The bench of justices Aniruddha Bose and Bela M Trivedi delivered different judgements on the applicability of section 17A of the Prevention of Corruption (PC) Act and referred the matter to the Chief Justice of India to decide whether the issue would be heard by a three-member bench or five-member bench.

Section 17A, introduced by an amendment, came into effect on July 26, 2018, and made it mandatory for the police to seek prior approval from the competent authority (in this case, the governor of the state) to conduct any investigation into any offence alleged to have been committed by a public servant under the PC act.

The scam in question

A few months after coming to power in 2014, the Andhra Pradesh government led by Chandrababu Naidu proposed to establish the Andhra Pradesh State Skill Development Corporation (APSSDC) to develop the employability skills of students studying non-professional courses.

The corporation was to serve as an executive agency for the department of skill development, entrepreneurship and innovation of the Andhra Pradesh government.

As part of the public-private sector model, the Naidu government signed a memorandum of understanding (MoU) with Siemens India in January 2015 to set up six skill development centres across the state in collaboration with Design Tech Systems Pvt Ltd.

The total project cost was ₹3,356 crore [as mentioned in the FIR], out of which the state government offered to provide 10% as a grant-in-aid, while the rest would be invested by Siemens. Accordingly, a government order (dated June 30, 2015) was issued about releasing ₹371 crore to Siemens and DesignTech for the setting up of six Centres of Excellence.

The scam came to light when YS Jagan Mohan Reddy-led YSR Congress party came to power in May 2019 — two years after Naidu had stepped down. The state Crime Investigation Department (CID) filed an FIR in December 2021 against the officials of Siemens and DesignTech for allegedly syphoning off a large part of the ₹371 crore released by the Naidu government and not using any of it for skill development centres.

According to CID authorities, the Naidu government had established the corporation through an executive order without the approval of the council of ministers. The money was released to Siemens and DesignTech for setting up six Centres of Excellence, but no tender was called for the project. The funds were released even before identifying the places where the skill development centres had to be set up. No performance guarantee or bank guarantee was sought from Siemens and DesignTech, before releasing the amount.

The CID said senior IAS officers in the Naidu government, including then chief secretary IYR Krishna Rao, PV Ramesh and K Sunitha, had written in the note-files raising objections to the release of funds in advance to DesignTech. They also indicated that the funds were being released as per the instructions of the then-chief minister.

The CID said two of these senior IAS officers were also deposed to this effect under Section 164 of the Criminal Procedure Code before a magistrate during the investigation later. The CID also said that the investigation revealed that Siemens and Design Tech had not spent a single rupee of their own resources on this project, but in fact, syphoned off a major portion of ₹371 crore contributed by the state government.

Investigations revealed that the money was diverted to shell companies like Allied Computers, Skillers India Pvt Ltd, Knowledge Podium, Cadence Partners and ETA Greens.

In June 2018, the Anti-Corruption Bureau (ACB) received complaints from a whistleblower. “However, the people in power blocked any investigation from taking place and started removing key documentary evidence from the state secretariat,” the CID charged.

In 2018, Central agencies like the Enforcement Directorate, Goods and Services Tax intelligence wing and Income Tax Department also initiated a probe into the case acting on a complaint from a whistleblower (it is unclear whether it was the same person or another.)

In fact, Siemens Global Corporate Office had conducted an internal investigation into the project and found that the then MD of Siemens India Suman Bose had acted on his own without authorisation from the global headquarters or its legal team. He was later fired, and the government informed the state assembly.

Investigations revealed that Suman Bose and Vikas Khanvilkar, MD of DesignTech, used a network of shell companies to issue fake invoices, without the actual delivery of the goods and services and syphoned off the funds to the extent of ₹241 crores. Siemens received only ₹58.8 crore out of the ₹371 crore paid to Designtech by APSSDC.

While the CID is continuing its investigation to trace the end-beneficiaries of the misappropriated monies, the ED, too, launched an investigation on the aspect of money laundering involved in the issue.

The ED authorities arrested Bose, Khanvilkar and two others in a money laundering case for diversion and misutilization of funds. The ED provisionally attached properties amounting to ₹31.20 crore belonging to DesignTech Systems. All the accused were released on bail by the Andhra Pradesh high court in 2021.

Naidu caught in the net

On the night of September 9, 2023, the CID arrested Naidu at Nandyal, where he was addressing a public rally. He was brought to Vijayawada and produced before a special court for Anti-Corruption Bureau cases. His name was included in the FIR, which had not previously named him in 2021.

He was charged with Sections 120(B) (criminal conspiracy), 166 (public servant disobeying law), 167 (public servant framing incorrect document), 418 (cheating a person to cause wrongful loss), 420 (cheating), 465 (forgery), 468 (forgery of an electronic document), 471 (fraud), 409 (criminal breach of trust), 201 (destruction of evidence), 109 (bribe) under the IPC, apart from the PC act.

The ACB court sent him to judicial remand for 14 days and he was immediately taken to Rajahmundry central jail on September 11. The judicial remand was extended three times, even as his bail plea was rejected.

After being in jail for nearly 50 days, Naidu finally obtained a four-week interim bail from the state high court on October 31 on medical grounds as he was suffering from skin infections and other complications. On November 20, the high court granted him regular bail.

Meanwhile, the state high court had also rejected Naidu’s plea to quash the FIR filed against him. Naidu’s counsel argued that the CID did not take the prior permission of the Governor before initiating the probe as per Section 17A of the PC Act.

Naidu moved the Supreme Court challenging the high court verdict. The case was heard through the first couple of weeks of October last year and the judgement, which was reserved on October 22, was delivered on January 16.

Two interpretations

Justice Bose said prior approval for conducting a probe for the alleged offences under the PC Act against Naidu was needed. He said the police could seek such approval from the competent authority even now to proceed with the case. Justice Trivedi, however, said section 17A would not apply retrospectively. However, she refused to quash the FIR and the police could still seek Naidu’s remand.

“The bench’s unanimous view that arrest and remand of Naidu are in accordance with law clearly upheld the state government’s contention of the scam,” said additional advocate general Ponnavolu Sudhakar Reddy, who argued the case in the Supreme Court on behalf of the state government.

He said the Supreme Court’s refusal to quash the FIR against Naidu clearly indicated that there was merit in the case and there was no political vendetta behind the prosecution of the TDP chief.

Senior TDP leader and Rajya Sabha member Kanakamedala Ravindra Kumar said the judgement was solely about the applicability of section 17A and not on the merits and facts of the case. “The status quo in the skill development case will continue,” he said, adding that the CJI will decide on the merits of the case.