Uttarakhand tunnel collapse: Infrastructure company Navayuga is no stranger to controversy

Navayuga Engineering Company Limited (NECL) has been in existence for almost four decades since C. Visweswara Rao started it in 1986, positioned as an infrastructure and civil engineering construction company. A large part of its business comes from executing civil construction contracts using the EPC (engineering, procurement and construction) model. Apart from that, NECL also does work related to infrastructure on a public-private partnership (PPP) basis. 

NECL was building the tunnel, part of the Char Dham project, that collapsed in Uttarakhand. While it put the company in the spotlight and many difficult questions were asked, this is not the first time it has run into a controversy.  

The first issue concerning NECL (to most people, it is just called Navayuga) was in connection with the Vadarevu and Nizampatnam Port Industrial Corridor (Vanpic for short). That goes back to over a decade and was the brainchild of Nimmagadda Prasad, a name in Andhra Pradesh’s business circles. The idea was to create an integrated port-based industrial area.  

Prasad made his fortune in the pharmaceuticals business. In 2006, he sold a 71.5 per cent in his generics firm, Matrix Laboratories, for $736 million (then Rs 3,428 crore). The enterprising businessman managed to convince UAE-based Ras Al Khaimah Investment Authority (RAKIA) to be a partner. The project became controversial for several reasons, with land acquisition being one. The initial plan needed just 400 acres and in 2011, NECL picked up most of Prasad’s holding in Vanpic and also from Ras Al Khaimah.  

That deal landed NECL’s Rao in trouble and he was questioned by the CBI in May 2012. The allegation was that Prasad sold his holding to NECL as also the dilution of equity by Ras Al Khaimah, which was viewed as a deviation in the concession agreement. These transactions facilitated NECL’s entry into Vanpic giving it a 65 per cent stake and consequently, control of the project. Importantly, all this was said to have taken place without NECL going through the open competitive bidding process leading to a violation of the initial Memorandum of Understanding (MoU). The state government of the day in Andhra Pradesh raised the question on why this was done without its prior permission. Four years before that in 2008, Prasad, according to media reports, is said to have invested Rs 25 crore into the Vanpic project, which the CBI later valued at least Rs 17,000 crore. The Navayuga story took another twist in 2018 when, according to media reports, the Registrar of Companies, carried out a site inspection when they realised there were 47 entities belonging to the Navayuga Group had the same address. While the Visakhapatnam-headquartered group had its corporate office in Hyderabad, the regional offices are spread out in more locations across India and also the Middle East.  

Meanwhile, a petition filed on 28 July, 2022 in the Telangana High Court by Vanpic said the principal terms and conditions of the project “include that the government of Ras Al Khaimah shall contribute not less than 51 per cent of the approved project cost and it shall hold 51 per cent of the equity in the special purpose vehicles (SPV) to be formed for implementation of Vanpic project.” On the specific issue of deviations, it outlined areas such as including provision for dilution of Ras Al Khaimah’s share in the SPV from 51 per cent to 26 per cent “without knowledge/approval of government of Andhra Pradesh against the spirit of the concept of government to government (G2G) contract. This provision facilitated the clandestine entry of a private company viz, M/s Navayuga Engineering Company Ltd., into Vanpic project with 65 per cent equity in the SPV, keeping the government of Andhra Pradesh in total oblivion as to dilution of the equity of Ras Al Khaimah and induction of an alien party taking reigns of SPV.” It went to mention another major deviation in the applicability of the build-own-operate-transfer (BOOT) concept “only to the two ports (4,000 acres) but not to the industrial corridor of Vanpic project comprising 24,000 acres, whereby the transfer of industrial corridor assets on completion of the concession period to the government is not incorporated. This resulted in divesting the government of Andhra Pradesh of its legitimate claim on revenue share and rights over the industrial corridor assets on such completion of concession period.”