Dr. Y.R. Midha vs Union Of India (Uoi) And Ors.

on 6 March, 2002

Bench: A D Singh, M Sharma Dr. Y.R. Midha vs Union Of India (Uoi) And Ors. on 6/3/2002 JUDGMENT Anil Dev Singh, J. 1. The unsavoury controversy presented in the writ petition results from a challenge inter alia to the action of the fourth respondent in awarding the contract to carry out physical verification of the stocks and inventories of the Food Corporation of India to M/s. SGS Ltd, a Mumbai based firm of surveyors in which the fourth respondent's son works as Executive marketing. 2. The petitioner, a member of the Indian Audit and Accounts Service, was working as Principal Director (Commerce and Audit) and Ex-officio Member, Audit Board, New Delhi. The first respondent is the Union of India which has been represented through the Ministry of Food and Consumer Affairs, Department of Food and Civil Supplies, New Delhi; second respondent is also the Union of India represented through the Ministry of Finance, New Delhi; third respondent is the Office of the Comptroller and Auditor General of India, New Delhi; fourth respondent is the Comptroller and Auditor General of India, New Delhi (for short 'the CAG'); the fifth to ninth respondents are/were the officers of the third respondent; tenth respondent is the Food Corporation of India (for short 'the FCI'), and the eleventh respondent is a company, namely, SGS India Limited. 3. The facts giving rise to this petition are as follows:4. On June 30, 1997, the Secretary to the Government of India, Ministry of Food and Consumer Affairs, Department of Food and Civil Supplies, wrote a letter to the CAG requesting a special audit of the inventories/stocks of rice held by the FCI in the States of Punjab, Uttar Pradesh, Haryana, Madhya Pradesh, Andhra Pradesh, Tamil Nadu and Orissa within one month. This request was made in view of the discrepancies between the figures of stock of rice available with the Government of India and the FCI. The letter reads as follows:"As a result of the discrepancies between the figures of stock of rice available with the Government of India and the FCI, the Cabinet Committee on Prices viewed this discrepancy with grave concern and have directed that a 'special audit' be carried out for the years 1995-96 and 1996-97 about the stocks of rice maintained with the FCI as well as stock procured for Central Pool by different agencies of the States of Punjab, Uttar Pradesh, Haryana, Madhya Pradesh, Andhra Pradesh, Tamil Nadu and Orissa. 2. The Ministry is of the view that a 'special audit' involving inventories/stocks with FCI and the concerned State should be carried out by the Comptroller and Auditor General of India and are requested to submit a report, preferably within one month. 3. A line in confirmation will be highly appreciated." 5. In response to the aforesaid letter, the Chairman, Audit Board & Deputy Comptroller and Auditor General, by his letter dated July 1, 1977, apprised the Secretary, Ministry of Food & Consumer Affairs, Department of Food & Civil Supplies, that it will not be possible to physically verify the stocks within one month. It was also pointed out that a plan was being developed for doing the needful and the same was expected to be ready by July 15, 1977. 6. On July 4, 1997, the Cabinet Secretary wrote a letter to the fourth respondent requesting the latter to depute an appropriate team to carry out special audit in respect of inventories/stocks held for the Central Pool by the
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Dr. Y.R. Midha vs Union Of India (Uoi) And Ors. on 6 March, 2002

F.C.I. and the concerned state agencies. The letter reads as follows:"Please refer to D.O. Letter No. 5-26/97-BP.I/S(FC&CS)/143/97 dated 30th June 1997 addressed by Shri B.K. Taimini, Secretary, Department of Food and Civil Supplies regarding carrying out of a special audit in respect of inventories/stock held for the Central pool by FCI and the concerned State agencies. As intimated to you, government has viewed the discrepancies between figures of stock maintained in Government of India and that reported by FCI seriously. It has been directed that a special audit should be carried out in respect of the stocks so as to arrive at the correct position. I will be grateful if you could kindly arrange to depute an appropriate team to carry out the special audit and let us have a report within a month, if possible. I am asking the Secretary, Department of Food and Civil Supplies to render full assistance to the audit team to enable them to complete the work expeditiously." 7. Accepting the request of the Government of India for carrying out the special audit of the inventories/stocks of the food grants held for the central pool by the F.C.I. and the concerned agencies of the State Governments, it was decided that the audit of the book balances of the F.C.I. be conducted by M/s. Thakur Vaidyanath Aiyar & Co., New Delhi, M/s. Suri & Co., Chennai, M/s. Price Waterhouse & Co., Calcutta, M/s. S.B. Billimoria & Co., Mumbai. 8. For the purpose of physical verification of the stocks and inventories of the F.C.I., SGS India Ltd., a Mumbai based firm of surveyors, was engaged by means of letter dated August 13, 1997. At this stage it will be convenient to set out relevant part of the letter:"I am directed to state that the Comptroller and Auditor General of India has been pleased to appoint your firm, SGS (India) Limited, as Surveyors to carry out physical verification of ground balances of stocks of wheat, rice and paddy of Food Corporation of India (FCI) as well as the stocks of wheat, rice and paddy held by the agencies of the State Governments for the central pool of Government of India, and report on the results of such physical verification. The above work of physical verification is to be carried out in accordance with the following terms and conditions: * Complete physical verification of ground balances of wheat, rice and paddy held by FCI as well as by the State Agencies for the Central Pool will be carried out by your firm in association with the following firms of Chartered Accountants, appointed by the Comptroller and Auditor General of India for the respective zone of FCI: ------------------------------------Region Firm's Name Northern Thakur Vaidyanath Aiyar & Co Region New Delhi. Southern Suri & Co., Chennai. Region. Eastern and Price Waterhouse, Calcutta North Eastern Region.
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1993. The request was made as the Government of India found discrepancies between the figures of stocks of rice available with the Government of India and the FCI. Again a meeting was held on August 21. rice and paddy held by the Food Corporation of India as well as the stocks of wheat. 11-SGS was given the work without calling tenders or resorting to any other method whereby other private agencies could quote their price for undertaking the job. requested the CAG to carry out special audit for the years 1995-96 and 1996-97 of the stocks of rice maintained with the FCI and the stocks procured for central pool by different agencies of the States of Punjab. The latter involves drawing out sample bags from stacks of wheat.. 11 met Sh. sugar and other commodities was conducted at the end of the year and it was not possible to express a opinion on the authenticity of the value of stocks and the extent of shortages of food grains. Singh (ADA)(I) when AC(C) was also present. Midha vs Union Of India (Uoi) And Ors.http://indiankanoon. by his letter dated July 1.R. a meeting was held in the Chamber of the CAG with the representatives of respondent No. Goburdhan. 19th August. Tamil Nadu and Orissa. rice and other commodities on random basis and the measurement of its volume after forming a separate sample stack and weighment to work out a weight volume ratio on storage factor. viz. as expounded by Shri D. 11 because son of the CAG was working with it. Haryana. On the same date. 1997. Ministry of Food and Consumer Affairs. * The physical verification will include hundred percent counting of the bags with appropriate weighing of the bags. Billimoria and Co.B. In respect of the year 1995-96 the auditors found it necessary that the determination of quality of stock and physical verification thereof should be entrusted to a well equipped and reputed outside agency. was allotted to respondent No. xx xx xx" On August 19.Dr. it will be apposite to quote the relevant portion of the report of auditors:"It is necessary that the determination of quality of stocks and physical verification thereof should be entrusted to well equipped and reputed outside agency.org/doc/355465/ 3 . 1997. Uttar Pradesh. The Ministry was of the view that the special audit involving inventories/stocks of the FCI and the concerned States should be carried out by the CAG and a report be submitted within one month. sugar and other commodities as reflected in the balance sheet as on March 31. I. In this letter it was pointed out Indian Kanoon . learned counsel is that the work could have been undertaken by the employees of the office of the Comptroller and Auditor General as it has a cadre of almost 50. Audit Board and Deputy CAG. 10.I.P. 11-SGS with regard to the difficulties encountered by them in conducting 100% physical verification of ground balances of the food grains of the F. The grievance of the petitioner. rice and paddy held by the agencies of the State Government for the Central pool of the Government of India. Y." As already noted. It is argued that work of verification of the ground balance of stock of wheat. It was inter alia decided that physical verification of the stocks of FCI will be carried out by volume density method. At this stage.N. The request of the Government of India was acceded to by the CAG and the same was conveyed to it by the Chairman. even at the cost of some repetition auditors of the FCI in respect of year 1992-93 reported that physical verification of stocks of the food grains. 1997. In order to appreciate the above submissions it will be necessary to refer to the background in which the work was undertaken by the CAG. Mumbai. Madhya Pradesh. the Government of India through the Secretary.C.000 employees. on 6 March. 1997 by the ADA(I) of the office of the Comptroller and Auditor General with the representatives of SGS. the representatives of respondent No. Andhra Pradesh. and respondent No. 2002 Western Region S. Thus the condition of 100% counting of bags with proper weighing of the same was substituted by bulk density method which is also referred to as weight volume ratio on storage factor method. 9.

Audit Board and Deputy CAG. dated June 30. 1997 addressed to the Secretary. 1997 wherein it was brought out that while the letter from the Secretary. it is also proposed that for verifying the ground balances reputed firms of certified Surveyors/Valuers may be engaged as neither our Department nor the Chartered Accountants have the requisite technical expertise." Indian Kanoon . Ministry of Food and Consumer Affairs. as the work will involve complete physical verification of stocks/inventories. 1997. Soon after the dispatch of the aforesaid letter. (2) physical verification of the ground balances and inventories of the FCI. on 6 March. Pursuant thereto the AC(C) recorded a note dated July 8.http://indiankanoon. the Cabinet Secretary. 1997 pointed out that the Government had viewed the discrepancies between the figures of stocks maintained by the Government of India and that reported by the FCI seriously. It was suggested that special audit should be conducted to cover stocks of wheat and rice in 1547 godowns covering the entire country instead of only the States mentioned specifically by the Secretary. 1997 was marked to the Assistant Comptroller and Auditor General (Commercial) [for short 'the AC(C)']. Ministry of Food and Consumer Affairs. dated June 30. firms. whereby the Government of India was informed that three months' time starting from August 1. As per the note. and since the work would involve complete verification of stocks and inventories. The Chairman. Midha vs Union Of India (Uoi) And Ors. 1997. 1997. (c) Issue of foodgrains during the aforesaid years.viz. nor the Chartered Accountants were possessed of the requisite technical expertise for such type of work. This letter along with the letter of the Secretary. and (d) Closing balance of foodgrains as on March 31.Dr. warehousing services. and specialising in stock management.R. office of the CAG. (b) Procurement and acquisition of food grains during the year 1995-96 and 1996-97. on July 4.. Besides. a member of International Institute of Surveyors and based in Mumbai. dated July 1. to begin with SGS India Limited. reputed firms of certified surveyors/valuers may be engaged to check the ground balances of the stocks of food grains as neither the third respondent. 1964 (for short 'the FC Act'). and (3) comparing the actual ground balances with the book balances of the FCI and the reported balances of food stocks in the books of the government. Ministry of Food and Consumer Affairs. It was also pointed out that the plan for verifying the stocks was being developed and would be ready by 15th of July. Ministry of Food and Consumer Affairs.A. marked the note of the AC(C) to the CAG with his comments for seeking approval to the following proposal of the AC(C):It is proposed that this work may be entrusted to reputed C. In view of the aforesaid provisions it was felt that the work could be entrusted to the firm of chartered accountants and surveyors/valuers. 1997 were to be verified by taking into account the following:(a) Opening balance of foodgrains as on April 1. Ministry of Food and Consumer Affairs. A reference was also made to the letter of the Chairman. 1995. in support of the view that the CAG is entitled to conduct supplementary or test audit of the FCI by such person or persons as the CAG may by general or specific order direct. Besides. It was pointed out that the book balances of the FCI as on March 31.. the work of special audit was required to have three components . the letter of the Cabinet Secretary did not mention the name of the stocks of food grains or the States in which they are lying with the FCI which required to be audited. 1997 would be required to complete the audit and for preparation of the report. Y. It is important to note that AC(C) in the aforesaid note proposed that the work should be entrusted to reputed firms of Chartered Accountants. specified that stocks of rice maintained in the FCI as well as the stocks of rice procured for the central pool by different agencies of the States were required to be audited. was approached for furnishing of work plan with quotations of its fees. etc. Reference was made to Section 34(5)(b) of the Food Corporations Act. (1) auditing the book balances of the FCI. It was pointed out that by way of ground work. while referring to the letter of the Secretary.org/doc/355465/ 4 . it was pointed out that the antecedents & capabilities of other reputed firms were being ascertained. 2002 that it will not be possible to physically verify stocks within one month. The CAG was requested to arrange an appropriate team to carry out the special audit in respect of the stocks so as to arrive at correct position. Audit Board and Deputy CAG.

Delhi and Chennai before end of July'97.org/doc/355465/ 5 . It appears from the note of AC(C) dated July 21. Y.." [see note of the AC(C) dated July 25. This was approved by the Chairman. was held. Fraser & Ross.A. Bombay. Pursuant to the aforesaid decisions. firms and the surveyors will quote their fees along with the detailed calculation for the same. firms in the respective FCI regions. New Delhi. The audit teams will carry out the system checks as part of the sectoral review already under way in respect of FCI. Mumbai. M/s. inter alia. (c) Audit teams from this department will be simultaneously deployed with the teams of C.http://indiankanoon. 2.B. Fraser & Ross declined to work on the ground that it was already engaged in statutory audit of several companies. 1997 that subsequently M/s. Southern Region. SGS India Limited. 1997. Price Waterhouse. In lakhs Revised Fees (Rs. (d) To finalise the detailed work-programmes and movement schedules for each region. a tripartite meeting of the aforesaid four firms of chartered accountants. & Co. Accordingly these firms were recommended for entrustment of the audit of the book balances. to audit the book balances of the FCI. on 6 March. On July 24.. M/s. New Delhi.A. 1997. Madras. They will also facilitate the other teams. 134.73 Indian Kanoon . the firm of surveyors M/s. 1997. Madras. firms. and the DAI(C). between the respective C. M/s.A. the aforesaid firms of Chartered Accountants intimated their professional fees for the work in question as per the following details:Region Firm's Name Professional fees (Rs. Thakur Vaidyanath Aiyer Northern Region.. meetings will be held at Calcutta. Suri & Co. Midha vs Union Of India (Uoi) And Ors. 3.Dr.A. S.R. Western Region. in place of M/s. Audit Board and Deputy Comptroller and Auditor General [DAT(C)] on July 10. 11.87 Southern Region Suri & Co. It was decided by DAI(C) to engage M/s. firms and the surveyors at the godowns.19 90. the surveyors and officers of this department. 4. in lakhs) Northern Region Thakur Vaidyanath Aiyar & Co. Calcutta and Madras was taken into consideration and the following firms in terms of professional standing and repute as well as scores allotted to them were considered for the purpose of conducting audit of the book balances in various FCI zones:1.30 66. Fraser & Ross. Chennai 94. Calcutta. Eastern and North Eastern Region. M/s. the C. Billimoria and Co. 2002 It appears that the proposal was seen and approved by the CAG on July 8. Since the CAG approved the proposal of AC(C). a list of firm of chartered accountants with points of 40 and above as per the panel prepared in 1986 in respect of Delhi. (e) Immediately on completion of these details. 1997] 12. (b) The physical verification of ground balances will be carried out by the surveyors in association with the C. In this meeting the following decisions were taken:(a) In view of shortage of time and the national importance of the project the work must start by 1st August'97.

50 148.R. (III) Paddy: Paddy will be checked for weeviled damaged. Parameters for determining of quality of various commodities will be determined as below:(I) Rice: A composite sample of stacks will be analysed for following refractions: (i) LB ratio (ii) damaged (iii) discoloured (iv) discoloured (v) chalky (II) Wheat : Wheat will be checked for weeviled bored kernels. Midha vs Union Of India (Uoi) And Ors. 2. 2002 Eastern and North Eastern Region. Price Waterhouse & Co. we will be declaring class and category. Alternatively the tonnage will be calculated on the basis of accessible portions of stacks.e. Quantity Samples will be drawn from all accessible stacks. Y. Based on above refractions of three commodities. on 6 March. (for short 'the quotation') not only quoted the rates but also specified the modus operandi for verification of the stocks as per below:"This is in continuation to our discussions regarding above subject.. Our modus-operandi for the same. SUCH STOWAGE FACtor will be uniformly applied in all centres for assessment of stocks. is as below:1. Billimoria & Co.60 M/s SGS India Ltd. analysed and disposed off after spot analysis. We have formulated the action plan for all the godowns of FCI covering the country for physical verification of the stocks. by its letter dated August 5. 1997. 107.Dr. Calcutta. determination of density by physically determining bulk density/stowage factor.http://indiankanoon.org/doc/355465/ 6 . (i) Sound grains (ii) Broken of sound grains Indian Kanoon . Quantity Quantity will be assessed on weight/volume ratio i.00 Western Region S.. Damaged stacks Damaged cargo will be classified on the following parameters and will be assessed & analysed separately and report of the same will be submitted via our lab in due course and not at the spot. Mumbai. 170.

Kamal Poplai and Capt.5. pl. provide adequate labour. Tentative programme of individual region/zone will be submitted in advance.http://indiankanoon.6. To ensure smooth functioning of the operations. ladders. The name of contact person is MRS. FCI to kindly ensure that all stacking in the godowns is done in regular geometric shapes and no stacks are presented in collapsed stage. No stack should be under fumigation at the time of inspection. IPSITA PATEL. alternative names are Mr. Midha vs Union Of India (Uoi) And Ors. etc. on 6 March. will be informed one week ahead of such changes. Cargo stacked in the open storage will be construed as a godown. Godown in charge are requested to keep this information ready in advance. calibrated scales.org/doc/355465/ 7 . Pushkarna and the fac nos. Rs. feel free to contact us and we look forward in associating with you and awaiting work order for the same.4.R. 2002 (iii) Slightly damaged grains (iv) Touched/discoloured & chalky grains. centralised reporting will be intimated to your office on every Wednesday for the previous week from our Delhi office. which if presented to our team prior to commencement of assessment of individual godown will facilitate the process of assessment. if any.Quantity assessed per godown and which will be sent in the format as per Annexure-I. are as below: 011-682 4182 011-692 9675 .Dr.Number of godowns covered . Rates : We have worked out our rates on the basis of approximate data available with us for quantities available to be covered for physical verification which are as follows:(a) up to 10 million tonnes : Rs. however any changes in the scheduled program. No receipts/dispatches should be undertaken during the inspection of godowns. 4. (v) Completely damaged grains (vi) Weeviled grains 3. in case any query.N.00 per metric tonne (b) Above 10 and less than : 15 million tonnes Rs. We hope you will find our offer competitive. Y.75 per metric tonne These rates are all inclusive except for photography charges which will be additional at cost. Enclosed is the format as per Annexure-II. Reporting: In order to facilitate coordinating with your good office. Y.25per metric tonne (c) Above 15 and less than : 20 million tonnes. subject to a maximum ceiling of 5000 tonnes. etc. we have to prevail upon your good office to instruct FCI to extend full co-operation. Indian Kanoon .

Dr. the CAG accepted the proposal. * The firm of Surveyors will furnish reports of physical verification in the formats prescribed by this office. rice and paddy of FCI and agencies of State Governments may be entrusted to M/s. 1997 recorded a note in which the rates quoted by SGS India Ltd. * The work will be completed within 30th September 1997. which states as follows:18. Indian Kanoon . * The physical verification will include hundred percent counting of the bags with appropriate weighing of the bags.R. transactions relating to procurement/acquisitions during 1995-96 and 1996-97 and issues during these years. SGS India Ltd. Accordingly on August 11. Midha vs Union Of India (Uoi) And Ors. In view of para 15 above. * The verification of book balances will also be authenticated by the firm with confirmation by the authorised representative of FCI. CAG's kind approval is solicited for the proposals contained in paras 13 and 17 above. SGS India Ltd. * On completion of the verification of book balances and ground balances. New Delhi. will be considered. * The firm of Surveyors will carry out quality testing of the food stocks as per established international norms and will report on the same.org/doc/355465/ 8 . with copy to the office of the CAG. * The verification certificates of the firm are to be sent to MAB-IV. In para 17 of the aforesaid office note. 2002 xx xx xx" On receipt of the rates. Mumbai. Any spill-over beyond this date. the AC(C) on July 25. The requisite approval to the proposals was sought in para 18 of the office note. it was proposed that the work of physical verification of stocks be entrusted to M/s. due to factors beyond the control of the firm.http://indiankanoon. * The firms of Chartered Accountants will verify the book balances of foodgrains as on 31st March 1997 in the respective Zones. Y. 1997. it is proposed that the work of physical verification of the stocks of wheat. This para reads as under:"17. discrepancy statements will be jointly authenticated by the authorised representatives of the firms of Surveyors and that of the Chartered Accountants as per prescribed forma. on 6 March.." The proposal was recommended to be accepted by the DAI(C). subject to the terms and conditions stipulated in para 16 above and at the rate quoted by the firm. were quoted in para 16 thereof which reads as follows:"* Complete physical verification of ground balances of wheat. rice and paddy held by Food Corporation of India as well as by the State Agencies for the Central Pool will be carried out by the firm of Surveyors in association with the firms of Chartered Accountants for the respective zone of FCI. and on the basis of actual quantity verified. were described to be within the limits prescribed by the Wealth Tax Rules. Certification will take into account opening balance as on 1st April 1995. 1957. Mumbai. SGS India Limited. * The firm will be paid for the verification work on completion of the same. The terms and conditions under which the work was proposed to be entrusted to the surveyors M/s.

1997 and August 11. and the extensive experience of working with major central public sector undertakings like SAIL. It is asserted that the fact that son of respondent No. who had to work out the stock balances as on 13. ONGC. Audit Board-IV. quality inspection and analysis. 2000. 11 is the larger inspection. 11 offers a wide range of independent services to most industries and has a specialised work force of around 2000 employees. According to the affidavit. (for short 'MAB-IV') on December 4. 11 was engaged as no other firm possessed the technical skill and the coverage required to undertake the work of physical verification on all India basis.J. textiles. 40 officers and over 1700 employees and considerable experience of over 40 years of inspection of all kinds of cereals as also verification and supervision of goods discharged and loaded at various ports in India. Secretary. and the rates were found to be within the limits prescribed by the Wealth Tax Rules. Indian Tobacco Company. BPCL. Midha vs Union Of India (Uoi) And Ors. Switzerland. in which it is stated that respondent No. that respondent No.org/doc/355465/ 9 . that SGS operates in 140 countries through out the world from 850 offices and 340 laboratories. TISCO etc. determination of weight of such goods by mechanical as well as volumetric methods. letter No.. which is as follows:"Following Government of India's request vide D. 1997 of ACC(C) Shri Bhadra it is apparent that SGS was selected to undertake physical verification of stocks of food grains of the FCI all over India in view of its experience. 5-26/97-BP I/S (FaC-S)/143/97 dated June 30. etc. BHEL.3. minerals and mines.1997 with reference to the stock verification report of the verifiers. 11-SGS did not influence the decision to award the work to respondent No. rice and paddy of Food Corporation of India physically verified. In the private sector.O. 2002 13.. Ranbaxy Lab. MMTC as well as various other State Government organisations like Electricity Boards and Municipal Bodes. dated November 19. expertise and size. 1998 relating to "Special Audit of Food Corporation of India" described SGS as well known and reputed firm of stock verifiers. Public Health Engineering Departments. Indian Kanoon . Deputy Director (Legal) of the third respondent in the office of the CAG dated May 8. Ministry of Food & Consumer Affairs. New Delhi. Nestle India. Bhadra and not from the SGS.K. Webster. 11. The above facts which have been culled out from the official record of the CAG particularly the office nothings show that the proposal to appoint SGS originated from AC(C) Shri D. From a conjoint reading of the office nothings dated July 25.R. Keeping in view the two factors it was considered that the work needed to be executed by firms specialising in stock management. It is also stated that it was ensured that the rates quoted by respondent No. CAG had appointed a well-known and reputed firm of stock verifiers for determination of such stock in all Depots of FCI and also a panel of reputed firms of Chartered Accountants. The affidavit refers to the fact that the firm has all India reach having at its command 26 labs. Srinivasan. Y. Taimni.. 11-SGS was selected after carefully ascertaining the credential of the firm and its suitability for the work. to the Comptroller & Auditor General of India. Tata Exports. warehousing services. it appears that AC(C) Shri Bhadra had proposed the name of SGS on relevant considerations. Essar Steel. 4 was working in respondent No. (Department of Food & Civil Supplies)." It may be pointed out that the petitioner had taken over as the Principal Director of Commercial Audit and Ex-Officio Member. 11 were reasonable and were compared with the sale of fees charged by registered valuers. Even the petitioner in his report dated March 20. 1997 and the report rendered by him was in that capacity. New Delhi. the firm had been working for Hindustan Lever. 14. on 6 March. For the purpose. The reason for appointment of SGS as surveyor based upon the magnitude of the work involved and the time constraint within which it was required to be completed. that SGS in India had been operating for almost 50 years and has under its umbrella extensive network of 35 offices and 27 laboratories. At this stage it will be necessary to quote the relevant part of the report. that respondent No. drawing appropriate samples. 11. testing and verification organization headquartered in Geneva. 2001 it is stated that respondent No. CEO and Managing Director of respondent No. This is also borne out from the affidavit of Shri R. CAG had got the total stocks of wheat. Iain L. food grains. We hasten to add that the aforesaid remarks made by the petitioner relate to the reputation of the firm and we are not referring to these remarks to convey that the petitioner was satisfied with the execution of the work by SGS. 11 deals with agricultural products/commodities. It was also averred that the respondent No. In the affidavit of Mr.Dr.http://indiankanoon. 1997 Shri B. the decision was an institutional decision and not of any individual. In the circumstances.

(iv) Project & Equipment Corporation. (7) Hindustan PetroChemical Rs. The affidavit also brings out the fact that respondent No. 0. Industry. 1. Y.44 crores. doe snot contain any document to show that any such exercise was undertaken. Rs. (3) Steel Authority of India Rs.org/doc/355465/ 10 . 15. and that respondent No. (5) Karnataka Power Rs. Corporation. Company. 0. 3. It is also asserted that respondent No. Rs. on 6 March. oil and petroleum products etc.32 crores. 11 has worked for 130 companies including public sector organisations. 11 in the last five years has undertaken work of inspection testing and verification entrusted to it by the following organisations against the fee mentioned against each of them:(1) MMTC Rs. (4) India Sugar & General Rs. (8) S. Midha vs Union Of India (Uoi) And Ors. (vi) Petroleum Conservation Research Association. (2) Indian PetroChemical Rs.R. Names of some of the government departments and organisations have been referred to in the affidavit. 11 is an ISO 9002 certified company having well documented practiced system for its branches across the country. There are no papers with regard to other firms of surveyors. Even the office file No. 11 has undertaken work of various government departments and undertakings either through commercial negotiations or through empanelment or otherwise. 1. (vii) Delhi Vidyut Board.Dr. It will be too much to assume that the proposal was made Indian Kanoon . 0.13 crores. 0.http://indiankanoon.49 crores.C. It appears to us from the office note recorded by AC(C) dated August 11. The file at pages 5/C to 8/C has details with regard to the functioning of the SGS in India. (iii) Bharat Petroleum Corporation Ltd. (x) NAFED. It is claimed that respondent NO. (ii) World Food Programme. 2002 machineries.44 crores. CA-III/259-97 of MAB-IV of respondent No. (9) Cotton Corporation of India Rs. These are(i) Ministry of External Affairs. (v) Punjab State Electricity Board. 3 relating to special audit of inventory/stocks held by Food Corporation of India. 0.77 crores. 0.16 crores. (viii) UNICEF. Corpn. It appears that though the office note dated July 8. (ix) Food Corporation of India.64 crores.48 crores. 1997 that quest for surveyors ended as SGS was approached for a viable work plan in respect of the physical verification of the stocks as according to the enquiry it was revealed that SGS had the requisite size and expertise necessary for undertaking physical verification of stocks of food grains all over India. 1997 recorded by AC(C) Bhadra speaks of the endeavor to ascertain the antecedents and capabilities of other reputed firms besides SGS for the purpose of obtaining quotations. noting has ben brought on record which could show that any such endeavor was made.T. (6) Indian Aluminium Co. which has been numbered as Vol-I.

It is pointed out in the affidavit of respondent No. Shakdher appearing for the respondents.A. rice and paddy pertaining to the FCI to M/s. the same will stand vitiated. 4. no undue privilege or extraordinary benefit was ever given to him by the company and he got the promotions and increments in normal course of the business of the company in consonance with is qualifications and experience along with other employees of the company. As per the affidavit filed by the SGS dated August 22. Midha vs Union Of India (Uoi) And Ors. This fact was not disputed by the learned Solicitor General as also Mr. on 6 March. 4 under Section 21 of the Comptroller and Auditor General's (Duties. On June 1. fair and reasonable and in keeping with rule of law. 4 being biased. Subsequently. justice must not only be done but also appear to have been done. whether there was a real likelihood of respondent No. is one of the employees. Shri Ajay Shunglu was appointed on November 15. Indian Kanoon . 2001 that it has not only provided services to different organisations through various contractual arrangements. Considering the facts that the proposal did not emanate from respondent No. Economics from New School. This position in the first instance was not disputed by the learned Solicitor General as also Mr. son of respondent No. In this regard. On April 5. experience and expertise as was possessed by SGS. In the instant case in approving the proposal of the AC(C) and the DAI(C) to entrust the work of physical verification to respondent No. For this the decision making process must not be polluted by considerations of pecuniary or personal interest. but it was also called upon to perform inspection of various organisations through empanelment. The unsavoury controversy would not have arisen in case respondent No. In India alone it has a large work force in which Shri Ajay Shunglu. Y. 11. Powers and Conditions of Service) Act. in that event there would be no statutory impedient in entrusting the matter of finalising the contract and matters connected therewith to a senior and responsible officer of the CAG.per month. it is pointed out that he was never associated with the contract in question. Under our constitutional system where rule of law had been given primacy. Mr. 4 Respondent No. it does not appear to us that there was any bias on the part of the respondent No. Wether the judicial authority or the administrative authority is actually biased is not the test for the action to survive. But it should not be lost sight of the fact that SGS is a vast company which has presence in 40 countries. 1971 (for short 'the CAG Act') had the power to delegate the functions/powers to a subordinate authority to consider the question of bestowing approval to the proposal.http://indiankanoon. however. expertise. 11 dated November 19. 1997 Shri Ajay Shunglu was confirmed as Executive Marketing. Assuming that Section 21 of the CAG Act was not applicable or the physical verification of stocks of food grains did not attract the provisions of the CAG Act. It will be a sad day if a high constitutional authority gives a contract to a firm just because his son happens to be one of its employees out of a work force of 2000. Ajay Shunglu was promoted to the post of Assistant Manager. 4. it needs to be considered whether a right minded person would think that in the circumstances there was a real likelihood of a bias on the part of the person who has to take a decision. experience and size of SGS. 16. Besides. SGS India Ltd. whether judicial or administrative. 1995 as management trainee on probation for a period of six months with basic salary of Rs. The proposal mooted by the office of the SGS was approved by respondent No. 2002 to entrust the work of physical verification of stocks of wheat. 2000. He is neither the CEO nor holding a position next to the CEO. In case there is a real likelihood of bias entering the determination of the authority. New York and was also having work experience of five years in different organisations. As per the affidavit. The decision must be just. 4 utilising the power under Section 21 would have delegated the function of considering the proposal to a subordinate authority.000/.R.Dr. 7. 4 and the same was based upon the reputation.org/doc/355465/ 11 . He was selected being M. The principle applies to both judicial as well as administrative decisions. they modified their stand and submitted that the overall responsibility was that of respondent No. 4 in approving the proposal of AC(C) Bhadra. The affidavit further goes on to clarify that no special favor or out of turn promotion was given to him. The real test is whether the circumstances are such as to create a reasonable apprehension in the mind of others that there is a real likelihood of bias penetrating the decision. the work was of an urgent nature and keeping the time constraint in view and having regard to the consideration that there was no other company having an all India presence. It is a salutary principle of jurisprudence that no one can be a judge in his own cause. Besides. 1999. because the son of respondent No. the work was entrusted to SGS without inviting tenders. Shakdher appearing for the respondents. 4 was working in that company.

500 employees in 27 offices all over India and there were 89 officers of his rank. At the conclusion of the evidence the Justices retired to consider their decision. The applicant's solicitor brought to Indian Kanoon . It was pointed out by the Department of Telecommunication. We do not think that the principle which requires that a member of a Selection Committee whose close relative is appearing for selection should decline to become a member of the Selection Committee or withdraw from it leaving it to the appointing authority to nominate another person in his place.There can be no doubt that if a Selection Committee is constituted for the purpose of selecting candidates on merits and one of the members of the Selection Committee is closely related to a candidate appearing for the selection.G. State of Haryana . need be applied in case of a constitutional authority like the Public Service Commission. 20. In Tata Cellular v. 256. But the situation here is a little different because the selection of candidates to the Haryana Civil Service (Executive) and Allied Services is being made not by any Selection Committee constituted for that purpose but it is being done by the Haryana Public Service Commission which is a Commission set up under Article 316 of the Constitution. 2002 17. Nayar. As a result of the accident Whitworth and his wife sustained injuries. 18. did not vitiate the selection on ground of bias. in the approval and selection of tender was indispensable.http://indiankanoon. in exceptional circumstances. BPL Systems and Projects was one of the successful parties and it was claimed that BPL was selected pursuant to normal course of selection on merit. This case has no application to the case in hand. [1924] 1 K. We may note that when the work of audit is entrusted to chartered accountants or legal work is assigned to attorneys no tenders are called. The claim on behalf of he injured was made by a firm of solicitors in which one F. In any event. Nayar as Director General of Communication as well as Telecom Authority. This was not a case where a contract was awarded to a company in which several hundred employees were working and one of the employees of the company happened to be related to the authority reasonable for awarding the contract. it would not be enough for such member merely to withdraw from participation in the interview of the candidate related to him but he must withdraw altogether from the entire selection process and ask the authorities to nominate another person in his place on the Selection Committee. Y. In respect of those injuries a claim was made on behalf of the Whitworth against the applicant for damages. F.R. on 6 March. Langham was also a clerk to Justices trying the applicant." The Supreme Court in the aforesaid case was dealing with a situation where the selection of individual candidates to Haryana Civil Service was challenged. Learned counsel for the petitioner relied upon a decision of the Queen's Bench Division in The King v. Sussex Justices . Government of India. involvement of one of the members of the Tender Evaluation Committee. Midha vs Union Of India (Uoi) And Ors. Member of the Tender Evaluation Committee.Dr. Union of India .R. B. B..org/doc/355465/ 12 . The police after making enquiries into the circumstances of the accident obtained summons against the applicant in driving his motor cycle in a manner dangerous to the public. wherein it was held as under:". It is a Commission which consists of a Chairman and a specified number of members and is a constitutional authority. In that case a collision took place between a motor cycle belonging to the applicant and a motor cycle and side-car driven by one Whitworth. On return to the court the Justice informed the parties that they had decided to convict the applicant and they imposed a fine of $10 and costs. being Director General of Telecommunication and Telecom Authority. 19.R. in the decision making process was considered to be necessary though his son was an employee of BPL Systems and Projects which had over 5.. Similarly. It was held that the involvement of Mr.. when the work of survey or inspections is to be executed. . because otherwise all the selections made would be vitiated on account of reasonable likelihood of bias affecting the process of selection.G. that the involvement of Mr. on parity of reasoning it may not be necessary in every case to call for tenders. the action of the respondents in not calling the tenders and assigning the work of SGS cannot be interfered with. Langham was a partner. whether Central or State.B. Learned counsel for the petitioner relied upon the decision of the Supreme Court in Ashok Kumar Yadav v..

ex p Barnsley and District Licensed Victuallers' Assn. might be most undesirable to investigate the state of mind of each individual justice. At that point of time he was not troubled by the close relationship of respondent No. Midha vs Union Of India (Uoi) And Ors. Langham and was himself a partner of the same firm of solicitors in which F. 23. he recorded in his report dated March 20. L. Bias is or may be an unconscious thing and a man may honestly say that he was not actually biased and did not allow his interest to affect his mind. 4 had not acted impartially objectively and without bias. 24. It found the presence of deputy clerk to be objectionable at the time the Justices retired to consider their decision. when the petitioner took over as Principal Director of Commercial Audit and Ex-Officio Member. The writ petition has been filed admittedly after the work has been executed. the court is to determine from the circumstances whether or not there was a real likelihood of bias entering the determination of the authority. Barnsley Licensing Justices. In fat on December 4. he may have allowed it unconsciously to do so. the Division Court held that in such cases. indeed. Audit Board-IV. 490. The matter must be determined on the probabilities to be inferred from the circumstances in which the justice sit.G. In case the work was entrusted to respondent No.. Liverpool City Justices. New Delhi. The conviction was quashed by the King's Bench Division. at the same time we do not find Indian Kanoon . v. We will revert to this aspect of the matter and deal with it. to import the principle in R. it was held by Justice Devlin. In the peculiar circumstances of the case. that the question of bias must be inferred from the circumstances. In this regard it was stated as follows:"We have not to inquire what impression might be left on the minds of the present applicants or on the minds of the public generally. Langham was also a partner. 1998 that the CAG had appointed a well known and reputed firm of stock verifiers for determination of such stock in all the depots of FCI.G. In case respondent No. Do they give rise to a real likelihood that the justices might be biased? The court might come to the conclusion that there was such a likelihood without impugning the affidavit of a justice that he was not in fact biased. nevertheless. the correct test to determine whether there is an appearance of bias. as already pointed out. the petitioner could have given an indication to that effect in the report or could have filed the writ petition much earlier than the did. We have to satisfy ourselves that there was a real likelihood of bias. and that as to the way in which the test is to be applied is to ask whether a reasonable and fair minded person sitting in court and knowing all the relevant facts has a reasonable suspicion that a fir trail for the applicant was not possible. challenging the action of respondent No. a little more.http://indiankanoon." 22. Thus. in detail at a later stage. 1997. In R. 2002 the notice of the Justices the fact that the deputy clerk of the court who had retired with the Justices was brother of F. although. 'Real likelihood' depends on the impression which the court gets from the circumstances in which the justices were sitting. It is used to show that it is not necessary that actual bias should be proved. the decision of Sussex Justices case was held to be vitiated in view of he deputy clerk's relationship to the case. It is not the case of the petitioner that since he did not come to know of the entrustment of the work to SGS in August 1997. [1983] 1 All E. 11-SGS on extraneous considerations there was no reason why the petitioner should have waited to file the instant writ petition. and not merely satisfy ourselves that was the sort of impression that might reasonably get abroad. 4 would have been well advised if it had left the matter of selection of a stock verifier for the work in question to a serious and responsible officer. it was not possible to file the writ petition earlier than the date on which it was actually filed. It seems to us that there is nothing common between the present case and Sussex Justices case (supra). 4 with one of the employees of the SGS. Sussex Justices [(1924) 1 KB 256. v. to which Salmon.J. Y. v. It is unnecessary and. on 6 March. (1960) 2 QB 167 = (1960) 2 All ER 703. referred. While we think that respondent NO. 11 to verify the stocks of food grains in the godowns of the FCI.Dr.org/doc/355465/ 13 . The term 'real likelihood of bias' is not used. In R. rather than whether is actual bias. ex p Topping .R. The petitioner ought to have filed the writ petition immediately on entrustment of the work to SGS India Ltd.R. The petition has been filed at a stage when the petitioner felt threatened by a departmental action in respect of a case of sexual harassment. Rather he used laudatory words for SGS. in my opinion. 21. 4 in approving the proposal to appoint respondent No. J.

25. The Supreme Court in Hem Lal Bhandari v. 11 as the stock verifier for carrying out physical verification of stocks in the depots of the FCI. pointed and necessary to be controverter." Following the principle laid down by the Supreme Court in the above decision. 11 was not up to the mark and there were several deficiencies in it. Even if the contention of the petitioner was to prevail it is too late in the day to cancel the contract in regard to which work has been executed. According to us it is not necessary since the allegations are wide in nature and are bereft of details. . 11 was approached for a viable work plan in respect of physical verification of the ground balances of the stocks and inventories of the FCI.Dr. held as follows:"7. Goburdhan next contended that despite the fact that the scope of the work was reduced. where allegations of mala fides were levelled against the Chief Minister of Sikkim in relation to a detention matter. Much was made of the fact the Chief Minister has not filed a counter-affidavit himself denying the allegations.. on 6 March. it also quoted the following rates for undertaking physical verification of stocks:"a) up to 10 million tonnes :Rs. He also submitted that the work performed by respondent No.http://indiankanoon. Not even a single firm of surveyors has come up before us to alleged bias in selection of respondent No. These allegations are not supported by any acceptable evidence. No one else. Midha vs Union Of India (Uoi) And Ors. 2002 any material to hold that there was real likelihood of bias entering the decision of respondent No. 11 to undertake the aforementioned survey. The petitioner has made various allegations of mala fides against the Chief Minister of Sikkim. the former must have favored the latter. 6. On August 5. 4 on affidavit.000 employees is concerned.e. According to him. On that basis respondent No. Goburdhan that respondent No. for all these reasons the plea of bias falls and is hereby rejected.org/doc/355465/ 14 . 1997 it appears that special audit in respect of stocks of food grains in respect of 1547 godowns was contemplated. we do not propose to consider them. State of Sikkim and Ors.. Mr. We do not think it necessary in all cases to call upon persons placed in high positions to controvert allegations made against them by filing affidavits unless the allegations are specific.N. 11 for carrying out the physical verification of the stocks of food grains in the godowns of the FCI. determination of density by physically determining bulk density/stowage factor. Therefore. Y. 26.00 per metric tonne Indian Kanoon . We may recall that from the office note of the AC(C) dated July 8. apart from the petitioner. has challenged the appointment of respondent No. . It is significant t note that the fourth respondents' son was one of the employees of SGS out of its work force of 1700 employees. The allegations are in the realm of conjectures and surmises and need not be answered by respondent No. D. 11 was paid full amount without any consequential reduction. 4 is working with SGS. We have given our deep consideration to the submission. at least on this score deduction should have been made from the amounts paid to it. In so far as the submission of the learned counsel for the petitioner that the work could have been undertaken by the employees of the office of the CAG as it has a large work force of almost 50. xx xx xx" Besides. Therefore.R. None of the firms of surveyors felt aggrieved by the appointment of respondent No. respondent No. 4 in according approval to the appointment of respondent No. we see no force in the submission of the learned counsel and reject the same. It may be noted that the allegations are of a general nature as opposed to specific ones and are based on the assumption that since the son of respondent No. 11. it appears from the affidavit and the office nothings that the work of physical verification of the stocks was a specialised type of work and they did not have the requisite expertise for the same. It was also urged by Mr. 1997 SGS gave its action plan for physical verification of stocks and indicated its modus operandi for the same as per below:"Quantity will be assessed on weight/volume ratio i. 4 against whom allegations of bias have been made has not filed an affidavit controverting them and the allegations should be deemed to have been accepted by him.

Area Manager and Shri Kamal Poplai.00 per metric tonne. The note dated August 22. These rates are all inclusive of photography and development charges. At the meeting.http://indiankanoon. Singh. b) Secondly. met Shri I.P. each bag will have to be weighed as the bags may not be of standard weight. 1997 of the AC(C) records as follows:"Captain Y. 1997 had specified use of volume density method for determining the stocks. SGS quoted the following revised rates:"a) up to 10 million tonnes :Rs. the physical verification of ground balances would take a long time and will have to be extended way beyond 30. 27.A." On August 12. They pointed out that respondent No.org/doc/355465/ 15 . 5. 11 was facing difficulties with some of the terms specified in the work order placed on it. b) Above 10 and less than 15 million tonnes . 1997. The undersigned was also present. taking into account the all-India average of density factor of the stacks.I. Besides. in his chamber on 19 August 1997. ADA(I) in his Chamber on August 19.75 per metric tonne 20 million tonnes.N. The officials of M/s. they pointed out that the adoption of a "cut-off date" by the physical verification teams. the letter of the AC(C) dated August 13. 2002 b) Above 10 and less than :Rs. They suggested that they be permitted to adopt the system of determination of total weight of a stack by volume-weight ratio. from the figure furnished by the Surveyors on the date of physical verification. 11 vide letter of the AC(C) dated August 13. Midha vs Union Of India (Uoi) And Ors. They also pointed out that as per their quotation. It was suggested that respondent No. 11 should be permitted to adopt system of determination of total weight of stocks by volume-weight ratio taking into account the all India average of density factory of the stacks. These rates are all inclusive except for photography charges which will be additional at cost.Dr.3. A. the AC(C) was also present. 1987. 1997." The work of physical verification of stocks was entrusted to respondent No.D. as well as weighed in as much as the bags may not always be of a standard weight.00 per metric tonne. SGS India pointed out that the Firm was facing difficulties with some of the terms specified in the Work Order placed on them.6.97. 11. It needs to be emphasised that the letter of the AC(C) was not in consonance with the quotation submitted by respondent No.4.. c) Above 15 million tonnes :Rs. 1997 with the CAG.R. It also needs to be noticed that in the meeting it was pointed out that the counting of bags is to take place in 2492 godowns. The difficulties were also discussed on August 19. Singh. in the pilot studies conducted by them earlier. 1997 that the representatives of respondent No. Manager Operations of M/s. (a) They submitted that if 100% counting of the bags in each of the 2492 Godowns was carried out.9. It was emphasised that 100 percent counting of bags in each of the godowns will take a long time as each stack would have to be broken and counted. 1997 talked of physical verification of the stocks including 100 percent counting of bags with appropriate weighing thereof. quantity is to be assessed on weight volume ratio. determined by them by averaging such density factors found by them in the four Zones of the FCI. It appears from the office note dated August 22. on 6 March.P.5.4. Pushkarna.25 per metric tonne 15 million tonnes c) Above 15 and less than :Rs. was not feasible and it was for the Chartered Accountant Firms to work out the ground balances as on 31. 11 by its letter dated August 5. Indian Kanoon . Y. :Rs. 11 met Shri I. The letter postulated physical verification of stocks which was to include 100% counting of bags with appropriate weighing of the same.00 per metric tonne. as each stack would have to be "broken" and counted.97. SGS India Ltd. While respondent No.

Dr. Bhadra. The C&AG directed that the determination of the ground balances as on 31. whichever is higher. whichever is higher. the density factor for assessment of quantity on volume/weight ratio.A. specific to that godown only.P.A. Y.I. New Delhi were also present. is required to be fully counted and weighed and the results obtained. 3. Shri Abhijit Das.1997. 2002 c) Thirdly. Singh. with the officials of M/s. Director. With this. a Meeting was held by Shri I. Midha vs Union Of India (Uoi) And Ors. is to be selected for Random sampling as prescribed in the Paragraph 1 above.3. the following were agreed to: 1. Further one normal stack. A. 2. After detailed discussions. In addition 500 stacks at random are required to be "broken" and completely counted and weighed on all All-India basis. by taking into account the receipts and issues between the date of physical verification and 31. 4. The sample bags should be weighed 100%. will carry out the physical verification of ground balances. Singh. 7. no cut-off date need be specified by the physical verification teams. the number of standard bags would also be worked out. This apart. Shri D.D. be re-examined by Shri IP Singh. MAB-IV. Indian Kanoon . taking into account the density factor described above.J. SGS India Ltd.. Vijaya Moorthy. The above submissions were thereafter discussed by the C&AG on 19th August 1997.3. were present. A minimum of 16 Bags or 1%. The C&AG also desired that the format for certificates required to be furnished by the Surveyors. Based on this method. Secretary to C&AG and the undersigned. A sample of 16 (sixteen) bags or 1% of the stacks. Shri I. New Delhi. in accordance with the procedure as detailed in Chapter 10 to be read with Appendix-10 of Internal Audit Manual (Volume-I) of the Food Corporation of India. A.97.(C) Ms. Also. per Godown subject to a minimum of 500 stacks all over India. 6. Shri Preman Dinaraj. A.N.I. Therefore. This will help in determining the corrective factor wherever necessary to be adopted in the Weight Volume Density Analysis. SGS India Ltd. SGS India Ltd. the method of determination of quantity by volume-weight ratio would be applied to all the stacks in the Godown concerned. on 21 August 1997 with Captain Y. The average density as also the average weight per bag is to be worked out from the stack of sample bags. of the foodgrains from each stack. representatives of M/s.I. A. 2.A. 5. O/O MAB-IV.P. would be determined.D. These bags would be weighed and shortages worked out based on this sample. from each Godown.C. on 6 March. taking into account the relevant factors.http://indiankanoon.R. Pushkarna and Shri Kamal Poplai. is to be carried out by the Firms of Chartered Accountants. Accordingly. be compared with the sample figures already arrived at. the Weight-Volume Density Analysis of each stack in the concerned godown is to be carried out for arriving at the total weight of that stack and the number of bags per stack in the concerned Godown. The following decisions were taken:1.D. The verification would be conducted only in respect of the Godowns owned/hired/leased by the Food Corporation of India.org/doc/355465/ 16 . they sought changes in the format of certificates to be furnished by the teams conducting the physical verification. M/s. should be taken from each stack in each godown. and the Surveyors.

Midha vs Union Of India (Uoi) And Ors.1. a review would be undertaken at the Office of the C&AG. 6. The Case will have to work out everything afresh because after last verification. it is apparent from the reading of the office note that the physical verification of stocks was to be undertaken by following volume-density method. M/s. 4. 7.000 (I have requested AC(C) to find out the exact number of godowns). The Surveyors will only declare stocks available in various godowns as on the date of start of physical verification of the Godown.98. In addition. can be attached along with the prescribed certificate. such Godowns will be subjected to detailed physical verification. and on receipt of the prescribed requisite Reports from the Surveyors. Therefore. This was necessitated in view of the peculiar circumstances which are also apparent from the office note recorded by the DAI(RC) on February 3." 28. The Certificate of Physical Verification required to be furnished by the Surveyors as already enclosed with the Work Order will remain as it represents the ground balances of the Godown as a whole. SGS India Ltd. wherever there are abnormal shortages. the matter needs to be discussed in detail as suggested by DAI(C) in para 10 of his note dated 27. 8. labour problems. On intimation regarding completion of 10% of the Physical Verification of Ground Balances. Y.Dr. and to avoid any disputes at a subsequent stage.000 to 20. 5. on 6 March. Sd/. A copy of the same may also be handed over to the Authorised Representative of the FCI and acknowledgement obtained for record. 100% weighment shall be conducted in respect of Baby Stacks (defined as stacks where the number of bags is less than 20% of the total number of bags received right from the creation of the stack). such stacks will be subjected to 100% counting and weighment. it is apparent that SGS has followed a method of determination density not strictly in accordance with the method suggested by us. may get the same duly signed by the Authorised Representative of the concerned Godown/Warehouse/Depot. non-availability of weighment facilities. fresh wheat stocks will start arriving in large quantities.1.R.000 godowns. the Surveyors. 1998:"From the previous notes. With a view to ensuring the authenticity and acceptability of the findings and conclusions thereof. it is doubtful whether FCI will be in a position to assist/cooperate in the exercise of reverification.org/doc/355465/ 17 . Moreover from April onwards. The responsibility for accuracy and veracity of the certificates so furnished would rest with M/s. 2002 3. The methodology followed by them has been explained in their note dated 31. The formats of Certificates now proposed by M/s. Thus. logistic constraints) during verification of stock of more than 20. fresh procurement of Kharif and Rabi crops would completely change the stock position. The verification would be conducted only in respect of the Godowns owned/hired/leased by the Food Corporation of India. SGS India Ltd. The proposal of the DAI(C) that we ask SGS to do the verification exercise again for each godown strictly as per our guidelines will have its own problems as it transpires now that the number of godowns may be in the vicinity of 15. they will record this fact and proceed further for the verification of other godowns. It will be a phenomenal exercise and many of the problems encountered earlier may still persist. Besides. and the Chartered Accountant Firms. Wherever FCI representative refuses to sign the report of SGS (India).http://indiankanoon.3/2/98 DAI(RC)" Indian Kanoon . If any stack arouses suspicion. to be attended by the Auditee (FCI). SGS India Ltd.98 which according to them was necessitated because of ground realities and other problems encountered (like resistance byC FCI staff itself.

Respondent No. the office note records as follows:Indian Kanoon .R. complete extent of the work could not be visualised in the first instance in view of its uniqueness and vastness of the operation involved an the decisions taken on August 21.000 godowns were required to be checked by the SGS. Subsequently. 11.000 stacks.000 to 20. Y. 31. loading of bags on trucks. We find that on January 27. 2000. the operation would require 1750 days in the event there are no interruptions and no stock moves during the period. 1997 provides for 100 percent counting of bags. it would not have been possible to complete the work within few months keeping in view the number of godowns which had to be covered and also having regard to the large stocks of food grains. The relevant part of the counter affidavit reads as follows:xx xx xx It is also submitted that 11 million tons spread in 15000 godown represent approximate 70.547 or 2.(C) recorded a note in which deficiencies were pointed out in the physical verification of the stocks of food grains by the SGS.000 to 20. 2000. to expect that each bag should have been weighed is even beyond the scope of the work order. 2002 29. respondent No. According to the stand of respondents 1 to 9. To weigh a stack means performing several operations which requires time and manpower as well as equipment .C. Even this figure was not correct. volume-density method was agreed to be employed for the purposes of verification of the stocks. Enormous task of physical verification of stocks of food grains kept in 15. each stack normally being about 150 MT. From the aforesaid office note it appears that number of godowns in which the food grains were stored were between 15. Thus this was not the original understanding of the parties and surely not what respondent No. 11 was paid in accordance with the rates quoted by it at a point of time when it was thought that work is required to be undertaken in 1547 godowns only.000 godowns located in different parts of the country required deployment of large infrastructure and manpower Despite the fact that the work had to be undertaken in 15. We have gone through the record. 11 was paid according to the actual quantity verified. Learned counsel for the petitioner pointed out that the work executed by respondent No. it was perceived that there were 2492 godowns. Hence even working on 10 Godowns per day in each area i. affirmed on July 25. as referred to in their affidavit dated 8th May. discharging the trucks. Therefore. One stack would require abut 12 hours (one day) and around 30 labour/truck drivers. It would also require the presence of 1200 persons constantly on the job for the period as well as 120 Inspectors of the answering Respondent Company permanently present for the same period.000 godowns of the FCI will have to be verified.000 godowns. 1997 were in the nature of expounding. We should not be understood to convey that respondent No.492 as estimated earlier.000 or 20. In case 100 percent bags would have been counted and weighed. When the first note was recorded by the AC(C) on July 8. There is no material on record to fault the stand taken by the said respondents. restacking the bags. Midha vs Union Of India (Uoi) And Ors. 1998 recorded by the DAI(RC) and the affidavit of respondent No.http://indiankanoon. weighing the trucks on weigh-bridge. The said office note inter alia pertains to the analysis of 100 certificates submitted by the SGS relating to physical verification of stocks of the FCI (for short 'the certificates'). underlined the magnitude of work. Respondent No. it does not provide for 100 percent weighment of bags. Therefore. As is apparent from the office note dated February 3. it was ultimately realised that 15.000 to 20. It also represents a total number of bags (on basis of 96 Kg/bag) amounting to 115.Dr.e.789. 11 was paid less.474. clarifying and streamlining the scope of the work. weighing bridge operator) as well as the constant presence of at least 3 Inspectors of the answering Respondent. 11 in its counter-affidavit. 1997 he had visualised the work to be undertaken in 1547 godowns. xx xx xx" 30. 40 Godowns per day. It may also be mentioned that though the work order dated August 13. Summing up the deficiencies in the certificates. 1998 A. 11 had bargained for. 11 was not satisfactory. it was not in the contemplation of the parties that the stocks in 15. on 6 March. If we go by the original understanding between the parties.org/doc/355465/ 18 .dismantling of the stack.000 and not 1.000 to 20.

and after verification it has certified a certain stock balance but it will not be possible to certify that the methodology adopted by the SGS was correct or appropriate and the certificates after scrutinisation were found to be acceptable. it emerges that (I) in most of the cases SGS (India) does not appear to have applied the agreed upon methodology in letter and spirit. Another important point is whether the methodology prescribed envisaged the repetition of the procedure of creating a sample stack in each godown or that the experience of one godown was to be used in the depot in which the godown was. 32.J. The deficiencies were attributed in the note to the failure of the SGS to educate the manpower employed by SGS to follow the correct methodology or to evolve the system of supervision and monitoring to ensure that proper methodology was followed and errors/omissions were detected and rectified soon after their scrutiny.R.http://indiankanoon. some or a large number of depots are to be reverified. It was Indian Kanoon . If with reference to the final interpretation of the methodology. the DAI(RC) recorded his comments and it was pointed out that the SGS had followed a method for determining density not strictly in accordance with the method suggested to it. in the North the incidence of such protests is much higher.org/doc/355465/ 19 . (4) Whereas in the South. It was pointed out that once the SGS received part payment it would lose motivation for repeating the verification work and the entire payment would be infructuous as new verifier would like to repeat the entire exercise. The note referred to the fact that already the report has been delayed and if the SGS was asked to repeat the exercise it will take at least another four to five months to complete the task since the godowns will have to be visited again. FCI representatives appear to have signed the working sheets without protest in Karnataka. it could be reported to the Government of India that SGS was appointed in view of its reputation and past experience. It is further submitted that it may kindly be decided whether and to what extent SGS (India) is to be asked to re-do the verification and what is the exact methodology. Y.Dr. 1998.27. BHADRA) A. Preparation of this list can be completed only after all the certificates have been checked. We may also need to ascertain as to (1) why the staff of MAB attached to the verification team of SGS could not intimate the failure of SGS to follow the approved methodology and (2) why the certificates received from SGS were not verified as and when these were received so as to detect well in time the deviation from the methodology. it was pointed out that if the certificates had been checked by the staff of the MAB the deficiencies in the certificates could have been detected much earlier. 1998 it was recorded that on scrutiny of about 100 certificates out of a total of 1511 certificates it was found that most of them were deficient and the figures of stocks mentioned therein contained errors and omissions. Midha vs Union Of India (Uoi) And Ors. (2) there is difference in methodology adopted in respect of North-West-South and of East Zone. Besides.C. It was also suggested that since the matter was quite serious the CAG may like to call a meeting for reviewing the matter and taking final decision.98 (D.(C)" Again in office note recorded by the DAI(C) on January 27.1. 2002 " xx xx xx From the foregoing. Sd/. An apprehension was also expressed that the Government would not be satisfied with the certificates and in case question was raised on merits of the certificates it would be difficult to answer the same. It was suggested that since the certificates submitted by the SGS were found to be not acceptable it was not prudent to make any payment to them even on percentage basis or in respect of godowns for which certificates were found to be correct. on 6 March. On February 3. then a list of such depots will have to be prepared. It was also suggested that in case the certificates were accepted with deficiencies. Kerala and Tamil Nadu (In Andhra Pradesh there is some). (3) there are some calculation errors/clerical errors.

that the laid down methodology has been actually followed in field and that the sample chosen for verification has CAG's clearance. In fact.CA. it is evident from sub-para (c) of page 8/n of F. logistic constraints and the fact that stock of more than 20. 1998. it would naturally be impossible to inject this element ex-post facto.CA. the position would be reviewed.I). that needs to be done at the appropriate moment.III)]. In this case. the Committee noted that there have been significant gaps in these areas. Once the overseeing role was forgone. However. A doubt was expressed whether the FCI will be in a position to assist in the exercise of reverification and the Chartered Accountants would have to repeat the exercise again as after verification fresh procurement of kharif and rabi crops would completely change the stock position. labour problems.Dr.1) that the task entrusted to the audit teams was to 'carry out the system checks as part of the sectoral review already under way in respect of FCI. on 6 March.1. notwithstanding the fact that the local problems being encountered by SGS were getting thrown up.No. non-availability of weighment facilities.III/259-97 (Vol.R.http://indiankanoon. 1998 which according to the SGS was necessitated because of ground realities including resistance by the FCI staff. Midha vs Union Of India (Uoi) And Ors. In connection with the proposal of the DAI(C) that SGS should be asked to undertake the verification of the stocks again in respect of each godown the DAI(RC) was of the opinion that it will have its own problems as it transpired that the number of godowns to be in the vicinity of 15. Besides. The only alternative would be to do the whole exercise again. It appears that keeping in view the aforesaid office notes a meeting of the concerned officers were held as per the direction of the CAG dated February 4.CA.No. were merely trying to smoothen the working of both SGS and the firms of CAs.1998 by DAI (Commercial).1997 (pages 265-264/c-F.000 to 20.' The review after conclusion of 10% of work also did not take place. It was also decided that after 10% of the work was done. It considered the question whether a report could be issued to the Government on the basis of the verification as done by SGS or whether the verification be redone.' They were also to 'facilitate the other teams.No.III/259-97 Vo. The committee noted that the following two options were identified in the note dated 27. [Reference: paras 5 & 6 of page 6/N-F.III/259-97-Vol.000 godowns had to be verified. but it merely acknowledges that if IAAD intends to oversee any activity. In other words. 33. Reportedly some of these local problems compelled SGS to follow different methods in different places. these MAB teams. (i) That verification certificates as given by SGS by acted upon.the fact remains that though MAB staff were attached with the SGS teams visiting the depots. 4. 2002 also pointed out that the methodology followed by SGS had been explained in its note dated January 31. This is not condoning any deficiency that may be there in SGS working. The Committee did not go into award and management of the contract etc. from April onward fresh wheat stocks would start arriving in large quantities.8. Y. it would be desirable if the CAG is to be associated to ensure that the methodology followed is cleared by CAG. in so far as SGS and Chartered Accountants were concerned. Indian Kanoon .000 and it would be a massive exercise and many of the problems encountered earlier would still persist. No doubt in a meeting taken on 21. these aspects apparently were not overseen as the work went along. The Committee felt that in the instant case the work had to be got done by specialised outside agency. 3. In this meeting it was noted as follows:" xx xx xx 2.org/doc/355465/ 20 . the sample and also the methodology was discussed with the firm of verifiers. Nevertheless in the opinion of the Committee. (ii) That SGS be asked to undertake the verification of stocks again.

With the General Election on. the Rabi procurement would start in April and is likely to go on till June. rice and paddy) separately. there may be compulsions due to local conditions leading to varied practice to some extent. In an exercise as voluminous and wide-spread as this. It was felt that a report on the following lines could be sent: "Following Government of India's request vide DO letter No. (ii) Even for drawal of specific samples. there is perhaps no alternative but to proceed on the basis of the verification report as worked out by SGS. Some of the instances.org/doc/355465/ 21 . Ministry of Food & Consumer Affairs. due reportedly to local problems. New Delhi. in practical terms. In fact. the Committee felt that subject to having the calculation errors corrected. no exercise would be possible till the first week of March in any case. 6. after detailed scrutiny of 50 cases. The Committee appreciated that this time-parameter. SGS has not followed any uniform practice. 8.K.Dr. rice and paddy of Food Corporation of India physically verified. CAG had got the total stocks of wheat. In this context.'s request to CAG had come as early as in July 1997 and the request was to complete the verification within a month. however. 2002 5. inter-alia. (iii) While SGS has generally followed the volumetric method. I/S(FaC-S)/143/97 dated June 30. It is true that SGS followed somewhat varying methodologies/sampling methods from place to place. as matter of fact. the Committee felt that one had to take note of the fact that the firm was selected on the basis of its standing in the field.8. That was obviously impossible and more than 6 months have already gone. in the Eastern Region they have followed the peripheral counting method to a large extent. on 6 March. Under the circumstances. The Committee. may not be acceptable having regard to the commitment given by CAG. inter alia are:(i) The meeting dated 21. Therefore. AC(C) and Director (DT)}. The Committee however was advised that the discussions with SGS all through were with reference to a number of around 1600 which. For the purpose. quite apart from other consequential difficulties. If the exercise has to be redone. (iii) In 3 cases the density factor was not worked out for the 3 different commodities (wheat. 5-26/97-BP.R. Redoing the exercise would thus appear impracticable. The point in that situation would be to judge whether the process consequently got vitiated to a point that the findings would become completely unreliable. Midha vs Union Of India (Uoi) And Ors. 7. is the number of the depots and not godowns. When this procurement is on. Secretary. quite apart from any other factor. all the depots would be in turmoil making any exercise of physical verification by an outside agency impossible. did not find any quick way to assess the degree/extent to which the departures in the sampling procedure and the methodology could have affected the final outcome. 1997 from Shri B. SGS too have apparently functioned under difficult local conditions. were as below: (i) In 14 cases the density factor adopted for a depot related to another depot. Shortly thereafter. the total number of godowns is still not known. (ii) In as many as 35 cases either samples were not drawn from the requisite number of stacks or sufficient number of bags were not drawn and so on. concluded that the departure/deficiencies. Taimni. The Committee noted that Govt. any re-verification would have to start only after June and would not be complete before September/October 1998. The findings of the Committee of three officers {PD(AEC). CAG had appointed Indian Kanoon . the Committee noted. to the Comptroller and Auditor General of India. Y.http://indiankanoon. This was stated to be due to lack of weighment facility in the depot. 9.1997 referred to in para 4 above talked of drawing samples from each godown. (Department of Food & Civil Supplies). normally it would take another 4-5 months.

http://indiankanoon. 4. the methodology of verification etc. 36. Re-doing the exercise for verification of foodgrains in the depots of the FCI would present difficulties such as :(a) Fresh exercise had to be undertaken. 2. The ground balance amounts to _____ MTs. or they were dancing to the tune of respondent No.Dr. but this view was based on sample study made after scrutiny of fifty cases. there was no alternative but to proceed on the basis of the verification report of stocks submitted by the SGS.R.1997 was _____ MTs against the book balance of _____ MTs as per the records of FCI. Accordingly to the report given by the Chartered Accountant firms the ground balance of FCI as on 31. Such cases. in regard.org/doc/355465/ 22 . It would take another four to five months. and actually the number of depots were around 1." 10. if any. representing _____ percent. (e) The MAB teams did not oversee the execution of the work. The Committee was of the view that subject to having the calculation errors corrected. 3. The exercise undertaken by the SGS was spread over in different parts of the country and was a voluminous one. on 6 March. The Committee also noted the deficiencies in the verification process of stocks pointed out by the committee of three officers based on scrutiny of fifty cases. This view was based on the following consideration:1. who had to work out the stock balances as on 31. the Committee noted the methodology employed by the SGS for physical verification of the stocks of food grains stored in the godowns of the FCI. (d) Physical verification by an outside agency would be impossible during the procurement season.3. As is seen from above. While coming to the above conclusion. inter-alia." 34. the Committee was aware that there could be queries seeking elucidation etc. but as a matter of fact the total number of godowns was not know. It is difficult to hold without positive evidence that the view of the Committee report was vitiated by mala fides and was meant to favor SGS as son of the fourth respondent was working with it. it was not feasible to re-check the stocks. Midha vs Union Of India (Uoi) And Ors. While it is true that there were calculation errors in the report of the SGS. (b) In view of the ensuing general election no exercise would be possible till the first week of March. It is significant to note that the committee comprised of seven officers out of which three held a rank equivalent to that of a Secretary to the Government of India. SGS had functioned under difficult local conditions which led to employment of varied practice for physical verification of the stocks. 35.3. It was also recognised that in the discussions with SGS reference was made to around 1.600 godowns in which work was to be executed. We cannot assume that the officers were not having their independent thinking in the matter and their decisions were based on extraneous considerations. Due to the magnitude of work and various other factors as pointed out above. It was also noted that generally SGS had followed volumetric method to assess the stocks of food grains lying in the godowns of the FCI except in the eastern region where it had followed peripheral counting method due to local problems.1997 with reference to the stock verification report of the verifiers. would have to be handled as one gets along. to the sampling procedure.600. Y. Since there is no material on record to show that view of the Indian Kanoon . (c) Rabi procurement would start in April and was likely to go on till June. 2002 a well-known and reputed firm of stock verifiers for determination of such stock in all Depots of FCI and also a panel of reputed firms of Chartered Accountant.

4 who recorded the following note of his own:" In another file we have accepted the work of the surveyor and the chartered accountants and have decided to forward the certificate to Government. SHUNGLU) 10. verification of the stocks of the FCI conducted by the SGS showed a shortage of 4. 1998 recorded the following note:" Let us pursue it and send the report to Government before the close of next week namely 20 February 1998. 2. 500 crores.74 lakh metric tonnes of food grains was found on physical verification of stocks held by the FCI. it is not possible to castigate them. the Government accepted the report and decided to take the following action :"(i) To initiate action against officials responsible for the discrepancy where the shortages are more than 20%. According to para 7 of the counter-affidavit of respondents 1 to 9. This must be put on the machine and organized in a manner where access by alphabet and regions is simple. 2002 officers was not a bonafide one. Sd/ (V. But in view of the impracticability to undertake fresh exercise to carry out physical verification of the stocks of the FCI the Committee recommended acceptance of the report of the SGS. Y. Sd/(V. Reverting to the question of payment to the SGS for the work carried out by it. SHUNGLU) Indian Kanoon . It appears that the aforesaid office note was placed before the respondent No. we may refer to the note of the AC(C) dated March 20.R. should be made.K. (iii) To request CAG to undertake food stock verification of State Agencies.org/doc/355465/ 23 . omissions.Dr. gave a statement in the Rajya Sabha that a shortage of about 4. 4 on February 10. That being the case we may make payment agreed to and the extra amount already settled with Thakur Vaidyanath Ayer & Company for consolidation. Whether full payment to SGS as per work order ignoring deviations.http://indiankanoon. (ii) To devise a new methodology for physical verification with the assistance of Indian Statistical Institute. Price Waterhouse have preferred an additional claim. In fact the committee did not make any attempt to whitewash the mistakes of SGS. According to the affidavit. subject to having the calculation errors corrected.98" Thereafter the report was sent to the Government of India. that may be looked into by DAI(C) and we can take a decision on that separately. in answer to a parliamentary question on March 10. While doing so the whole point about depot and godown should also be resolved.K. Pursuant to the report of the Committee. 1998 in which the following two question were raised for consideration :1.2. The Minister of State in the Ministry of Consumer Affairs and Public Distribution. the respondent No. I believe the work done has a significant potential for data base in relation to location and storage facilities of FCI. etc. 37. Whether some deductions be made from the amount payable to SGS. 2000. Calcutta and National Sample Survey and in consultation with C&AG of India.74 lakh metric tonnes of food grains valued at about Rs. on 6 March. Midha vs Union Of India (Uoi) And Ors.

Y. Indian Kanoon . 1 and 2.As for depots which have not been visited before the finalisation of reports or the result of which have not been included in the report. When an officer who is to make payment of the bills is threatened in this manner it is likely to affect his judgment and condition his mind. Having observed thus. However. Learned counsel for the respondents took the stand that the work assigned to SGS being work of physical verification of the food stocks of the FCI.A." By a letter dated March 27. According to Section 34(5)(b) of the FC Act. 1998. the warning was not given with regard to the payment of the bills of the SGS. on 6 March.98" Once the Committee took a decision to accept the report subject to correction of errors and did not arrive at a conclusion that the deviations in the work assigned to SGS had vitiated the report. 2002 20. A proportionate deduction will be made from the bills of C./Surveyor unless a communication to this effect is received from Headquarters office. Thus. On March 26. It was canvassed by Mr.. 38. the CAG is entitled to conduct supplementary or test audit of the FCI either itself or by a person or person as he may direct. we at the same time note that at one stage the deputy Comptroller and Auditor General. Audit Board.org/doc/355465/ 24 . No additional amount shall be paid to any of the C. also threatened disciplinary action against the petitioner in case orders of the fourth respondent in that behalf were not carried out. presuming that expenditure on visiting of all depots in a particular region is uniform. it appears that the bills were paid keeping in view the quantities physically verified by SGS. We do not approve of this. 39. powers and obligations of the CAG are governed by the Constitution and the statute. 1998. 2. In case it takes up any assignment which does not fall within the purview of the statutory provisions.http://indiankanoon. Section 34(5)(b) of the FC Act reads as follows:"Accounts and Audit: 34. the AC(C) communicated the approval of the concerned authority to the aforesaid proposal Nos. dated March 26.3. the CAG accepted to undertake the work as requested by the Government of India. being MAB and dealing with the question of payment to SGS and Chartered Accountants. it cannot be construed as an audit of accounts and was not an exercise conducted within the purview of Section 19 of the CAG Act and Section 34 of the FC Act.. (1) . While clarifying that payment as per work done should be made and proportionate deductions could be made from the bills of the Chartered Accountants by taking into account the number of depots which they did not cover. Goburdhan that the work of physical verification under taken by the fourth respondent was beyond the scope of the powers of the CAG. This has been so clarified now in your letter under reference.. 1998 to the petitioner. the petitioner. 3. Midha vs Union Of India (Uoi) And Ors.R. This is reflected from the communication of the Deputy Comptroller & Auditor General-cum-Chairman. perhaps it was concluded that the payment to the SGS be made as per the rates quoted by it.Dr. made the following properties :" The quantity claimed to have been physically verified in the bill presented by M/s SGS will be restricted to the quantity reflected in physical verification certificates for each unit furnished by them and received in this office. The CAG is a constitutional authority and the duties. It was submitted on behalf of the respondents that since the exercise was not barred by any statutory provisions. the staff of the CAG will not be bound to execute the same. It is difficult for us to accept the view that the exercise relating to verification of stocks did not fall within the purview of the CAG Act or the FC Act.. It is not supposed to undertake an extra constitutional or extra statutory work. We have considered the submissions of learned counsel for the parties.

xx xx xx" Thus. the FCI will fall in the category of a company providing services. Indian Kanoon ..org/doc/355465/ 25 .. MAOCARO 1988 applies to certain companies including companies providing services.. 2002 (2) ... if any.. Y. on 6 March. going through accounts may not be sufficient. (b) to conduct a supplementary or test audit of the accounts of a Food Corporation by such person or persons as he may authorise in this behalf. It seems to us that the word "audit" used in Section 34 cannot be construed in a limited sense. Midha vs Union Of India (Uoi) And Ors. by such person or persons. and in such form as the Comptroller and Auditor-General may.. Thus. In this regard we may refer to "Statement of MAOCARO" 1988 which was issued under Section 227 of the Companies Act.http://indiankanoon.Dr. Unless the physical verification of stocks is undertaken. having regard to size of the company and nature of its business. * See that the procedure followed for physical verification is adequate. It while dealing with the subject of inventories provides as follows:xx xx xx " (iii) Inventories * Ensure that physical verification is conducted at reasonable intervals of : (a) finished goods: (b) stores and spare parts: (c) raw materials. Undoubtedly.. and for the purpose of such audit. on such matters. noticed on physical verification as compared to book records have been properly dealt with in the accounts. (4) ..R. MAOCARO refers to matters to be included in auditors report. * Further ensure that procedure for identifying damaged and obsolete items of inventory is proper and adequate... direct. by general or special order. it is obvious that the work of supplementary audit of the FCI could be conducted by the CAG itself or any agency authorised by it. to require information or additional information to be furnished to any person or persons so authorised. (5) The Comptroller and Auditor-General of India shall have power (a) . it cannot be said that appointment of SGS along with the Chartered Accountants to undertake physical verification of the stocks of FCI was outside the province of the fourth respondent. (3) . Audit of accounts of the FCI may require physical verification of the stocks held by it in order to ascertain whether the stocks reflected in the books of accounts match with the stocks actually held by it.... * Also ensure that the discrepancy.. * Ensure that cut off procedures have been followed..

(2) The duties and powers of the Comptroller and Auditor-General in relation to the audit of the accounts of corporations (not being companies) established by or under law made by Parliament shall be performed and exercised by him in accordance with the provisions of the respective legislations. letter No. * Further ensure that the method of valuation of stocks is same as that followed in the previous year.. Goburdhan submitted that since it was a case of single tender contract exceeding Rs. In a given case verification of stocks may become necessary for the purpose of audit of the accounts. '33 . regarding verification of stocks of wheat. rice and paddy of the Food Corporation of India. we are of the view that the CAG was empowered to undertake the audit of accounts of the FCI and audit would also mean the verification of the stocks held by the latter. 1997 requesting for funds to the tune of Rs. Thus. There is no force in the contention of the appellant and the same is accordingly rejected. Mr. 17 crores in regard to the exercise to be undertaken for the purpose of physical verification of the ground balances of stocks of wheat. We agree to an additional expenditure not exceeding Rs. 2002 * Compare the raw material consumption ratio for the current year with previous year. On the same principle.R. Y. 2453-BRS/132-97(I) dated August 13. by IA&AD. * Ensure that method of valuation of ratio is appropriate and properly discharged in the accounts.http://indiankanoon. One crore in value the previous consent of the Finance Ministry should have been obtained before disbursing the amount to the SGS. on 6 March. This item can also be included in the Proposals at that stage.org/doc/355465/ 26 . 19(1) . 1997. then the effect of such change in accounts should be separately disclosed and quantified. Department of Economic Affairs. dated September 2." 40. Rather it is part and parcel of the same. which we have employed for construing Section 34(5)(b) of the FC Act. rice and paddy with the Food Corporation of India. Indian Kanoon . Ministry of Finance. the Department may go ahead with the expenditure which may for the present be met by temporary reappropriation within Grant No. It was argued on behalf of the respondents that the Delegation of Financial Powers Rules on the basis of which this submission was made by the counsel for the petitioner does not apply to the CAG as it is not a department of the Government of India. the CAG is empowered to audit the accounts of Corporations established by or under law made by Parliament. * If there is change in the method of valuation. 42. It appears to us that even under Section 19 of the CAG Act. There is nothing in the CAG Act or the Constitution which debars the CAG from ordering physical verification of the stocks of food grains of the FCI. which reads as follows:"Kindly refer to your d.. 1997. the idea of physical verification of stocks is not foreign to the concept of audit. Midha vs Union Of India (Uoi) And Ors. xx xx xx" 41. 2. Supplementary grant will in any case be necessary for expenditure arising out of Government decision on the Pay Commission's recommendations.Audit'. Section 19(2) of the said Act reads as follows:Audit of Government companies and corporations.Dr. the Government of India accorded approval vide letter of the Additional Secretary (Budget) to the Government of India.o. 17 crore being incurred on the exercise in the current year.. As this is not on a New Service.. It is not necessary to go into this question as we find that in response to the letter of the Deputy Comptroller and Auditor General of India dated August 13.

Once the expenditure of Rs. Rawalpindi. Mr. the auditors are required to send a copy of their report together with audited copy of accounts to the CAG of India who is empowered to comment upon or supplement the audit report in such manner as he may think fit. learned counsel for the respondents submitted that only physical verification of food grains was conducted and the report of physical verification of stocks was not required to be placed before the Parliament by the CAG. Goburdhan urged that honesty and integrity of SGS is in question and it was accused of bribing the ex-Prime Minister of Pakistan and others for securing a contract of pre-shipment inspection in Pakistan.Dr. the CAG is required to send the report to the Central Government and it is the duty and obligation of the Central Government to place it before the Parliament. 44. Learned counsel for the petitioner submitted that the CAG was required to place the report regarding the physical verification/audit of the stocks of food grains conducted by respondent No. the contention of the learned counsel that the CAG did not have the sanction to spend the amount for undertaking the exercise is rejected. It was pointed out that against the order of the Ehtesab Bench of Lahore High Court. Rawalpindi Bench.org/doc/355465/ 27 . This submission of the learned counsel for the respondents proceeds on the basis that none of the provisions including Section 19 of the CAG Act and Section 34(5)(b) of the F. We have also found that the CAG is empowered to direct verification of the stocks of food grains of the FCI under Section 34(5)(b) of the FC Act and under Section 19 of the CAG Act. The petitioner has not placed any evidence on record to show that any bribe was paid by SGS to secure the contract.C. It was stated that Ehtesab Bench of Lahore High Court. According to the learned counsel. Under Sub-section (2) of Section 19A of the CAG Act. an appeal was filed before the Supreme Court of Pakistan. Thus. the report of the CAG in relation to the accounts of a government company or a corporation referred to in Section 19 thereof is required to be submitted to the concerned government. the provisions of Section 19 of the CAG Act read with Section 34(5)(b) of the FC Act confer a power on the CAG to conduct an audit of accounts as distinct from physical verification of stocks of the FCI. the Central Government in turn is required to cause every report received there under to be laid as soon as may be after it is received before each house of Parliament. We have already taken a view that physical verification is not foreign to the concept of audit. Accordingly. Therefore. We are not concerned with what happened in Pakistan.R.http://indiankanoon. 11 and the Chartered Accountants before the Parliament. Act envisages verification of the stocks of food grains of the FCI. or supplement to. In the instant case no inference of dishonesty or favoritism on the part of the SGS can be drawn on the basis of what is alleged to have happened in Pakistan. 45. any comments upon. it cannot be argued that there was no sanction by the Government of India to incur the expenditure. 1999 convicted the accused and sentenced them to various terms of imprisonment. Midha vs Union Of India (Uoi) And Ors. on 6 March. We have given our thoughtful consideration to the submissions advanced on behalf of the parties. Y. As a sequitur it was urged that there is no obligation on the CAG to place the accounts of the FCI along with a report of auditors before the Parliament in terms of Section 19A of the CAG Act and Sub-section (7) of Section 34 of the FC Act. by its order dated April 14/15. Again under Section 19A(1) of the CAG Act. xx xx xx" 43. 2002 Secretary (E) has seen. Under Clause (d) of Sub-section (6) of Section 34 of the FC Act. the audit report made by the CAG under Clause (d) of Sub-section (6) thereof is required to be placed by the FCI before the Central Government. 17 crores was allowed to be incurred by the CAG on the aforesaid exercise. On the other hand. Rather it is part and parcel of the same exercise and in a given case verification of stocks may become necessary for purpose of audit of accounts. 17 crores was allowed by the Government of India. Indian Kanoon . Under Sub-section (7) of Section 34 of the FC Act. it is apparent that expenditure not exceeding Rs. under the aforesaid provisions of the FC Act and the CAG Act. The appeals were accepted and convictions recorded against and the sentences awarded to the appellants were set aside and the case was remitted to the court of competent jurisdiction for fresh trial in accordance with law.

4. a lady made a complaint of sexual harassment against the petitioner.3. 1999. 3. 9. 10. From the aforesaid chronology of events it is obvious that the petitioner filed the writ petition only after being charge sheeted in connection with the case of sexual harassment. Rather. the Supreme Court held that a writ petitioner who comes to the court for relief in public interest petition must come not only with clean hands.1997. 1997 the petitioner noted certain deficiencies in the working of the SAG (see letter of the petitioner dated December 22. On November 19. 48. it will be necessary to mention chronology of events :1. clean mind and clean objective.M. On July 4. 1999. .http://indiankanoon. like any other writ petitioner. 1997 to the seventh respondent. Srinivas v. On December 22. The petition. 2002 46. 2. 1998 the petitioner in his capacity as Member.Dr. Ministry of Food and Consumer Affairs. . Before parting with the matter we would also like to consider the question whether or not this petition.R. In June 1998 one thousand five hundred and sixty one certificates issued by SGS relating to verification of stocks were sent to the Government of India by the CAG. It is not claimed that the petitioner did not know about the employment of fourth respondent's son with the SGS and as soon as he came to know about the relationship he filed the writ petition. on 6 March. In the instant case since the petitioner has come up only after he was charge sheeted it is difficult to accept the theory that the petitioner filed the instant petition because he was driven by public interest. does not Indian Kanoon . 1998 the petitioner was of view that SGS was appointed as it was a well-known and reputed firm of stock verifiers. a question arises why did the petitioner wait for so long for filing the writ petition after he took over the charge as MAB-IV. 11. 1999 the petitioner was placed under suspension pending enquiry. 5. but must further come with clean heart. Midha vs Union Of India (Uoi) And Ors. On March 20. The change in the attitude appears to have taken place after the petitioner was charge sheeted even though he was not satisfied with the execution of the work by the SGS as is apparent from the letter of the petitioner dated December 22. In order to determine the question. therefore. 7. On December 8. On 30 June 1997 the Secretary to the Government of India. On December 4. In In K. 1997 the petitioner took over charge as Member Audit Board-IV. R. recorded a report with regard to Audit of Food Corporation of India in which it was inter alia stated that the CAG had appointed a well known and reputed firm of stock verifies for determination of stock of food grains in the Depots of FCI and also a panel of reputed firms of Chartered Accountants to work out the stock balances as on 31. On 18/23 August.R. fact finding committee submitted its report with regard to the aforesaid complaint of sexual harassment. 1997. 6. 1999 the petitioner filed the instant writ petition. 1997 to the seventh respondent (which is at page 74 of the paper book). In March 1998 the FCI submitted report to the Government of India. Y. 47. requested the CAG to conduct a special audit of inventories/stocks of rice held by the FCI. On November 29. the Cabinet Secretary repeated the request for special audit in respect of inventories and stocks held by the FCI. Premchand and Ors. Audit Board-IV.org/doc/355465/ 28 . which has been filed under the category of public interest litigation. In case the petitioner had any genuine grievance with regard to the appointment of SGS to verify the stocks of food grains of the FCI on the ground of the fourth respondent's son being an employee of the SGS or on the ground that the fourth respondent had shown a favorable bias towards the SGS in entrusting the work to it. is maintainable. 8. it appears that till March 20.

Indian Kanoon . and Ors. it would be the bounden duty of the court not to entertain such petition as otherwise the very purpose of innovation of public interest litigation will be frustrated.org/doc/355465/ 29 . the Supreme Court held that a public interest litigation is usually entertained for the purpose of redressing public injury. Public interest litigation is in fact a litigation in which a person is not aggrieved personally but brings an action on behalf of the downtrodden or suffering masses for the redressal of their grievances. it has been held that the dominant object of public interest litigation is to ensure observance of the provisions of the Constitution or the law. 54. which can be best achieved to advance the cause of community or disadvantaged groups and individuals or public interest by permitting any person. State of West Bengal and Ors. acting bona fide and having sufficient interest in maintaining an action for judicial redress for public injury or to put the judicial machinery in motion like actio popularis of Roman Law whereby any citizen could bring such an action in respect of a public delict. effective access to justice to the economically weaker class and meaningful realisation of fundamental rights. the same should not only be refused but also strongly discouraged. on 6 March. it will not entertain the same. v. if any. 51. Y. State of U. . . H.http://indiankanoon. the Supreme Court held that public interest litigation cannot be initiated to settle private scores. 53.S. Chowdhary and Ors.Dr. . enforcing public duty. In Chhetriya Pradushan Mukti Sangharsh Samiti v. Obviously. protecting social rights and vindicating public interest. The motive for filing public interest writ must be explored by the court with care and caution. . It is hard to believe that the petitioner filed the instant public interest petition bona fide for the purpose only of serving the public interest. In case the High Court finds the filing of the public interest litigation to be motivated by self interest of the petitioner for wreaking vengeance. In Janta Dal v. we consider it appropriate to dismiss the writ petition with the aforesaid observations and in terms of the conclusions reached by us. 49. Again in Malik Brothers v. In case a court finds that in the grab of a public interest litigation actually an individual's own interest is sought to be advanced or protected. Applying the principles laid down by the Supreme Court it cannot be said that the instant petition has been filed by a person who is not aggrieved personally or who has no axe of his own to grind. . of the petitioner and ask itself the question: "Is there anything more than what meets the eye?" That was exactly what was laid down by the Supreme Court in Sachindanand Pandey and Anr. 2002 fulfill the criteria for filing the public interest litigation as laid down in Srinivas 's case (supra). . In a public interest petition court in order to check and prevent misuse of the remedy ought to examine the motive. the petitioner has a personal interest in the litigation because of the disciplinary action initiated against him.R. Midha vs Union Of India (Uoi) And Ors. . In the light of the aforesaid discussion.P. It was also held that where it appears that the PIL is only a cloak to feed any grudge or enmity. 50. . The real purpose of entertaining such litigation lies in the vindication of the rule of law. Narendra Dadhich and Ors. 52.