On Monday, November 20, the Andhra Pradesh High Court finally granted regular bail to Telugu Desam Party (TDP) chief Chandrababu Naidu in the alleged skill development scam case. Former Chief Minister of Andhra Pradesh Naidu was jailed for nearly 50 days in the case. In granting him regular bail, the High Court made some key observations about the investigation by the Crime Investigation Department (CID), disagreeing with many of the prosecution’s arguments, and poking holes in the CID’s case against Naidu. Here’s a brief recall of what the case is all about, and what the court said on Monday. While the HC said it was only briefly examining the evidence in the case to decide on the bail plea, it noted that no money trail has been established yet in the corruption case to Naidu or the TDP. The court also said that a former CM can't be held responsible for every subcontractor’s evasion or discrepancies in the agreement signed for the project.
The CID’s case against Naidu
The CID arrested Naidu in the Skill Development Corporation scam case, which allegedly happened when he was the CM from 2014-19. According to the CID, public funds worth Rs 371 crore were released to set up skill development centres in the state, of which around Rs 241 crore were diverted to shell companies through private firms contracted to carry out the project. It alleged that Naidu and TDP were the ultimate beneficiaries of the siphoned funds.
CID registered an FIR in the case in December 2021, based on findings of the Directorate-General of Goods and Services Tax (GST) Intelligence in a related case involving the two private firms – Siemens Industry Software (India) Pvt Ltd and DesignTech Systems Pvt Ltd – that were contracted for the skill development project. According to the Enforcement Directorate, which is also probing a parallel case, money went from DesignTech to multiple tiers of shell companies, but none of the central agencies have mentioned any involvement of the Andhra Pradesh government or Naidu.
However, the CID added Naidu’s name as the 37th accused in the case earlier this year, and arrested him amid high drama on September 9.
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What the High Court said while granting bail to Naidu
The High Court said that for considering the bail petition, it wanted to briefly examine the evidence furnished by the prosecution to see if there was indeed a prima facie case against Naidu. However, it noted that these observations were only meant for deciding on the bail plea, and can’t be seen as a reflection on the merits of the case.
> Allegation of diverted funds being transferred to TDP’s account
Firstly, it contested the prosecution’s claims that the funds siphoned off were withdrawn in cash by Naidu and other accused, and that significant cash deposits were made in TDP’s account at a time that aligns with the alleged diversion of funds. The court said as of now, there wasn’t enough proof to definitively conclude that the siphoned funds were diverted to TDP’s accounts. The court also said there was not enough proof that Naidu had withdrawn the amount in cash.
The court said that such serious allegations — that misappropriated funds were transferred to TDP’s account – should be backed by substantial proof when seeking Naidu’s remand on such a basis.
> Linking text messages between heads of contracted firms to Naidu
The Additional Advocate General on behalf of the state government had referred to SMS and WhatsApp messages between former Siemens India MD Suman Bose and DesignTech MD Vikas Khanvelkar. The text messages allegedly show that there were multiple transactions made between them between December 2014 and January 2016 by exchanging currency note numbers as tokens. This period overlaps with the period during which the Rs 371 crore from the Andhra Pradesh government was transferred to DesignTech: December 2015 to March 2016.
But the High Court said that the relevance of the transactions between the two MDs to Naidu’s case was not established. It said these texts can’t be definitively linked to Naidu and the alleged transfer of funds diverted from DesignTech to shell companies to TDP, as the source of cash and the purpose of the transactions were not clear from the text messages.
> Discrepancies in project’s Memorandum of Agreement
Another point contested by the CID (based on a forensic audit of the project conducted by a private firm Sarath & Associates appointed by the state government) is that the signature from the Siemens India representative on the Memorandum of Agreement in the skill development project said ‘Soumyadri Sekhar Bose’ and not ‘Suman Bose’. The absence of a signing date on the document was also flagged as suspicious.
The court questioned how Naidu can be held responsible for such discrepancies, as he was the CM at the time and it wasn’t his duty to verify and compare signatures on such contracts. It also said it’s not clear how these missing details and the alternative signature can be seen as the main reason for the alleged siphoning of funds.
> Naidu rushing to clear funds
CID has alleged that Naidu had hastily set up the Andhra Pradesh State Skill Development Corporation (APSSDC) which was handling the skill development project, brought it under the SDE&I Department (from the Higher Education Department), failed to call tenders or set up a monitoring committee for the project, handpicked the heads of APSSDC, and released the entire amount of Rs 371 crore to DesignTech in just four months — all of this to have the funds diverted through shell companies to benefit his family and party. The six clusters were to cost a total of Rs 3354 crore, of which the Andhra government’s `contribution’ was capped at Rs 330 crore or 10% (Rs 371 crore with taxes). It also alleged that Naidu ignored cautionary advice from a couple of IAS officers who were wary of releasing such a huge amount of funds so quickly.
However, the court said that Naidu’s eagerness to clear the funds doesn’t imply any wrongdoing, without evidence of these funds being diverted to his or TDP’s account. The court agreed with Naidu’s lawyer that the former CM “cannot be held responsible for every subcontractor's evasion.”
“There is no prima facie indication that officials informed the petitioner of such deviations,” the bail verdict said.
> Naidu not influencing witnesses
The court also noted that the prosecution's claim that the petitioner indirectly influenced witnesses, co-accused, and party members lacked substantiating material. It said that the filing of a petition by Kilaru Rajesh (a close associate of Naidu and his son Nara Lokesh) with the Hyderabad police, and the non-appearance of Pendyala Srinivas (an employee of the government of Andhra Pradesh, who was working as Personal Secretary to Naidu) are irrelevant to Naidu’s bail plea. The CID had alleged that cash siphoned off in the skill development scam on Naidu’s behest was handed over to Pendyala Srinivas and Kilaru Rajesh.
The court noted that Naidu was added as an accused and arrested nearly two years after the FIR was first registered in December 2021, and that in this period, there is no indication that he tried to interfere with the probe. Noting that Naidu is provided with Z+ category security by the Union government, the court said this goes to show that “there is no flight risk, and there is no possibility of tampering with the evidence or influencing/intimidating the witnesses.”
> Not convinced of regime revenge
Not all of the court’s observations were in Naidu’s favour. It also said it was unconvinced by Naidu’s claim that the case was “politically motivated as a regime revenge” by the YS Jagan Mohan Reddy-led YSRCP government.