As part of its investigation in a case of conflict of interest and other irregularities in the acquisition of land in Gelephu Throm, the Anti-Corruption Commission (ACC) has frozen transaction for an acre of dry land owned by Penden Cement Authority Ltd. (PCAL).
The freeze notice, issued on October 25, stated that the notice will remain effective until such time the commission revokes the order or upon completion of legal proceedings, whichever comes earlier.
Anti-Corruption Act of Bhutan 2011 empowers the commission to freeze or seize any immovable property when the commission is satisfied on information obtained by it that any immovable property is the subject matter of an offence under the Act or evidence of the commission of such offence.
The commission is reportedly investigating the case involving a PCAL’s board director based on the findings referred by the Royal Audit Authority (RAA). In 2010 and 2011, the PCAL acquired land for the purpose of construction of depot and cement warehouse at various locations.
On review of documents relating to land acquisition and on enquiry to relevant officials of the company’s management, the audit observed conflict of interest and other irregularities while entering into such transactions.
RAA report stated that PCAL had opened a cement stock transfer depot at Gelephu in 2005 with a view to avoid deflection of cement meant for domestic use to the Indian market enroute Indian territory and make cement available at all times in the domestic market.
In 2007, PCAL had procured an acre of land in Gelephu for Nu 2.174M from Lt. Colonel Kezang Jigme for the construction of cement depot. However, instead of constructing the depot at the land procured, the management in 2010 looked for an alternative land for the same purpose.
On November 4, PCAL announced in Kuensel inviting offer from interested parties to sell their land in Gelephu for construction of a cement depot. Five private individuals quoted their rates ranging from Nu 53,500 to Nu 100,000 per decimal.
Based on the offers, the PCAL’s purchase committee met on December 18 and decided to accept the offer of Rinzin Chophel at a negotiated rate of Nu 52,500 per decimal. However, the decision of the committee was overruled and in 2011 PCAL procured an acre of land directly from Rinzin Rabgay for Nu 5.150M at the rate of Nu 51,500 per decimal flouting the procurement norms.
Based on the review of records including the Lag Thram of the land procured, the audit found that Rinzin Rabgay is the wife of PCAL’s board director Karma Tenzin. The audit stated that PCAL had purchased land from the spouse of a board director, which was in deviation to Section 89 (1) and 89(2) of the Companies Act of Bhutan, 2000.
“The decision to purchase the land from a land owner other than those who had submitted their offer in response to PCAL’s advertisement also defeated the very purpose of competitive bidding and impeded transparency and fairness in the said land transaction,” RAA report stated. Although the matter was discussed in the 134th board meeting based on the proposal submitted by the PCAL management, the concerned board director, who was also present in the meeting, did not disclose that the purchased land belonged to his wife.
The Companies Act stated that no director of a company shall take part in the discussion on any contract or arrangement entered into by the company in which he is concerned or interested, nor shall his presence count for the purpose of forming a quorum at the time of any such discussion.
The tour report of officials engaged in processing the land transaction who visited Gelephu in November 2011 indicated that the concerned board director was fully engaged in facilitating the land transaction. “Besides the existence of conflict of interest, whether or not the transaction had taken place at arm’s length basis remained doubtful. The concerned board director had totally disregarded the provisions of the Companies Act,” the report stated.
The audit also found that the land purchased from Rinzin Rabgay was restrictive since it fell within the Sarpang-Gelephu highway in the south and the boundary wall of the newly constructed domestic airport in the north. “Knowing such restrictive condition, the management deliberately went ahead with the procuring of land, which was not in the interest of the company,” RAA stated.
The legal officer of the company had coordinated in all land transactions that had taken place in the past. However, in this particular case, the audit found that the legal officer was least involved and all the transaction formalities, including several correspondences with the owner of the land, were carried out by the top-level management.
As suggested by the legal officer, the management on September 6, 2011 wrote to the Department of Civil Aviation (DCA) requesting for clearance on construction of depot since the land purchased for proposed construction fell adjacent to airport boundary wall. However, DCA denied issuing clearance stating that the proposed construction fell directly in the flight funnel zone and in close proximately to the runway, which would pose an obstacle to the flight while landing and take – off.
“It can be deduced from the DCA letter that the land purchased by the PCAL cannot be put into use, thereby resulting into unproductive investment and blockage of fund,” RAA report stated.