The Commission for Investigation of Abuse of Authority has filed a corruption case against 17 people and entities, including three former secretaries, on the charge of irregularities in the Melamchi Water Supply Project.

The anti-graft body registered the case at the Special Court on Sunday.

Former secretaries Sanjay Sharma, Bhim Upadhyay and Gajendra Thakur have been named defendants in the chargesheet. All of them headed the Melamchi Water Supply Development Board during their respective tenures as secretary at the Ministry of Water Supply as its ex-officio chair.

A total of 17 defendants, other immediate board members of the board including Mukunda Prasad Paudel and Rudra Singh Tamang, then executive directors Ghan Shyam Bhattarai, Ramchandra Devkota and Surya Raj Kandel have also been charged-sheeted.

Tamang, currently director general at the Department of Immigration, is now automatically suspended from the post as per the Corruption Prevention Act-2002.

Under-secretaries (account) at the board at different times—Manibhadra Neupane, Begnath Poudel, Kedar Prasad Aryal, senior divisional engineer and director Bhojbikram Thapa—are other defendants.

Deputy team leader Shiva Kumar Sharma of the consulting firm Eptisa BETS J/V; the consulting firm itself, and the contractor—Co-operativa Muratori eCementisti di Ravenna, Italy—have also been chargesheeted for corruption in the case.

The anti-graft body said in a statement that a corruption case was registered against them as they were involved in making illegal payments of the government’s resources. The CIAA has made claims ranging from Rs890 million to Rs41.13 million each from different defendants for allegedly causing losses to the government.

“The corruption case against them was registered over the irregularities that allegedly took place while paying the former contractor of Melamchi Water Supply Project—CMC di Ravenna,” said CIAA spokesperson Narahari Ghimire. “The claims made by the CIAA differ depending on how long the officials stayed in the Melamchi office and how much in illegal payments was made.”

The board hired the Italian company in July 2013 after terminating the previous contract with China Railway 15 Bureau Group, following the latter’s sluggish progress in tunnel and headworks construction.

But in January 2019, the contract with the Italian firm was also terminated citing poor progress in the works. Since then, the Chinese contractor SinoHydro Corporation was hired to complete the remaining works and it was badly damaged by massive floods just before the completion of the project in June 2021.

According to the CIAA, the Italian contractor was paid illegally several times and the advance payment was also not deducted while making further payments, causing losses to the state coffers. Nepal has been building this project with assistance from the Asian Development Bank.

In June 2016, the Italian contractor was issued Rs536.32 million as additional advance payment in two instalments based on a memorandum of understanding (MOU1). An additional Rs322.86 million was paid on February 17, 2017 based on the memorandum of understanding (MOU2).

But, according to the CIAA, these MoUs were signed against the contract and the Public Procurement Act. The first payment exceeded the legally fixed cap of 20 percent while the second payment was made under the heading of value engineering before actual value engineering took place.

Value engineering is a systematic, organised approach to providing necessary functions in a project at the lowest cost.

The anti-graft body also said that after the contract’s termination, the interest to be charged on the illegal payments was not recovered once the bank guarantee deposited by the Italian contractor was seized after the contract was terminated in 2019. According to the CIAA, the interest to be recovered from the bank guarantee amounts to Rs110.91 million.

Likewise, as much as Rs12.99 million in interest to be charged on the unspent amount of legally paid advance was also not recovered after the bank guarantee of the Italian contractor was seized.

The government faced extra losses of Rs100 million for the board’s failure to deduct from the provisional payments made to the Italian contractor. Then officials of the Melamchi Water Supply Board also faced the charge of failing to recover Rs276.64 million from the contractor for the use of the equipment and structures left by the former Chinese contractor—S China Railway 15 Bureau Group Corporation and China Machinery Industry Group Corporation Inc JV.

Payment was made also for the rehabilitation of the Sundarijal Tunnel Squeezing and Collapse without approval of the variation order while full payment was made for the incomplete works, causing losses to the state coffer, the CIAA said.