section to Indian Railway. They are operating in India through Indian Agent M/s PPS International Noida, since 2009.

    As per the extant instructions issued by the Government and CVC, whenever Indian Agents participate in the tenders issued by the Government Departments, submission of proforma invoice from the Foreign Principal along with their bid is one of the mandatory requirements. This is an important document to ad-judge the reasonability of the rates quoted by the Indian Agents on behalf of their foreign Principal.

    In the above stated background, it is stated that CORE (Central Organization for Railway Electrification), Ministry of Railway had issued a Global Tender No. Core/S/1271/4054 opened on 18.03.2013 for purchase of 282 Sets of PTFE short neutral section.

    Against the aforesaid tender, M/s PPS International, while acting as an India Agent of M/s Arthur Flury Switzerland, had submitted their offer on behalf of their Principal. Along with their bid, they had also submitted original proforma invoice said to have been issued by their Foreign Principal (M/s Arthur Flury Switzerland).

    In the aforesaid proforma invoice, their Foreign Principal (M/s Arthur Flury Switzerland) had declared FOB rate of CHF 9500 per set (CHF means Swiss Currency i.e Swiss franc 1 CHF= Rs.68.43). Subsequently, the Indian Agent M/s PPS International offered a revised/reduced rate of FOB CHF 8600 per set claiming that they had decided to pass dealer discount to the Railways. And, based on such declaration, they submitted a calculation-sheet of Landed price (In INR) @ Rs. 7,38,000/- per set. In this connection, Copy of proforma invoice No. 121/4054, Dated 22.01.2013 and the aforesaid letter submitted by the Indian Agent is in passession of 'Railway Samachar'.

    On the strength of above mentioned 2 documents, the quoted price in INR @Rs.7,38,000 per set (later marginally reduced to 7,25,000/ during the course of negotiation) was considered reasonable. Accordingly, an order was placed on them for 282 sets @ Rs 7,25,000 per set. The copy of the contract is in passession of 'Railway Samachar'. They supplied the material and got the payment of Rs 20.44 Crores.

    In the meanwhile, some suspicion arose about the transactions. Hence, the Purchaser i.e CORE, Ministry of Railway, wrote a letter to the Custom Authority to find out the actual rate at which the Indian Agent imported the item from their Principal for further supply to Railways. The reply that was received from the Custom Deptt is extremely shocking. Custom Department confirmed that actual import has been made @ CHF 6400 as against the ordered rate of CHF 8600 per west on Indian Agent. Thus, commission paid is CHF 2400 per unit. The related document is in passession of 'Railway Samachar'

    In terms of INR (i.e landed price in India), as can be seen from the reply of Custom Deptt., the actual import was made @ Rs 5,73,248 per set as against the ordered rate of Rs 7,25,000 per set. Thus, in one single contract of 282 sets, the middleman looted the public money by Rs 4.28 Crs and had a profit margin of 26.4%.

    Since annual requirement of Indian Railway including the Metro Railways for this item is approx. 400 nos, Indian Agent have looted the national exchequer approx. 35-40 Crores over the last 6 years. As a matter of fact, it is understood had they had earlier supplied this item even @ Rs 12 Lakhs as against the actual import rate of Rs. 5.7 Lakhs.

    As per extant rule, Agency commission in Indian Railway should normally not exceed than 5%. However, while on one hand, they claimed that their commission is only 2% (refered as per their calculation), they on the other hand and behind the back, got the commission of 26.4%.

    It is very important to reiterate that the order was placed on Indian Agent in Indian Rupee and the had imported it from thier Foreign Principal. While they had paid CHF 6400 to thier Principal, they charged CHF 8600 per set from CORE.

    Such a day light robbery of public exchequer wouldn’t have been possible but for the active criminal support from their foreign principal. As brought out at above, in order to lend credence to the rate quoted by their Indian Agent, the foreign supplier (M/s Arthur Flury, Switzerland) had submitted proforma invoice showing FOB price @ CHF 9500. Based on such declaration signed jointly by their CEO & President, the rate quoted by their Indian Agent was considered reasonable. However, subsequently, Custom Department revealed that foreign supplier has actually  supplied at much lesser FOB price @ CHF 64 to their Indian Agent, who in turn have supplied at 26.4% higher price to the Railways.

    In view of above mentioned clinching documentary evidences, it is proved that Foreign Principal deliberately indicated higher rate of CHF 9500 in the proforma invoice, though the actual rate was CHF 6400, which was much lower. Such a deliberate act of omission and commission on the part of foreign principal was a part of well-orchestrated design to help the Indian Agent in getting the contract at much higher rate, and thereby, making huge profit of 26.4% as commission. Thus, conspiracy angle between the two is established beyond any doubt.

    Further, another angle of criminality not involving the criminal conspiracy but also violation of foreign exchange rules has been noted in this case. On 03/07/2012, a contract of supply of 91 sets was placed directly on Foreign Principal i.e. M/s Arthur Flury (copy of Contract is in passession of 'Railway Samachar'). This contract was placed @ CHF 8600 per set and the payment was made by the payment was made by the Railway directly to them through LC. Against this contract they had declared that their Indian Agent is M/s PPS International, Noida but no agency commission is being paid to them. However as already discussed, they actually supplied @CHF 6400 per set. Since Railway had made entire payment to M/s Arthur Flury in foreign currency through LC, they shared the illegally got 34% of excess money with their Indian Agent in foreign currency and at foreign soil. Hence, it is a matter of investigation to find out the flow of funds as to how much payment foreign principal made to the Indian middleman in Switzerland, and whether rules and acts governing the foreign exchange transactions, were compiled or not.

    Further, as per tender condition, it is mandatory on the part of Foreign suppliers to declare any payment which they have made to their Indian Agent either in India or abroad whereas a commission or as a Agent retainer fee. However, they did not declare so and shared excess amount more than 34% with their Indian Agent without disclosing anything on this count. This shows the criminal conspiracy between the Indian Agent and his Foreign Principal.

    It is further submitted that any Agency commission to the Indian Agent is to be paid in the Indian Currency. However, through the illegal adopted mentioned route above, overseas suppliers got the payment directly through LC in Foreign Currency and hared the booty with their Indian Agent in the Foreign Currency and that too without any knowledge of the Purchaser i.e. Ministry of Railways.

    Having proved the existence of crystal clear nexus between the foreign supplier and their Indian Agent, Now proceed to prove existence of the unholy nexus between the Indian Agent M/s PPS International and Railway officials. As already stated above M/s Arthur Arthur Flury is the sole RDSO approved supplier to the Indian Railway. In the past, M/s Siemens, AG, Germany, had also participated in the tender, and they were considered capable for supply of the item. Hence, in order to break the monopoly of M/s Arthur Flury, COS/CORE, with the approval of GM/CORE wrote a letter on 30.07.2013 to the then DG/RDSO for assessment and approval of M/s Siemens. A copy of the said letter is in passession of 'Railway Samachar'. However, the then DG/RDSO deliberately choose not to act on it apparently under undue influence of M/s PPS International, who in connivance of his foreign principal was ruthlessly exploiting the monopoly. On identical scale, the then DG/RDSO maintained complete silence with regard to approval of another alternate source M/s Galland, France and didn’t take timely action to expedite field trial reports. In result, M/s Arthur Flury continued to loot the Indian Railways in connivance with his greedy Indian Agent. Thus, criminal conspiracy between DG/RDSO and Indian Agent is proved.

    This is the quantum of loot only for one item alone. M/s PPS International is the Indian Agent of 10 foreign suppliers for more than 100 items, whose names have been indicated in above. Further, they are operating in the name of 2 sister firms namely PT Communication Systems Pvt. Ltd & SIMPRA Agencies. If this is the loot amount for one item alone, you can easily gauge the quantum of illegally commission that they have been paid over decades through illegal routes by indulging into fraudulent mean and criminal conspiracy hatched between the various beneficiaries. This amount will run in hundreds of Crores.

    So, the concerned authorities requested that please constitute multi-disciplinary investigation team comprising of CBI, ED, DRI and IT, and order investigation order to unearth the scam, which is of much bigger size than Bofors. In order to unearth the scam, following actions may be taken (i) Wherever import orders have been placed in Indian rupees directly on Indian Agent i.e. on M/s PPS International or their 2 sister concerns as mentioned above, the comparison of actual rates at which import has been made (through Custom documents) vis-à-vis the ordered rates indicated in the contracts, shall reveal the illegal commission that they have got. (ii) And, where orders have been placed directly on their foreign Principals in foreign currency, foreign suppliers should be approached to indicate the commission that they have paid to the Indian Agent at foreign soil. These 2 actions shall be enough to unearth and expose this scam.

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