₹397 crore transformer procurement scam: Madras High Court calls for DVAC inquiry report and minutes of tender committee meetings

The Madras High Court on Thursday called for the minutes of the meetings of the tender committees which had cleared the government contracts for procuring thousands of distribution transformers during the tenure of former Electricity Minister V. Senthilbalaji between 2021 and 2023 when a reported loss of ₹397 crore had been caused to the public exchequer due to collusive bidding.

First Division Bench of Chief Justice Manindra Mohan Shrivastava and Justice G. Arul Murugan also ordered that a report of the preliminary inquiry being conducted by the Directorate of Vigilance and Anti Corruption (DVAC) into the issue must be placed before the court on March 9, 2026. The directions were issued on a 2024 writ petition filed by anti corruption organisation Arappor Iyakkam.

When Advocate General P.S. Raman submitted the DVAC had commenced a preliminary inquiry into the issue, the judges wanted the investigating agency to submit a status report for perusal during the next hearing. Wondering how the officials could have allowed collusive bidding in contracts worth ₹1,182.88 crore, the judges also wanted to peruse the minutes of the tender committees.

Representing Arapppor Iyakkam, its counsel V. Suresh told the court the distribution transformers were equipment meant for stepping down the voltage used in distribution lines to a level that could be used by the end consumers. Tamil Nadu Generation and Distribution Corporation (Tangedco) procures these transformers in various capacities, ranging from 25 KVA to 500 KVA, depending on the load capacity requirements.

The procurement takes place through competitive bidding by inviting tenders through www.tntenders.gov.in from entities which meet the eligibility criteria fixed by the tender inviting authority. Arappor Iyakkam analysed 10 tenders floated between 2021 and 2023 for procurement of 45,800 distribution transformers. The total value of these tenders floated by Tangedco amounted to ₹1,182.88 crore.

The petitioner organisation examined the number of bidders, the value quoted by each bidder, the prevailing market rate and such other factors to find out if there were any irregularities. The exercise led to the finding that in seven of the 10 tenders there was clear evidence of unjust enrichment to the contractors through collusive bidding and cartelisation and resultant loss to the tune of ₹397 crore.

“It is interesting to note that in each of the 10 tenders, more than 26 bidders were shown to have participated, thereby creating an apparent image of healthy competition, but what is to be noted is in all tenders, almost all bidders had quoted exactly the same price corrected to the same decimal points too,” the affidavit filed by Arappor Iyakkam read.

It went on to state: “It is mathematically near to a zero probability for more than 20 bidders to have quoted the exact same rate in tenders. The only logical and plausible conclusion that follows from this fact is that these bidders have conspired and colluded amongst themselves to prefix the rate and had thus snuffed out the competition and made a mockery of the tender process.”

Asserting there were materials to suspect the involvement of the then Minister Senthilbalaji, the then Tangedco chairman and managing director Rajesh Lakhoni and the then Financial Controller (Purchase) V. Kasi in the entire process, the petitioner organisation had included all three of them by name as respondents to its writ petition and sought a direction to the DVAC to register a First Information Report.