Republic of India Maharashtra Water Sector Improvement Project Redacted Report April 2018 Statement of Use and Limitations This Report was prepared by the World Bank Group (the WBG) Integrity Vice Presidency (INT). It provides the findings of an INT administrative inquiry (the Investigation) into allegations of corrupt, fraudulent, collusive, and/or coercive practices, as defined by the WBG for purposes of its own policies, rules and procedures (the WBG’s Framework regarding Anti-corruption), in relation to the WBG-supported activities. The purpose of the Investigation was to allow the WBG to determine if the WBG’s Framework regarding Anti-corruption has been violated. This Report is being shared to ensure that its recipients are aware of the results of the INT Investigation. However, in view of the specific and limited purpose of the Investigation underlying this Report, this Report should not be used as the sole basis for initiating any administrative, criminal, or civil proceedings. Moreover, this Report should not be cited or otherwise referred to in the course of any investigation, in any investigation reports, or in any administrative, civil, or criminal proceedings. This Report is provided without prejudice to the privileges and immunities conferred on the institutions comprising the WBG and their officers and employees by their respective constituent documents and any other applicable sources of law. The WBG reserves the right to invoke its privileges and immunities, including at any time during the course of an investigation or a subsequent judicial, administrative or other proceeding pursued in connection with this matter. The WBG’s privileges and immunities cannot be waived without the prior express written authorization of the WBG. 1 Executive Summary This report provides the findings of an administrative inquiry by the World Bank Group Integrity Vice Presidency (INT) into allegations that Company A may have engaged in misconduct in connection with the Maharashtra Water Sector Improvement Project (the Project) in India. Company A was awarded a contract under the Project (the Contract). As required by the bidding documents for the Contract, Company A submitted several bank guarantees purportedly issued by Bank A. However, in response to INT’s inquiry, Bank A stated that it had not issued the bank guarantees submitted by Company A. The World Bank Group imposed a sanction of debarment with conditional release on Company A. The ineligibility extends to any legal entity directly or indirectly controlled by Company A. 2 Background The International Bank for Reconstruction and Development (IBRD)1 and the Government of India signed a Loan Agreement for the Maharashtra Water Sector Improvement Project (the Project). The Project aimed (i) to strengthen the state’s capacity for multi-sectoral planning, development, and sustainable management of the water resources; and (ii) to improve irrigation service delivery and productivity of irrigated agriculture. The Project Agreement signed by the IBRD and the State of Maharashtra provided that the Project Preparation and Management Unit (PPMU) would coordinate the work of the State departments involved in the Project and the procurement, financial management and reporting under the Project. The Project became effective in September 2005 and closed in March 2014. As part of the Project, Agency A published the Invitation for Bids (IFB) for a contract under the Project (the Contract). The bidding documents for the Contract required that the winning contractor submit a Performance Bank Guarantee and a Bank Guarantee against the retention money until the completion of the works. Company A submitted a bid for the Contract, and subsequently was awarded the Contract. Allegations The World Bank Group Integrity Vice Presidency (INT) received allegations that Company A submitted false bank guarantees. Methodology INT’s investigation consists of, among other steps, a review of Project documents, as well as statements obtained from the purported issuer of the bank guarantees submitted by Company A. Findings Evidence indicates that Company A submitted a false Performance Bank Guarantee and false Bank Guarantees Against the Retention Money. As required by the bidding documents, Company A provided Agency A with a Performance Bank Guarantee and two Bank Guarantees against the retention money, purportedly issued by Bank A. Evidence indicates that prior to the completion of the work, Company A abandoned the works, after being paid approximately 75 percent of the total Contract value. Following Company A’s abandonment of works, Agency A contacted Bank A and attempted to encash the Performance Bank Guarantee and both Bank Guarantees against the retention money. Subsequently, Bank A informed Agency A that it had not issued the Performance Bank Guarantee and Bank Guarantees against the retention money submitted by Company A. 1 The IBRD is one of the five institutions comprising the World Bank Group. The International Development Association (IDA) and the IBRD constitute the World Bank. The IBRD and the World Bank are used interchangeably throughout this Report. 3 INT contacted Bank A, which confirmed that it had not issued the Performance Bank Guarantee and Bank Guarantees against the retention money submitted by Company A. INT issued a Show Cause Letter to Company A, but the letter was returned to INT as undeliverable. INT also conducted a site visit to Company A’s offices at the address provided in its bid documents and the Contract. During its visit, INT found that neither Company A nor its named owner occupy that address. Instead, a hospital occupied the address. INT attempted to deliver the Show Cause Letter to Company A’s owner’s residential address, but was also unsuccessful. Follow Up Action by the World Bank The World Bank Group imposed a sanction of debarment with conditional release on Company A. The ineligibility extends to any legal entity directly or indirectly controlled by Company A. 4