REPORT OF

THE JUSTICE R.S. PATHAK INQUIRY AUTHORITY

IN THE MATTER OF

THE INDEPENDENT INQUIRY COMMITTEE REPORT

ON

THE UNITED NATIONS OIL - FOR - FOOD PROGRAMME

RELATING TO

CONTRACT NO. M/09/54 AND CONTRACT NO. M/10/57

REPORT OF THE

JUSTICE R.S. PATHAK INQUIRY AUTHORITY Introduction 1.0 The sanctions imposed by the United Nations against Iraq

consequent upon events which led to the ‘Desert War’ were found,

over time, to produce severe hardship and intense privation, to the

Iraqi people. In an attempt to relieve them against deprivation

caused by the shortage of food, medical supplies and other

necessities, the United Nations evolved a United Nations Oil-for-

Food Programme. Iraq was permitted on the one hand to enter into

contracts of sale of its oil and on the other to acquire humanitarian

goods for its citizens. However, a constant course of misuse of the

programme by the Iraqi authorities having come to light, the United

Nations constituted an Independent Inquiry Committee (the IIC) to

inquire into the various acts of illegality and malpractice.

2.0 In its Fifth and Final Report the IIC reported that the

Government of Iraq sold 64.2 billions of oil to 248 companies, and

in time, 3,614 companies sold $ 34.5 billion of humanitarian goods

to Iraq. In some cases, illicit surcharges were exacted in connection

with the contracts of 139 companies, and humanitarian “kickbacks”

were paid in connection with the contracts of 2,253 companies. A

set of eight tables identifying contractors and other actors of

significance to Programme transactions, such as non-contractual

beneficiaries of Iraqi oil allocations and parties that financed oil

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transactions were released by the IIC. Among them, Table-3

contained the following entries under the head: “Summary of Oil

Sales by Non-Contractual Beneficiary”:

Beneficiary: Singh, Mr. K. Natwar Contracting Phase Mission Contract Barrels Barrels Note on SOMO Country Country Allocated Lifted Allocation records.

Masefield AG 9 Switzerland M/09/120 2,000,000 Nil Member of Indian

Congress Party

Masefield AG 9 Switzerland M/09/54 2,000,000 1,936,000 Member of Indian

Congress Party

Beneficiary: India-Congress Party Country: India Contracting Phase Mission Contract Barrels Barrels Note on SOMO Country Country Allocated Lifted Allocation records.

Masefield AG 10 Switzerland M/10/57 1,000,000 1,001,000

Surcharge Payments Associated with a Contracting Company (Committee Oil Surcharge Table)

Masefield AG

Contract Contract Value Barrels Lifted Surcharge Levied

M/09/54 $ 46,224,516.90 1,935,892.00 $ 498,973.00 Information from SOMO Information from Iraqi Embassy or Bank Records

Named Payment Amount Bank or Named Payment Amount Depositor Date Embassy Depositor Date

Andleeb Jordan Sehgal Sehgal 3/13/2001 $ 60,000.00 National Bank Andleeb 3/13/2001 $ 60,000.00

Hamdan Jordan Hamdan Exports 5/27/2001 $ 438,518.00 National Bank Exports 5/27/2001 $ 438,518.00

Total for Contract M/09/54 $ 498,518.00 $ 498,518.00

Masefield AG

Contract Contract Value Barrels Lifted Surcharge Levied

M/10/57 $ 16,808,457.40 1,000,896.00 $ 250,224.00 Information from SOMO Information from Iraqi Embassy or Bank Records

Named Payment Amount Bank or Named Payment Amount

Depositor Date Embassy Depositor Date

Hamdan Jordan Hamdan Exports 6/11/2001 $ 59,808.00 National Bank Exports 6/11/2001 $ 59,808.00

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Hamdan Jordan Hamdan Exports 12/19/2001 $ 190,214.00 National Bank Exports 12/19/2001 $ 190,214.00

Total for Contract M/10/57$ 250,022.00 $ 250,022.00

Entry Total $ 748,540.00 $ 748,540.00

2.1 It is apparent from the aforesaid data that Mr. K. Natwar Singh

has been shown as a Non-Contractual Beneficiary in respect of

Contract No. M/09/54 and the India-Congress Party has been shown

as a Non-Contractual Beneficiary in respect of Contract No.

M/10/57.

3.0 Creation of the Inquiry Authority and the Terms of Reference

3.1 The Government of India decided to create an Inquiry Authority

to probe into the matter. By Notification No. 8/35/2005-E.S. dated

November 11, 2005 published in the Gazette of India –

Extraordinary, the Government of India in the Ministry of Finance

(Department of Revenue) constituted the Justice R.S. Pathak Inquiry

Authority, with the following Terms of Reference:

1. To inquire into the sources of information, materials and

documents that were available with the Independent Inquiry Committee (appointed by the Secretary General of the United Nations to investigate the administration of the UN Oil-For-Food Programme) with reference to the Report (including the Tables) of the said Committee pertaining to contracts bearing number M/9/54 and number M/10/57 and to give its opinion on the authenticity and reliability of the said source, materials and documents, and whether, in its opinion, the purported transactions in oil are genuine or not.

2. To inquire into the aforesaid information, materials and documents, and any other material or evidence that may be obtained by the Inquiry Authority, and to give its opinion whether the references to Indian entities and individuals

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pertaining to contracts bearing number M/9/54 and number M/10/57 are justified or not.

3. To inquire into the question whether any Indian entity or individual received any money or other consideration from, or paid any money or other consideration to, any Government, agency, company, firm or individual in connection with the purported transactions in oil under the United Nations Oil-For-Food Programme pertaining to contracts bearing number M/9/54 and number M/10/57.

4. To inquire into any other aspect or matter relevant to the Inquiry pertaining to contracts bearing number M/9/54 and number M/10/57.

5. To make any recommendations or suggestions that the Inquiry Authority may consider necessary or proper.

4. Jurisdiction and Powers of the Inquiry Authority

4.1 By another Notification No. S.O. 1593(E) of the same date, the

Central Government acting under section 11 of the Commissions of

Inquiry Act, 1952 declared that certain specified provisions of that

Act would be applicable to the said Authority. They were sub-

section (4) of Section 3, Section 4, sub-sections (2), (3), (4) and (5)

of Section 5, Section 5A, Section 6, Section 9, Section 10 and

Section 10A. Notable among the provisions not included are

Section 8B and Section 8C. Section 8B entitles a person in whose

conduct the Commission considers it necessary to inquire or whose

reputation is likely to be prejudiciously affected by the Inquiry, a

reasonable opportunity of being heard in the Inquiry and to produce

evidence in his defence. Section 8C entitles a person who is referred

to in Section 8B or any other person whose evidence is recorded by

the Commission to cross examine a witness other than the witness

produced by it or him, to address the Commission and to be

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represented before the Commission by legal practitioner or by any

other person.

4.2 The Commissions of Inquiry Act, 1952 embodies a code of

provisions considered necessary for an inquiry conducted by a

Commission under that Act. An Authority set up under an order of

the Government for the purpose of making an inquiry into a definite

matter of public importance may be directed to apply only such of

the provisions of the Act as are made applicable to that Authority.

When the Government selects only some of the provisions of the

Commissions of Inquiry Act, 1952 and not others for application to

the said Authority, it is clear that the Government does not intend

that those other provisions should be applied to the said Authority.

When it was open to the Government to apply Section 8B and

Section 8C of the Act and it does not do so when selecting the

provisions which it considered should constitute the envelope of

power of the said Authority, it may be taken to have deliberately

excluded Section 8B and Section 8C of the Act from application to

the Inquiry before the Authority. Where a provision in the

Notification setting up the Authority empowers it to adopt such

procedure as it considers appropriate during the Inquiry, the

Authority must ensure that the contours of such procedure conform

to the limitations so imposed on it. In this view of the matter, it is

clear that this Inquiry Authority does not enjoy the power to permit

the cross-examination of a witness or representation by legal

practitioner or by any other person.

4.3 As to the status of the findings recorded by the Inquiry

Authority, it may at once be said that this is merely an inquisitorial

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proceeding and not an adversarial proceeding. This is not a trial of a

person accused of an offence or misconduct, where allegations are

made by one party against another. Such a trial entitles the accused

to cross-examine witnesses deposing against him. Such a person

would also be entitled to representation by a legal practitioner or by

other suitable person of his choosing. The inquiry entrusted to this

Inquiry Authority is not in the nature of a trial at all. It is merely an

inquiry into the facts of a particular matter by way of information to

the Government in respect of that matter. Keeping before it this

essential character of the inquiry and its attendant limitations, the

Inquiry Authority must, at the same time, ensure its adherence to the

principle of fairness. In the present Inquiry that was ensured.

Wherever the material on the record appears to affect adversely the

standing, character or reputation of a person appearing before the

Inquiry Authority, such material has been put before him to enable

him to remove any erroneous impressions concerning him. In this

connection, it will be pertinent to note that throughout the present

inquiry, the Inquiry Authority has also insisted on the confidentiality

of the proceedings. Further, to ensure that there is responsibility for

the statements made by persons appearing before the Inquiry

Authority, in all cases the statements, when in written form have

been required to be on affidavit, and when rendered orally have had

to be made on oath.

4.4 Summarising the total impact of the aforesaid considerations,

the Inquiry Authority is of opinion that its findings or observations

contained in this Report cannot be made the basis of a proceeding,

civil or criminal, against a person involved in the inquiry. Nor can

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any person involved in this inquiry claim any rights on the basis of

any finding or observation made in the Report.

5. Legal Assistance:

5.1 A panel of legal consultants was constituted by the Inquiry

Authority to assist it in the conduct of the Inquiry. The following

panel was constituted:

Senior Consultants

Mr. Dipankar P. Gupta, Senior Advocate, Formerly Solicitor

General of India;

Mr. T.R. Andhyarujina, Senior Advocate, Formerly Solicitor

General of India;

Mr. Raju Ramachandran, Senior Advocate, Formerly Additional Solicitor General of India; Mr. Parag Tripathi, Senior Advocate. Junior Consultants: Mr. Pragyan Sharma, Advocate, Supreme Court of India;

Mr. Siddhartha Dave, Advocate, Supreme Court of India;

Mr. Jayant Mehta, Advocate, Supreme Court of India;

Ms. Priyanka Sharma, Advocate, Supreme Court of India.

Of these legal consultants, Mr. Raju Ramachandran was appointed

as Senior Legal Counsel to the Inquiry Authority and Mr. Siddhartha

Dave as Legal Counsel to the Inquiry Authority.

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6. Term of the Inquiry Authority and the reasons for its

extension:

6.1 When my consent was sought by the Government to accept

appointment as Inquiry Authority, I mentioned that I was committed

already for the whole month of February 2006 to function as

President of the Olympic Division of the Court of Arbitration for

Sport for the Winter Olympic Games at Turin, Italy. In these

circumstances, the Government which at first had proposed a period

of 3 months, then considered that a period of 6 months should be

allowed to me as the Inquiry Authority for conducting and

completing the inquiry. However it was not possible to adhere to

this date for the reason that the entire volume of documentary

material pertaining to the Inquiry could not be made available to the

Inquiry Authority for a considerable period.

On December 8, 2005 the Inquiry Authority wrote to the Director of

Enforcement pursuant to Sections 4 and 5 of the Commissions of

Inquiry Act, 1952 as applied to the Inquiry Authority to produce

within a week and deliver all documents, statements, affidavits and

other materials, which had a bearing on, or were related or

connected to, the subject matter of inquiry which were in his

possession or control. In the reply dated December 23, 2006 the

Director of Enforcement stated that the Directorate of Enforcement

was investigating the matter connected with certain transactions

referred to in the Independent Inquiry Committee Report in

accordance with the provisions of FEMA, 1999, and that as the

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investigations were at a very sensitive and critical stage, it would be

possible to hand over copies of the relevant documents only after the

investigation was completed. In regard to the records obtained from

the Independent Inquiry Committee, the Directorate of Enforcement

stated that before copies of these documents could be handed over to

the Inquiry Authority, a waiver in its favour had to be secured from

the Independent Inquiry Committee.

6.3 To secure the permission of the Independent Inquiry Committee

and make the documents already in the possession of the Directorate

of Enforcement available to the Inquiry Authority, proceedings were

taken at the United Nations level in that behalf, and ultimately by

letter dated December 28, 2005 the Directorate of Enforcement was

informed that there was no objection to the Directorate sharing the

Independent Inquiry Committee documents with the Inquiry

Authority.

6.4 On January 3, 2006 the Directorate of Enforcement wrote to

the Inquiry Authority enclosing a copy of the Annexure listing out

the documents which it had received from the Independent Inquiry

Committee and handed over copies of the documents to the Inquiry

Authority.

6.5 Then, in January, 2006, another collection of documents were

sent by the Independent Inquiry Committee to the Directorate of

Enforcement.

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6.6 On January 28, 2006 the Inquiry Authority requested the

Directorate of Enforcement that all documents, records and other

evidence available with the Directorate of Enforcement relating to

Contracts M/9/54 and M/10/57 be made available to the Inquiry

Authority. There was no response from the Directorate of

Enforcement for over two months and on April 3, 2006 the Inquiry

Authority again wrote to the Directorate of Enforcement for the

records, documents and other evidence. The Inquiry Authority

reminded the Directorate that sufficient time had passed and the

Directorate would presumably be in a position to supply the relevant

material emerging out of its investigation to the Inquiry Authority.

This had become imperative because the Inquiry Authority had

decided to commence recording evidence from April 17, 2006

onwards. It also said that a copy of the Inventory prepared by the

UN Legal Affairs Department was required. A copy of the

Inventory was forwarded by the Directorate of Enforcement to the

Inquiry Authority. At the same time, the Directorate of Enforcement

reiterated that in the case of certain transactions where investigation

was said to be still at an extremely critical and sensitive stage, the

documents would be furnished subsequently.

6.7 On May 3, 2006 the Inquiry Authority again requested the

Directorate of Enforcement to make available all the remaining

original documents received by the Directorate from various sources

abroad. On May 17, 2006 a further number of documents was

supplied to the Inquiry Authority.

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6.8 From the above, it is apparent that a significant volume of

documentary material was received from the Directorate of

Enforcement only by the end of the period of 6 months which had

been provided to the Inquiry Authority for conducting and

completing its inquiry. The Government was aware of the

difficulties that faced by the Inquiry Authority in proceeding

effectively with the Inquiry, and of its own it enlarged the period of

6 months by a further period of 3 months ending August 10, 2006.

7. Recording of Evidence:

7.1 At this point, it may be mentioned that a general notice was

published in the newspapers in January 2006 requesting persons to

file statements before the Inquiry Authority in regard to facts known

to them relating to the subject matter of the Inquiry. Some

statements were filed by the end of February 2006, but they were

wholly irrelevant.

7.2 Therefore, individual notices were issued to a number of

persons, and most of them filed their statements. They were called

and then oral statements were recorded in the following order:

Shri Andaleeb Sehgal : May 23, 2006

Shri A.R. Antulay : May 23, 2006

Shri Aditya Khanna : May 24, 2006

Shri Jamil Saidi : May 29, 2006

Shri Vipin Khanna : May 29, 2006

Shri Aneil Mathrani : May 29, 2006

Shri Jagat Singh : May 30, 2006

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Shri Asad Khan : May 30, 2006

Shri K. Natwar Singh : May 31, 2006

Shri Vikas Dhar : May 31, 2006

Shri Moti Lal Vohra : June 1, 2006

Shri P. Shiv Shankar : June 2, 2006

Shri Randip Singh Surjewala : June 2, 2006

8. Meeting of Inquiry Authority deputation with the Chairman,

I.I.C. and Staff:

8.1 After recording the oral statements, it was considered

necessary that clarification on certain points be sought from the

I.I.C. and its staff who were engaged in the preparation of the I.I.C.

Report. Accordingly, Shri Siddartha Dave, counsel to the Inquiry

Authority accompanied by Mrs. S. Pillai, Secretary to the Inquiry

Authority, were deputed to visit New York for that purpose. They

met Mr. Paul Volcker, Chairman of the I.I.C., Ms. Susan Ringler,

Committee Counsel and Mr. Aleksandr N. Shapovalov, Deputy

Counsel to the Committee of the Legal Affairs Department and

sought information on a number of points. Shri Siddartha Dave

interacted with the group and as a result of his queries, valuable data

was provided by the group. A copy of the Report submitted by Shri

Siddartha Dave is annexed hereto as Annexure – C.

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8.2 Thereupon, the Inquiry Authority considered it appropriate to

recall the following persons for further statements:

Shri Andaleeb Sehgal on July 17, 2006

Shri Jagat Singh on July 18, 2006

Shri Aditya Khanna on July 19, 2006

Shri Vikas Dhar on July 19, 2006

8.3 Beyond this, the Inquiry Authority requested and examined the

following persons also:

Shri H.C.S. Dhody

Shri R. Dayakar

Shri Krishna Kumar

Shri K.B.S. Katoch

as their evidence was considered necessary for the purpose of the

Inquiry.

9.0 This part of the Report proposes to examine the events that led

to the execution of the Contracts M/09/54 and M/10/57, which are

the subject matter of this inquiry, and the subsequent transactions

and dealings that took place between various persons and companies

involved either directly or indirectly in the execution of the two

Contracts. It will be necessary to trace the events of the period prior

to 2001, the year in which the said Contracts came to be executed, in

order to properly appreciate the method and manner in which the

said two Contracts were made in favour of M/s. Hamdaan Exports.

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9.1 It will also be necessary to mention here the execution of

another Contract viz. M/09/120 which though executed was not

carried through and the oil barrels under the said Contract were not

lifted. Although it does not strictly fall within the Terms of

Reference of the Inquiry Authority, the reason for mentioning this

Contract and tracing the events leading up to it is that it needs

consideration because it was executed during the time context

relative also to the execution of the Contracts M/09/54 and M/10/57.

It may be observed that Contract No. M/09/120 came to be executed

in the month of May, 2001 and it followed the same pattern as the

two Contracts M/09/54 and M/10/57, thereby establishing and

confirming the modus employed by the concerned players in

obtaining and executing the two Contracts under inquiry.

EVENTS PRIOR TO JANUARY, 2001

9.3 As stated above, it is necessary to trace the events leading up

to the awarding and execution of Contracts M/09/54 and M/10/57.

9.4 In the year 1996-97, Shri Andaleeb Sehgal, a Delhi based

businessman and son of Shri Suman Sehgal, and Shri Aditya Khanna

son of Shri Vipin Khanna, a Non-Resident Indian (NRI), decided to

form a company by the name of INDRUS, as a 50:50 Joint Venture

Company. It was registered in Jersey, the Channel Islands, United

Kingdom to do business in commodities in Russia. The name

INDRUS is derived from India-Russia. In his deposition before the

Inquiry Authority, Shri Aditya Khanna stated that the company was

managed by an administrator, the CI Law Trust, an accounting firm

which also included some lawyers on its Board, while the shares

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were beneficially held in the name of Shri Andaleeb Sehgal and Shri

Aditya Khanna. Although Shri Aditya Khanna stated before the

Inquiry Authority that he would provide the Certificate of

Incorporation, the share holding pattern and the accounts of the

company, he did not do so and subsequently explained that he was

unable to obtain the requisite documents. It may be mentioned at

this point that the CI Law Trust also managed M/s. Hamdaan

Exports Limited, a company involved in the execution of Contracts

M/09/54 and M/10/57. M/s. Hamdaan Exports Limited was

registered in the British Virgin Islands on February 9, 2001, and the

beneficial ownership therein belonged to Shri Andaleeb Sehgal. It is

of interest to note that there was also a Partnership Firm of

substantially the same name, M/s. Hamdaan Exports, with its

address at A-53, Panchsheel Enclave, New Delhi. Its partners were

Shri Andaleeb Sehgal and Shri Vikas Dhar.

9.5 Reference is made to INDRUS here because, as would be seen

in a later Chapter, part of the payments were received by Shri

Andaleeb Sehgal in his bank account in India towards his

commission for the execution of the said two contracts passed from

INDRUS.

9.6 Shri Aditya Khanna deposed that INDRUS managed to do

only one transaction since its incorporation as the trips made by him

and Shri Andleeb Sehgal in its behalf to Russia were largely

unsuccessful Both of them were disillusioned by the venture and

soon lost interest in it. He stated further that about a year or two ago

both of them asked that INDRUS be closed down. There is however

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no documentary material before us to show that anything to that end

has been done so far.

9.7 It may be mentioned here that Shri Andaleeb Sehgal has stated

in his affidavit filed before the Inquiry Authority that INDRUS was

the name of Aditya Khanna’s company in London and that he had

nothing to do with it. Although there is no documentary material

before the Inquiry Authority indicating clearly who were the

beneficial owners of INDRUS, it is relevant to mention that Shri

Andaleeb Sehgal admitted during his examination that he had in fact

done business in Russia on behalf of INDRUS and had even carried

visiting cards of the company as a representative of it and that some

of the correspondence had been addressed to the office of Shri

Andaleeb Sehgal in Delhi. Although Shri Sehgal further stated that

he had never signed any document authorizing any person to “open

INDRUS” on his behalf, he did admit that he held himself out to be

a representative of INDRUS and had in fact tried to do business on

its behalf in Russia. Balancing the evidence on the record, the

Inquiry Authority is satisfied that INDRUS was a company

incorporated for the beneficial ownership of Shri Aditya Khanna and

Shri Andaleeb Sehgal.

9.8 It was while grappling with the failure of the doing business

venture in Russia that, as stated by Shri Aditya Khanna, Shri

Andaleeb Sehgal came to meet a person by the name of Shri Jamil

Saidi, who, as appears from various depositions given before the

Inquiry Authority, was involved in doing business in Iraq. It may be

noted that Shri Jamil Saidi also at one time General Secretary of the

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Youth Wing of the Congress Party in Rajasthan. Though Shri Jamil

Saidi stated before the Inquiry Authority that the nature of his work

was not that of a businessman but more that of an independent

Consultant, but the Inquiry Authority is inclined to believe that the

nature of his work was essentially that of helping Indian companies

to secure opportunities to do business in Iraq.

9.9 From the evidence it seems that Shri Jamil Saidi was well

known to Shri Andaleeb Sehgal. His application dated August 28,

2000 made on an Application Form for Miscellaneous Services on

Indian Passports mentions that he was a businessman and the

address of his place of business as A-53, Panchsheel Enclave, New

Delhi. This address, it will be recalled, is the address of Hamdaan

Exports.

9.10 Shri Andaleeb Sehgal was introduced to Shri Jamil Saidi by

one Shri Asad Khan, who appears to be a common friend, some time

during the years 1999-2000 to explore the possibilities of doing

business in Iraq. They discussed the possibilities of doing business

in wheat, rice, tea, sugar and other commodities through Hamdaan

Exports. Though Shri Saidi stated before the Inquiry Authority that

he advised Shri Sehgal and Shri Asad Khan as a friend and merely

wanted to help them, it appears to the Inquiry Authority that there

may have been some agreement for payment of a commission to

Shri Saidi by Hamdaan Exports for the business that may come its

way.

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9.11 That sometime in the months of October/November 2000,

Shri Jamil Saidi also met Shri Aditya Khanna, who was introduced

to him by Shri Andaleeb Sehgal. The meeting took place in New

Delhi and it was primarily to discuss the possibilities of doing

business in oil in Iraq. Both Shri Sehgal and Shri Khanna were

enthusiastic about doing business in oil in Iraq since it was a new

area and their desire to succeed in that field was strengthened by

their disappointment in the business relating to other commodities.

9.12 Shri Saidi claimed that he had extremely close ties with the

then Iraqi Ambassador to India, whose help he could seek to enable

Hamdaan Exports to participate in the tenders in Iraq. It was in that

context that about the same time he had a meeting with the Iraqi

Ambassador where Shri Sehgal was also present. Though the main

purpose of the said meeting, as stated earlier, was to obtain a letter

of recommendation for Hamdaan Exports, Shri Saidi stated before

the Inquiry Authority that the name of Shri Jagat Singh also came to

be mentioned. Upon being specifically asked as to how the name of

Shri Jagat Singh came to be mentioned at the meeting, Shri Saidi

stated that it was to further their business interests in Iraq by using

the name of Shri Jagat Singh’s father, Shri K. Natwar Singh, who

was a close friend of the then Deputy Prime Minister of Iraq, Shri

Tariq Aziz. This meeting took place sometime before November-

December 2000.

9.13 After the meeting of October/November 2000 at New Delhi,

Shri Aditya Khanna got a call from Shri Sehgal asking him to look

for companies which would be interested in doing business in oil in

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Iraq. This was suggested by a man named, George Curmi, an

independent trade consultant who works with various companies and

resides in London (United Kingdom). According to Shri Aditya

Khanna, Shri Andaleeb Sehgal had on his various visits to Baghdad

obtained information pertaining to doing business in oil in Iraq. One

requirement was to secure the services of a company experienced in

doing business in oil. For this purpose, Shri Sehgal sought the help

of Shri Khanna who in turn contacted George Curmi. Curmi

introduced Shri Khanna to a company by the name of Masefield

located in the United Kingdom. This was sometime in December,

2000 or even some weeks prior to that. According to Shri Khanna’s

testimony it took him about a month’s time or more prior to the

execution of the actual Contract on February 11, 2001, to get

Masefield AG to agree to do business with them for the oil that

could be obtained in Iraq.

9.14 George Curmi introduced Shri Aditya Khanna to a

representative of Masefield by the name of Nick Swan in London.

The three met initially to get to know each other and for Masefield

AG to agree to do business with Shri Khanna. Shri Sehgal was later

introduced by Shri Khanna to both Nick Swan and George Curmi.

9.15 It is clear from what has been stated above that the

opportunity to do business in oil in Iraq had already arisen in the

months of November/December 2000. Initial arrangements with a

foreign company i.e. Masefield AG had now also been made in

London. Though Shri Sehgal in his deposition stated that he only

went about doing what Shri Khanna asked him to do, Shri Khanna

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stated before the Inquiry Authority that his role was a limited one,

namely, to introduce Shri Sehgal to Masefield AG. The truth

appears to be that Shri Sehgal was entrusted with the job of getting

the allocation of oil under the United Nations Oil-For-Food

Programme in Iraq and to prepare the ground work in Iraq in that

behalf, and Shri Khanna was entrusted with the responsibility of

finding a company suitably qualified for actually lifting the oil.

Thus, by the end of December, 2000 and the beginning of January,

2001 the possibility of getting an allocation of oil in Iraq had started

to strengthen, and the necessary ground work for that purpose had

been performed by Shri Khanna and Shri Sehgal. What was now

left was obtaining the actual allocation of oil and the subsequent

lifting of it by a company appropriately qualified to do so.

THE EVENTS UNTIL JANUARY 18, 2001

10.0 It is clear from the above sequence of events that the thought

of doing business in oil in Iraq had already taken concrete shape in

the minds of Shri Aditya Khanna and Shri Andaleeb Sehgal. The

primary reason for thinking about engaging in the oil business in

Iraq was that the other businesses which Shri Andaleeb Sehgal had

attempted to do in Iraq, namely trade in commodities such as wheat,

rice and sugar had not fructified and the business forays in Russia

had not shown sufficiently encouraging success.

10.1 Shri Jamil Saidi had informed Shri Sehgal and Shri Khanna

about the difficulties in doing business in oil in Iraq. Before the

Inquiry Authority he stated that the business in oil in Iraq was

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controlled by the political leadership of the country and only those

persons could manage to do business in oil in Iraq who had some

influential standing with the political leadership of the country. He

stated further that to succeed in doing business in oil in Iraq it was

futile to operate through a local agent; one had to deal directly with

the officials of the Oil Ministry. According to Shri Jamil Saidi,

there was a Committee of five people who were authorized by

President Saddam Hussain at that point of time to allocate oil. They

were the Deputy Prime Minister, the Oil Minister and some other

Ministers by whom or under whose instructions the allocations of oil

were made by the State Oil Marketing Organization (SOMO).

10.2 Therefore, when in the month of January, 2001 Shri

Andaleeb Sehgal with the help of Shri Aditya Khanna and Shri Jamil

Saidi decided to venture into procuring contracts for oil in Iraq, they

faced the difficulty that the contracts of oil from SOMO could be

obtained only if they could invoke the help of someone who enjoyed

some influence with the political leadership of Iraq. At this stage, it

appears that Shri Jagat Singh offered to help in securing the

contracts for oil by using the name or help of his father, Shri Natwar

Singh. It is not clear from the material on the record as to how

exactly did Shri Jagat Singh enter into the picture. It has been stated

before the Inquiry Authority that Shri Jagat Singh and Shri Andaleeb

Sehgal were very close friends. It is probable that Shri Sehgal

sought the help of Shri Jagat Singh and requested him to use the

political influence that his father, Shri Natwar Singh commanded

with the Government in Iraq. The opportunity came when they

learnt that a Congress delegation led by Shri Natwar Singh of the

21

Indian National Congress was leaving for Iraq around the January

18, 2001.

10.3 The delegation of the Indian National Congress Party was to

visit Iraq for the purpose of expressing solidarity with the people of

Iraq. According to Shri Moti Lal Vohra, an invitation had been

received from the Government of Iraq inviting a delegation from the

Indian Congress Party. A note was prepared by the then Secretary

of the External Affairs Department of the Indian National Congress

Party, Shri Aniel Mathrani, about the visit of the delegation to Iraq

and it was approved by the President of the Congress Party. The

delegation first consisted of three persons, Shri Natwar Singh, Shri

A.R. Antulay and Shri Aniel Mathrani and the original date of travel

was January 8, 2001 with the return date as January 12, 2001. For

this purpose, Shri Mathrani requested Shri K.V. Rajan, Secretary

(East), Ministry of External Affairs, New Delhi on January 3, 2001

to assist in the coordination of the visit.

10.4 The original composition of the delegation and even the

departure date was subsequently changed, Mr. P. Shiv Shankar was

added as a member of the delegation and the date of departure was

changed to January 18, 2001 and of return to January 24, 2001.

What was responsible for the change in the composition and the date

of departure is not clear and none of the persons who appeared

before the Inquiry Authority, who were part of the delegation could

throw light on this. It may be mentioned here that when Shri

Natwar Singh was asked about this, his answer was that the question

should be directed to Shri Aneil Mathrani, who was the Secretary in

22

the Foreign Affairs Department of the Congress Party, which

Department he had headed. When the Inquiry Authority asked Shri

Mathrani about this, his reply was that he did not know and that one

should ask Shri Natwar Singh. In fact Shri Mathrani stated that he

did not know Shri Natwar Singh closely. He said this even though

he was Secretary in the very same Foreign Affairs Department. It

appears, however, from the documents before the Inquiry Authority

that it was Shri Mathrani himself who coordinated the entire visit of

the delegation to Iraq. Shri Mathrani, during his deposition before

the Inquiry Authority, did not seem to recall many of the incidents

relating to the visit of the Congress delegation to Iraq and attempted

to distance himself entirely from any effort to closely associate him

with the delegation. This was done despite being shown documents

on which he hd signed. Although he admitted the signatures to be

his, he stated that he did not recall the contents of those documents.

10.5 The visit of the Congress delegation to Iraq was coordinated

by Shri Krishan Kumar, Counsellor, Embassy of India, Amman,

Jordon. The reason for involving the Indian Embassy in Jordon was

that at that particular time the sanctions regime was in place in Iraq

and direct access by air to Iraq was not permissible, and therefore,

anyone wanting to visit Iraq would have had to coordinate with the

Iraqi officials in Amman. It is in this context that the Counsellor at

the Embassy of India, Amman, was asked by Shri Mathrani to make

necessary arrangements for travel from Amman to Baghdad and

back and also to arrange for local transport for the delegation. It was

the Counsellor at the Indian Embassy, Amman who intimated that

the delegation had changed from three persons originally to four and

23

the date of departure had been postponed to January 18. This

information was given around January 9, 2001. The Counsellor

made the necessary travel arrangements for air-travel from Amman

to Baghdad. The Counsellor was examined by the Inquiry Authority

and he testified to the authenticity of the documents before the

Inquiry Authority relating to this aspect of the matter.

10.6 However, the Counsellor wrote on January 17, 2001 to the

Indian Embassy, Baghdad with reference to the visit of the Congress

Party delegation to Iraq and mentioned therein that the delegation

comprised six members. Apart from the four members whose names

were already available, the name of Shri Jagat Singh, son of Shri

Natwar Singh was added to the list of those who would travel to

Baghdad. The name of the sixth member was still not available.

The delegation was booked for its travel from Amman to Baghdad

on Royal Jordanian Flight No. 2718 leaving Amman on Friday,

January 19 at 1615 hrs, arriving Baghdad at 1845 hrs. On the same

day, the Counsellor wrote to the First Secretary, Embassy of the

Republic of Iraq, Amman informing him that the delegation would

consist of six members. The name of the fifth member was Shri

Jagat Singh, while the name of the sixth member was awaited from

New Delhi. He also requested that overnight hotel accommodation

of six single rooms may be booked at the Jordan Intercontinental

Hotel for the night of January 18, 2001 and that two cars be made

available for transfer to and from the Airport.

10.7 The Counsellor also wrote to one Ms. Rajaa, Iraqi Airways,

Amman giving the names of the Congress delegation as stated above

24

and stated that the name of the sixth member of the delegation was

not available and requested that the flight tickets be booked on the

flight mentioned above.

10.8 It is important to note that Shri Jamil Saidi in his deposition

before the Inquiry Authority stated that sometime in early January,

2001, probably a week before the Congress delegation was to depart

for Iraq, Shri Andaleeb Sehgal, Shri Jagat Singh and Shri Asad Khan

requested him for such assistance as he was able to provide them.

They requested that the names of Shri Andaleeb Sehgal and Shri

Jagat Singh be included in the names of the list of the Congress

delegation due to visit Iraq. The Iraqi Ambassador to India told him

that four names had already been received by him and it seemed

difficult to do anything but he gave the assurance that he would look

into the matter. The Ambassador refused to entertain the request

made to include Shri Sehgal’s name on the ground that he was a

private person. Shri Saidi stated that by the time the Ambassador

was to get back to him about including Shri Jagat Singh’s name, the

Ambassador had already been informed by Shri Jagat Singh that he

would be going there as a member of the Youth Congress.

10.9 The issue whether Shri Jagat Singh went to Iraq as a member

of the Youth Congress needs to be dealt with at this stage. Shri

Jagat Singh stated before the Inquiry Authority that at the relevant

time he was one of the General Secretaries of the Indian Youth

Congress. The President of the organization was Shri Randeep

Singh Surjewala. During his deposition before the Inquiry

Authority, Shri Jagat Singh was asked whether he went to Iraq as a

25

member of the Youth Congress on authorization by the Youth

Congress. His answer was in the affirmative. He stated that he had

been authorized by the then President of the Youth Congress Shri

Randeep Singh Surjewala.

10.10 However, the Inquiry Authority called Shri Randeep Singh

Surjewala for examination and asked him whether he had at any

point in time, in particular in January of 2001, authorized Shri Jagat

Singh to go to Iraq as a representative of the Youth Congress. The

answer of Shri Surjewala was in the negative. He stated that at no

point in time had he authorized Shri Jagat Singh to go to Iraq and

that the structure of the Youth Congress does not empower it to take

any decision for meetings outside India, which necessarily have to

be approved by the Parent body i.e., the Indian National Congress.

10.11 Shri Jagat Singh subsequently filed before the Inquiry

Authority a letter purporting to have been signed by Shri Surjewala

claiming it to be the letter authorizing him to visit Iraq. The letter is

dated January 4, 2001. It is not addressed to any particular person.

It is inscribed “To Whom So Ever It May Concern”. It is apparent

however that the letter is to be used in Iraq. As pointed out by Shri

Jagat Singh, the last line in the letter reads:

“……………We also look forward to the day that sanctions against

your great nation are lifted…..”

26

The one country which could have been intended was Iraq. There is

nothing to show that any other country was under a “sanctions”

regime.

10.12 The delegation of the Congress Party traveled from New

Delhi to Amman on January 18, 2001. Traveling along with the

delegation were two other persons, Shri Jagat Singh and Shri

Andaleeb Sehgal. Though Shri Sehgal has stated that he happened

to be in Amman when the delegation arrived, Shri P. Shiv Shanker

has stated that he saw both of them at the airport at New Delhi and

they flew with the delegation in the same flight from New Delhi.

Therefore, the Inquiry Authority is not inclined to believe the

explanation put forward by Shri Sehgal that he had happened to be

in the same hotel at Amman where the delegation was put up. The

assertion of Shri Sehgal is also belied by the fact that on January 17,

2001, the Counsellor at the Indian Embassy in Amman informed his

counter part in the Iraqi Embassy, Amman, that the delegation

consisted of six persons and that six single rooms should be arranged

for their stay. It is further belied by the deposition of Shri P. Shiv

Shanker who stated that Shri Sehgal and Shri Jagat Singh traveled

with them from New Delhi. It is no coincidence also that the

number of days that Shri Sehgal stayed in Amman and Baghdad

were exactly the number of days that the delegation spent in visiting

the two countries. Therefore, the Inquiry Authority finds that Shri

Jagat Singh and Shri Sehgal accompanied the delegation from New

Delhi.

27

Amman-Baghdad: January 18 to 24, 2001

11.0 The above narration clearly shows that six persons, four of

whom were part of the official Congress Delegation, arrived in

Amman on January 18, 2001. The fifth, Shri Sehgal has admitted

that he was in Amman on January 18, 2001.

11.1 The Ambassador of India to Amman at that point of time was

one Shri H.C.S. Dhody. He has been examined. From the

documents available before the Inquiry Authority it appears that a

dinner was arranged at the residence of the Ambassador of India to

Amman where nine persons were mentioned in the list of those

expected to be present. Out of the nine persons four of them were

the official Congress delegates and two were Shri Jagat Singh and

Shri Andaleeb Sehgal. Shri Dhody deposed before the Inquiry

Authority that the names of Shri Jagat Singh and Shri Sehgl were

included in the list of invitees because they were there along with

the members of the Delegation. It may be mentioned here that

when Shri Andaleeb Sehgal was asked about his presence at the

dinner he denied being present there. Shri Dhody, however, stated

that all the persons whose names mentioned in the list of invitees

were present at the dinner. However, it makes little difference to the

main issue in this case as to whether Shri Sehgal dined with the

Indian Ambassador at Amman.

11.2 The official Congress Delegation took a flight to Baghdad on

January 19, 2001 and they were accompanied by Shri Jagat Singh.

28

Shri Andaleeb Sehgal did not board the flight but instead went by

car to Baghdad. Be that as it may, the members on the flight and

Shri Sehgal arrived in Baghdad on January 19, 2001. The official

Congress Delegation had meetings with some Ministers of the Iraqi

Government and attended some functions arranged for them in

Baghdad. It is not clear as to what Shri Jagat Singh and Shri Sehgal

were doing in the initial few days of their time in Baghdad. Shri

Mathrani who was in charge of the visit of the Delegation to

Baghdad did not disclose to the Inquiry Authority, when he appeared

before it, as to what exactly transpired during the visit of the

Delegation to Baghdad. None of the delegates were forthcoming in

their depositions about what transpired and whom they met while in

Iraq. It is surprising that though the delegation was “a high profile

Delegation”, no itinerary had been prepared for the vist of the

Delegation in Iraq. Shri Mathrani, whom one would have expected

to be in charge of this aspect, stated that it was Shri Natwar Singh

who was in charge of the Delegation and it was in fact, Shri Natwar

Singh who knew about the various meetings that were to take place.

The Inquiry Authority asked the several members of the official

Delegation whether any Report of the visit had been submitted upon

their return from Baghdad to the President of the Congress Party.

The replies were either that they did not know or that it could have

been prepared, but they themselves did not prepare any Report. It is

in the absence of any such documentary proof before the Inquiry

Authority and also the fact that no Report, if prepared, was

submitted to the President of the Congress Party that has made the

task of the Inquiry Authority somewhat difficult in ascertaining the

exact nature of the business transacted in Baghdad. The Inquiry

29

Authority is left with no option but to fall back upon the oral

testimony of the six persons who were in Baghdad at the relevant

time and to cull out the truth from their statements.

11.3 Of these six persons who were examined by the Inquiry

Authority, the deposition of Shri P. Shiv Shanker appears to be the

most comprehensive and detailed. Shri Shiv Shanker stated that

while they were in Iraq they met some Ministers including the

Petroleum Minister. But he also stated that it was possible for

individual members of the Congress delegation to meet some of the

Ministers separately.

11.4 The fact that Shri Natwar Singh met the Oil Minister,

Government of Iraq, Dr. Amer Mohammed Rasheed, on January 22,

2001 along with Shri Andaleeb Sehgal is borne out by a letter

written by Shri Natwar Singh himself on January 30, 2001. The said

letter is one of the most crucial pieces of evidence in this

proceeding. It demonstrates that Shri Natwar Singh utilized his

presence in Iraq not merely for the purpose of representing the

Congress Party in a goodwill mission but also took the opportunity

of lending his assistance in the procurement of the oil allocation to

Shri Andaleeb Sehgal who accompanied him on the visit to the Oil

Minister. It is appropriate at this stage to describe and quote the

contents of the letter. The said letter was written on an official

letter-head of the All India Congress Committee with the name of

Shri Natwar Singh shown on the letter head as “Member, Congress

Working Committee” and beneath that “Chairman, Foreign Affairs

Department”. The address given is 24, Akbar Road, New Delhi.

30

The official phone numbers of the All India Congress Committee are

mentioned on the letter head itself and at the bottom of the letter

head the residence phone numbers along with the fax number are

mentioned. The letter reads as follows:

January 30, 2001

Excellency,

I am sending this letter with Mr. Andaleeb Sehgal. He was present when I called on you on January 22, 2001 at your office in Baghdad. He is well known to me for many years and so is the company he owns. He enjoys my full support and confidence, and I would appreciate you giving him your full assistance and cooperation.

May I take this opportunity to thank you for receiving me and giving me so much of your time out of your busy schedule.

I greatly valued our discussions on Indo-Iraq relations and wider issues of importance to both our Parties and countries. The Congress Party greatly values its fraternal links with the Arab Ba’ath Socialist Party. I believe that these links have been further intensified during our stay in Baghdad.

We have returned full of admiration for your stouthearted people.

With regards,

Yours sincerely,

(K. Natwar Singh)

H.E. Dr. Amer Mohammed Rasheed, Minister of Oil Govt. of Iraq Baghdad

31

11.5 Before the Inquiry Authority, Shri Natwar Singh was asked

whether he had called on the Oil Minister during the visit to

Baghdad, to which he answered in the affirmative. He was further

asked whether he alone, without other members of the delegation

being present, met the Oil Minister and he responded: “Yes,

myself”. He stated that the other members of the delegation were

not present because they were busy elsewhere.

When confronted with the aforementioned letter he admitted that

the signatures on the said letter were his. He however stated that he

was not sure about the text of the letter.

The Inquiry Authority is of opinion that the aforementioned letter

was in fact written by Shri Natwar Singh because not only is the

signature on the letter that of Shri Natwar Singh but also the words

“with regards” are written by hand, the handwriting of which Shri

Natwar Singh admitted to be his.

Accordingly, the Inquiry Authority is satisfied both as to the

contents and the form of letter that it was Shri Natwar Singh who

wrote it.

11.6 It is possible that Shri Jagat Singh was also present at the

very said meeting since in a subsequent letter dated April 26, 2001

again addressed to the Minister of Oil, Iraq, written by Shri Natwar

Singh it is stated that Shri Jagat Singh was with Shri Natwar Singh

and Shri Andaleeb Sehgal when they called upon the Iraqi Oil

Minister about three months ago. The aforesaid letter is written on a

32

similar letter head of the All India Congress Committee and is

marked as “personal”. This letter is dealt with subsequently herein

by the Inquiry Authority.

11.7 It is thus evident that a meeting took place with the Iraqi Oil

Minister where Shri Natwar Singh, Shri Jagat Singh and Shri

Andaleeb Sehgal were present. No other members of the delegation

were present at that meeting. What transpired during the said

meeting is not known since none of the three persons mentioned

above have deposed before the Inquiry Authority about the same.

However, it is reasonable to infer that there was some talk about the

allocation of oil since on the very next date i.e. on January 23, 2001,

Shri Jagat Singh and Shri Sehgal, along with Shri Mathrani went to

the building of the State Oil Marketing Organization (SOMO) where

they were explained about how the Iraqi officials in the Ministry of

Oil went about allocating oil to companies under the Oil-for-Food

Programme. This appears from the deposition given by Shri R.

Dayakar who was at that time the Ambassador of India to Iraq. Shri

Dayakar deposed before the Inquiry Authority that there was a call,

while the delegation was visiting Iraq, from the Iraqi Foreign

Ministry asking him to be present at the office of SOMO. When he

went there, Shri Jagat Singh, Shri Aniel Mathrani and Shri Andaleeb

Sehgal were also present there. Shri Dayakar stated further that he

had arranged for an interpreter for the meeting and the conversation

at the meeting took place in Arabic and English. Also present at that

meeting was the Executive Director of SOMO, a person by the name

of Saddam Zibn Hassan. At the meeting the Indian members were

explained the process and procedures to be followed in relation to

33

the United Nations approved Oil-for-Food Programme. Shri

Dayakar went on to state that the officials of SOMO were probably

under the impression that the Congress delegation was an official

delegation since in Iraq at that point of time there was no distinction

between the Government and the political party. More importantly,

Shri Dayakar stated that the Executive Director of SOMO had

mentioned that they had instructions from top officials to receive the

Indian delegation. It was further stated that the SOMO officials

explained to the Indian Members that a company needs to be

registered with the United Nations before it can lift or do business

under the Oil-for-Food Programme.

11.8 It is apparent that the meeting of Shri Natwar Singh with the

Iraqi Oil Minister carried great significance. That can be judged

from the fact that the State Oil Marketing Organization (SOMO)

opened its doors to Shri Jagat Singh and Shri Andaleeb Sehgal the

very next day after the meeting between Shri Natwar Singh and the

Iraqi Oil Minister. It was known at that time that the Iraqi

Government did not deal with any stranger and did not permit any

one apart from the persons who had been approved by them to deal

in the commodity of oil. It is also well known that at that time the

Iraqi Government allocated oil only to those persons or entities that

were perceived as “Iraqi friendly”. Shri Natwar Singh was well

known in international circles and was an influential international

personality as he had been the External Minister of India for many

years. He was also at that time Chairman of the Foreign Affairs

Department of the All India Congress and was a member of the All

India Congress Committee. The Iraqi officials were probably of the

34

belief that Shri Natwar Singh would be able to help their cause in

the international community and his influence would be great

especially as he was a senior member of considerable standing in his

party, the Indian National Congress. There can be no doubt that the

terms in which he recommended the case of Shri Andaleeb Sehgal

would have carried more than significant weight. The letter written

by Shri Natwar Singh as mentioned above on January 30, 2001 and

also a letter written by Shri Andaleeb Sehgal a day after his return

from Baghdad on January 25, 2001 are of arresting interest.

11.9 During the stay of the Indian delegation at Baghdad, the

Indian Ambassador at Iraq hosted a reception for the Indian

delegation where apart from the four members of the official

Congress delegation, Shri Jagat Singh and Shri Andaleeb Sehgal

were also present. At this dinner Shri Jagat Singh introduced Shri

Sehgal to the Ambassador and sought his active assistance and

cooperation to further the business interests of Shri Sehgal in Iraq.

11.10 Upon its return from Baghdad, the Indian Ambassador at

Amman hosted another dinner for the delegation and this dinner,

apart from the members of the delegation, was attended also by Shri

Jagat Singh and Shri Andaleeb Sehgal. The following day all the

persons returned back to India.

35

EVENTS CULMINATING IN THE ALLOCATION OF

CONTRACT NO. M/09/54

12.0 The Congress delegation and Shri Jagat Singh and Shri

Andaleeb Sehgal returned from Amman to India on January 25,

2001. Immediately upon his arrival in India, Shri Sehgal sent a fax

to SOMO wherein he referred to the meeting which was held on

Tuesday, January 23, 2001 in the office of SOMO regarding

allocation of 2 million barrels of crude oil. In the said letter which

was written on the letter head of Hamdaan Exports, a partnership

firm in which Shri Sehgal was a partner, it was stated that Shri

Sehgal would be providing SOMO with the following documents:

1. An authorization letter from the Leader of the Indian delegation

to Shri Andaleeb Sehgal of Hamdaan Exports to lift or negotiate

the allocation with SOMO.

2. A letter of undertaking from Hamdaan Exports confirming that

the amount of 25 cents for Far East or European Ports or 30 cents

for US destination will be paid to SOMO 30 days from the issue

of the Bill of Lading. A bank guarantee to this effect will also be

provided within 10 days of signing the contract.

3. An authorization from Hamdaan Exports to the buyers for lifting

of this quantiy.

12.1 It is clear from the aforesaid that the condition that was

imposed by SOMO during the meeting of January 23, 2001 in

Baghdad was that Shri Sehgal get a letter from the leader of the

36

Indian delegation, namely Shri Natwar Singh. It would have been

only upon Shri Sehgal making available this letter from Shri Natwar

Singh that Hamdaan Exports would be able to negotiate the

allocation of 2 million barrels of crude oil. Thus, it is evident that

during the visit of the Congress delegation, Shri Natwar Singh’s

meeting with the Oil Minister, with Shri Andaleeb Sehgal

accompanying him, played a vital part in the allocation of 2 million

barrels of crude oil to Shri Sehgal. The allocation of two million

barrels of oil was made to Andaleeb Sehgal solely because the Iraqi

Government wanted to oblige Shri Natwar Singh.

12.2 During his deposition before the Inquiry Authority, Shri

Sehgal stated that the officials of SOMO had asked him to obtain

the approval from the Government of India and it is only when he

failed to obtainthat approval tht he obtained an endorsement from

Shri Natwar Singh. It is difficult to accept this. There is no

tangible evidence that Shri Sehgl made any attempt to secure the

approval of the Government of India in order to obtain the

allocation of oil. In fact, on the very day that he returned from his

visit to Amman and Baghdad, Shri Sehgal wrote to SOMO stating

that he would get a letter of authorization from the leader of the

Indian delegation, namely Shri Natwar Singh.

12.3 What is also clear from the letter of January 25, 2001 is that

Hamdaan Exports, upon allocation of the oil, would give a letter of

undertaking wherein it agreed to pay the amounts stated above to

SOMO. Though the letter does not use the words “surcharge”, it is

evident from a plain reading of the letter that it is nothing but an

37

undertaking to pay the surcharge. Thus, it appears that the

question of payment of surcharge had been explained to Shri

Sehgal and the others when they called upon the Oil Minister on

January 22, 2001and during the meeting with SOMO on January

23, 2001.

12.4 One other aspect is clear from the letter itself and that is that

Hamdaan Exports on January 25, 2001 was aware that it would be

authorizing a third party (buyer) for lifting the oil allocated and it

was already in touch with Masefield AG. It is difficult to believe

the claim by Shri Sehgal in his deposition before the Inquiry

Authority that till then he had no idea who the buyer would be.

12.5 Almost simultaneously, Nicholas (Nick) Swan representing

Masefield Ltd., a company located in London, England wrote to

SOMO on January 26, 2001 which letter was sent by telefax to

Baghdad wherein he requested for the issuance of a visa to him.

Interestingly the letter is titled “Invitation to visit SOMO –

Hamdaan Exports Allocation”. It goes on to state as follows:

“……….I refer to the recent visit to your offices and your

meeting with Andaleeb Sehgal in January concerning the

political allocation of two million barrels of Basrah Light Crude

Oil and understand that he intends to return to Baghdad in early

February to sign the contract and would like to accompany him

when he does……..”.

A copy of this letter was marked to Shri Andaleeb Sehgal, Delhi.

38

12.6 It is evident from a bare reading of this letter that Masefield

Ltd. was already in the picture when the delegation headed by

Shri Natwar Singh and accompanied by Shri Jagat Singh and

Shri Sehgal visited Iraq. It would not have been possible for Mr.

Sehgal to come across Masefield only within a day of his return

from Baghdad. The letter confirms that there was a meeting in

January, 2001 in the offices of SOMO in Baghdad and that the

allocation made was a “political allocation”.

12.7 Next in the sequences of events is the letter written by Shri

Natwar Singh on the letter head of the All India Congress

Committee dated Janaury 30, 2001. The significance of the letter

now becomes clearer. It was given as an approval of Shri

Andaleeb Sehgal, as was desired by the officials in the Oil

Ministry in Iraq and as mentioned by Shri Sehgal in his letter of

January 25, 2001. This letter of January 30, 2001 has already

been analyzed in the preceding chapters and is not being repeated

here. What is important, however, is to state that the letter of

January 30, 2001 stresses that Shri Sehgal is well known to Shri

Natwar Singh for many years and so is the company he owns,

and that Shri Sehgal enjoyed Shri Natwar Singh’s full support

and confidence. In language which is forthright, he said that he

would appreciate the Oil Minister giving Shri Sehgal his full

assistance and cooperation.

12.8 Another aspect which is important is that the letter does not

speak of whether it was for a personal or official use. But Shri

39

Moti Lal Vora, when examined by the Inquiry Authority in his

capacity as a Treasurer of the Indian National Congress,

characterized the letter as a letter for a personal purpose. When

Shri Natwar Singh goes on to state about the Congress Party and

how it greatly values the fraternal links with the Arab Ba’ath

Socialist Party and that these links have been further intensified

during their stay in Baghdad, it is apparent that Shri Natwar

Singh tried to project himself as speaking for the entire Congress

Party while in fact he was addressing a personal request to the

Iraqi Government.

12.9 Shri Sehgal during his deposition before the Inquiry

Authority admitted to having received the letter from Shri

Natwar Singh and further that he carried it with him to Iraq when

he visited Iraq around February 8, 2001 and handed over the

letter to the officials at SOMO.

12.10 On February 3, 2001, Shri Andaleeb Sehgal addressed a

letter to the officer-in-charge at the Permanent Mission of India

at the United Nations, New York wherein he stated that he had

been “granted” an allocation of crude oil under the United

Nations Oil-for-Food Programme and that he would be obliged if

the Mission would help, as a matter of urgency, in submitting his

application for accreditation to the United Nations Oil Overseers.

In this letter the name mentioned of the contract person was Mr.

Nick Swan. It will be recalled that Nick Swan was the

representative of Masefield Limited. Prior to this letter Shri

Sehgal had received a fax from one George Curmi, with a copy

40

marked to “AK2” informing Hamdaan as to whom the

application of Hamdaan was to be submitted. The letter of

George Curmi was sent from two fax numbers mentioned on it,

and Shri Sehgal during his deposition informed the Inquiry

Authority that one of these was the fax number of Shri Aditya

Khanna and that the reference to AK2 stood for Aditya Khanna.

12.11 Shri Sehgal stated that George Curmi was actually

working for Shri Aditya Khanna in London and was using his

office as well. This was denied by Shri Khanna but he admitted

that one of the fax numbers on the letter was his. It seems to the

Inquiry Authority that George Curmi was a person carrying on

the business of a consultant but more as a liaison acting between

two entities for a commission payable to him. Shri Khanna has

stated before the Inquiry Authority that George Curmi had been

introduced to Shri Sehgal by him and in fact it was this George

Curmi who had located Masefield Limited for doing business

with Hamdaan Exports. The Inquiry Authority is of the opinion

after perusal of the records that George Curmi was described as

an independent consultant and was paid by Masefield a sum of

USD 9,000/-. It may be of interest to note that both Shri Khanna

and Shri Sehgal claimed that George Curmi was closer to the

other. Be that as it may George Curmi did play the role of a

liaison man in this entire transaction between Hamdaan Exports

and Masefield Limited.

12.12 Coming back to the sequence of events, SOMO wrote to

the Iraqi Embassy in London asking them to issue a visa in

41

favour of Mr. Nick Swan so as to enable him to visit Baghdad.

SOMO also wrote to the Iraqi Embassy at New Delhi on

February 1, 2001 asking it likewise to issue a visa to Shri Sehgal.

On February 5, 2001 Shri Andaleeb Sehgal wrote to the then

Ambassador of India at Amman stating that he was intending to

travel to Baghdad from Amman. Since he was unclear as to how

to go about this procedure he sought the help of the Indian

Ambassador. Accordingly he was informed by the Indian

Embassy at Amman about the difficulties in traveling by air to

Baghdad and that the road was the best way to travel.

12.13 Shri Sehgal and Nick Swan arrived in Baghdad on

February 9, 2001. It is not clear whether they were accompanied

by any other person of significance.

12.14 While in Baghdad, a letter was given by Masefield AG

addressed to Shri Andaleeb Sehgal dated February 9, 2001 with

the caption “Payment For An Allocation Of Crude Oil Under

The UN Oil for Food Programme”. In this letter it was stated by

Nick Swan that Hamdaan Exports had been allocated 2 million

barrels of Basrah Light and confirmed that Masefield would

accept full legal assignment of the allocation from Hamdaan. It

went on to state that Masefield would attend SOMO’s offices

with Shri Sehgal and sign a contract on behalf of Hamdaan.

According to the letter, a total fee of USD 0.30 (30 cents) per

barrel would be paid to Hamdaan. Out of this, 3 cents per barrel

would be paid promptly upon signing of the contract. Masefield

would also open a bank guarantee to a nominee bank of

42

Hamdaan Exports for a further 22 cents per barrel in 30 days

before the anticipated bill of lading date. Masefield would pay a

further 5 cents per barrel to a bank of Hamdann’s choice.

12.15 The need for assignment of the contract by Hamdaan in

favour of Masefield AG, a company registered in Switzerland

and owned by Masefield Limited of England, arose because

under the UN Oil-for-Food Programme only companies

approved by the United Nations or accredited with it were

allowed to lift the Iraqi oil. Masefield AG was such a company.

Since Hamdaan Exports was not registered with the United

Nations nor was it approved by the United Nations, it would not

have been possible for Hamdaan Exports to actually lift the oil.

Every contract entered into between a company and SOMO for

the sale of oil had to be approved subsequently by the United

Nations and only such of the contracts were approved as were in

favour of UN approved companies. Thus, even though the

allotment initially was in favour of Hamdaan Exports it would

have to be assigned by it to Masefield, which then would enter

into the contract with SOMO.

12.16 The letter of Masefield AG of February 9, 2001 showed

that the prevalent rate of surcharge that was payable per barrel of

oil was 25 cents. Thus out of the 30 cents of fee paid by

Masefield to Hamdaan, 25 cents of that would go towards

payment of surcharge to SOMO and the share of Hamdaan

would be 5 cents per barrel of oil. Shri Aditya Khanna, during

the course of his deposition before the Inquiry Authority, stated

43

that his share out of the five cents per barrel of oil was one cent

while four cents were to be retained by Hamdaan Exports.

Although, as is stated in the later part of this Report dealing with

financial transactions, there is no written agreement that has

come before the Inquiry Authority to prove this fact, yet a

perusal of the accounts of Hamdaan and INDRUS, shows the

likelihood of such an agreement or arrangement having been

entered between the said parties.

12.17 It may be mentioned that probably on the advice of Mr.

George Curmi and Mr. Nick Swan, Shri Sehgal decided to create

another company by the name of Hamdaan Exports Limited, a

company to be incorporated in the British Virgin Islands.

Various documents have been located relating to the

incorporation of Hamdaan Exports Limited, including a

Certificate of Incorporation issued by the Registrar of Companies

in the Territory of the British Virgin Islands under the

International Business Companies Act. The number on the

certificate is 431599. The company was managed by the same

C.I. Law Trust Group Limited (Channel Islands Law Trust

Group Limited) which, as has been noted earlier, was also

associated with the company of Shri Khanna and Shri Sehgal

called INDRUS. The shares of Hamdaan Exports Limited were

held by this C.I. Law Trust Group Limited and the beneficial

owner was Shri Andaleeb Sehgal.

12.18 When confronted with the sets of documents relating to

Hamdaan Exports Limited, Shri Sehgal denied any knowledge of

44

them and stated that he was unaware of the registration of any

such company in his name. However, when Shri Khanna was

asked about these documents and the registration of Hamdaan

Exports Limited he stated that Shri Sehgal did have a company

which was registered as an offshore company and affirmed that

the Certificate of Incorporation was a true copy of a genuine

Certificate of Incorporation of a company in the British Virgin

Islands. Shri Khanna was able to depose this because, as he had

stated before the Inquiry Authority, he had already incorporated

an offshore company and was familiar with these procedures by

reason of his experience in international business and trade.

12.19 The set of documents relied on by the Inquiry Authority

relating to Hamdaan Exports Limited has been obtained through

the Ministry of Foreign Affairs, the Hashemite Kingdom of

Jordan, Amman which has in turn obtained them from the Jordan

National Bank. The documents were available with the Jordan

National Bank, Cyprus because Shri Andaleeb Sehgal opened

two bank accounts with the Jordan National Bank, Cyprus, one

being Account No. 12367 in the name of Hamdaan Exports

Limited and the other being Account No. 12349 in the name of

Shri Andaleeb Sehgal. The Jordan National Bank has sent to the

Inquiry Authority the applications for opening two current

accounts. Both were signed by Shri Andaleeb Sehgal. Shri

Sehgal was asked about these documents, and he answered that

he did not remember having opened any bank account in Cyprus

as he had never traveled to Cyprus. Strangely, however, he did

admit that the signatures on the said two documents i.e. the

45

account opening forms as his. In the circumstances, the Inquiry

Authority takes the view that Shri Sehgal did as a matter of fact

open the said two bank accounts.

12.20 That view is confirmed by the circumstance that Shri

Sehgal wrote various letters to the concerned officials of the

Jordan National Bank, Cyprus in which references have been

made to the said two accounts in relation to transactions of

money leading to a credit or a debit in one or the other of the two

accounts. These letters bear the signatures of Shri Sehgal. It

may be pointed out here that these two accounts were the

accounts which Shri Sehgal used and operated to receive the

payment of commission which Masefield paid to Hamdaan

Exports Limited as its share in the transactions relating to the two

contracts under inquiry.

12.21 While the said three persons were in Baghdad, they visited

the offices of SOMO to enter into and execute the Contract

M/09/54 for two million barrels of oil. The said Contract was

entered into on February 11, 2001 between SOMO and

Masefield, which was represented by Nick Swan. Prior to this,

Shri Andaleeb Sehgal representing Hamdaan Exports executed a

Deed of Assignment in favour of Masefield AG in respect of the

allocation by SOMO of 2 million of barrels of Iraqi crude oil.

The said Assignment was signed by Shri Andaleeb Sehgal and

Mr. Nick Swan. The Assignment referred to a letter dated

February 9, 2001 wherein the assignee agreed to pay the assignor

a fee for the assignment of the sale contract to the assignee.

46

12.22 However, the obligation to pay the surcharge to SOMO

for the said allotment of two million barrels of Iraqi oil remained

with Hamdaan Exports. This was not assigned to Masefield AG

under the Deed of Assignment. In fact Shri Andaleeb Sehgal

gave an undertaking addressed to Mr. Saddam Z. Hassan,

Executive Director General, SOMO on February 11, 2001,

wherein he agreed to issue a bank guarantee for the payment of

the surcharge for the quantity of two million barrels, which bank

guarantee would be submitted to SOMO 10 days prior to the date

of each lifting. The letter further stated that Hamdaan Exports

undertook to pay to an account nominated in that behalf by

SOMO, the surcharge in the amount of 0.25 USD per barrel of

oil net loaded for Europe and Far East destinations and 0.30 USD

per barrel of oil loaded for US destinations. This payment had to

be done within 30 days from the receipt of the Bill of Lading.

The letter further stated that payment of 10% of the total

surcharge was to be paid to the nominated account prior to

sending the contract for approval.

12.23 Thus it is clear from the above that although the oil under

the contract was assigned to Masefield AG, which ultimately

signed the Contract M/09/54, the obligation to pay the surcharge

remained with Hamdaan. This would be so because SOMO had

no direct relationship with Masefield AG. The allocation

according to their practice, had been made to Hamdaan Exports

and it was a political allocation. Therefore, since the allocation

as per SOMO’s record had been made to Hamdaan Exports the

47

obligation to pay the surcharge remained with Hamdaan Exports.

SOMO was not concerned with Masefield AG, which may or

may not lift the oil. According to Shri Sehgal, he had assigned

the entire bundle of rights and obligations under the contract to

Masefield AG. However, he was unable to point to any

provision in the Deed of Assignment obliging the assignee to pay

the surcharge. The document dated February 11, 2001

undertaking to pay the surcharge bore his signature – that was

admitted by him. It may be stated that there is material to show

that as a matter of fact Hamdaan Exports did pay a surcharge for

the amount of oil lifted under this Contract to SOMO from the

bank accounts maintained in the Jordan National Bank, Cyprus.

Therefore, the case adopted by Shri Sehgal that he was under no

obligation to pay the surcharge is not acceptable.

12.24 Once the Contract was entered into, it was the practice of

SOMO to send to the Oil Minister, Iraq a letter seeking the

latter’s approval for the contract entered into. In this case also a

letter was written by Saddam Z. Hassan to the Oil Minister, Iraq

wherein approval was sought for Contract No. M/09/54. The

letter at serial number 3 mentioned:-

“Name of Purchasing Company: Swiss (in English Masefield AG) for Natwar Singh, Member of the Indian Congress Party”. The said letter was written in Arabic, However the words

Masefield AG were written in English. The approval of the

Minister was obtained on February 15, 2001.

48

10.25 It was only after the Minister had approved it that the

contract was, thereafter, sent to the United Nations for their

approval, which in the present case was granted.

10.26 It seems from the letter written by the Executive Director

of SOMO that in the eyes of the Iraqi authorities the intended

beneficiary of the contract was Shri Natwar Singh of the Indian

Congress Party. Had Shri Natwar Singh not met the Iraqi Oil

Minister on January 22, 2001, when he visited Baghdad, there

would have been practically no possibility of Hamdaan Exports

obtaining the contract. These allocations were political

allocations for which the primary consideration was that the

person at whose behest the contract was being allocated was

friendly to the people of Iraq and sympathetic to their cause.

This letter was put to Shri Natwar Singh when he was examined

by the Inquiry Authority. He did not offer any explanation as to

how his name came to be mentioned in the letter of the Executive

Director, SOMO to the Oil Minister, Iraq. All these

considerations taken together indicate why Shri Natwar Singh

was described by the I.I.C as a Non-Contractual Beneficiary and

suggest the perspective in which he was so regarded by the Iraqi

authorities.

PAYMENTS AND LIFTING OF OIL UNDER CONTRACT

M/09/54

13.0 After the execution of Contract No. M/09/54 and its

assignment to Masefield AG, Shri Andaleeb Sehgal returned

49

from Baghdad to India. While in India he continued to take

active interest in obtaining the approval of the contract from the

United Nations and, accordingly, he kept in close touch with the

officials of SOMO besides Mr. Nick Swan and Mr. George

Curmi. In that connection, he wrote to SOMO on March 2, 2001

and announced that he had fulfilled condition No. 3 of the letter

of February 11, 2001 which required that 10% of the total

surcharge was to be paid into a nominated account of SOMO

prior to sending the Contract for approval.

13.1 In his letter of February 27, 2001, Shri Sehgal wrote to one

Mr. Joseph Bitar of the Jordan National Bank, Cyprus stating

that an amount of USD 62,000 would be credited in the Account

No. 12349 in the name of Shri Andaleeb Sehgal by Masefield

and that on receipt of the said amount a sum of USD 60,000 was

to be transferred to the Jordan National Bank, Amman to the

credit of Account No. 500320/02, and Mrs. Nawzat A. Al Qudsi

informed accordingly. The account number referred last was in

the names of Saddam Z. Hassan and Ibrahim Ali Shaiyeb of

SOMO. Information of this transfer was to be given by the Bank

to one Mrs. Nawzat A. Al Qudsi. It is not clear as to who this

Mrs. Nawzat A. Al Qudsi was and there is no evidence in regard

to her identity.

13.2 It may be mentioned here that the procedure for receiving

the surcharge has been dealt with at length in the Report of the

I.I.C under the Chairmanship of Mr. Paul Volcker investigating

into the manipulations in the Oil-for-Food Programme. It is not

50

necessary to repeat the details here as the said Report is widely

available to all.

13.3 Reverting to the letter written by Shri Sehgal on February

22, 2001 to the Jordan National Bank, Cyprus, it will be noted

that the said letter is under the signature of Shri Sehgal and that

has been verified by the bank. Pursuant to this letter, an amount

of USD 61,969 was transferred by a SWIFT MESSAGE from

the Chase Manhattan Bank, New York, USA. The said transfer

was made on the instructions of BNP Paribas, Paris at the

instance of Masefield AG which was the ordering customer. The

beneficiary of this transfer was Shri Andaleeb Sehgal. Upon

receipt of the money in the bank account of Shri Sehgal in the

Jordan National Bank, Cyprus an amount of USD 60,000 was

deducted and transferred to the bank account referred to above in

Amman.

13.4 While treating with the payment of surcharge under

Contract No. M/09/54 it may be mentioned that on May 10,

2001, Shri Andaleeb Sehgal wrote on the letter head of Hamdaan

Exports Limited, British Virgin Islands to Masefield giving the

details of the outstanding surcharge payable to SOMO.

According to this letter a total sum of USD 498,973 was due.

Out of this an amount of USD 60,000, referred to above, had

already been paid. The balance due was USD 438,973. The

letter, however, stated that a further five cents per barrel was

separately due in favour of the INDRUS Trading Company

Limited and would be invoiced for value on May 29, 2001.

51

13.5 Shri Sehgal received into the account of Hamdaan Exports

bearing Account No. 12367 with the Jordan National Bank,

Cyprus, an amount of USD 438,973 on May 15, 2001 from

Masefield AG through their bank, the Chase Manhattan Bank,

New York, USA. This amount, like the amount of USD 60,000

discussed above was further transferred on May 27, 2001 into

Account No. 500320/02 mentioned above held in the name of the

officials of SOMO. Thus the total amount of surcharge paid to

the officials of SOMO under the Contract No. M/09/54 was USD

498,518.

13.6 The oil under this Contract was lifted on two dates namely

April 17, 2001 when 300,000 barrels of oil were lifted by the

vessel M T Hellspont Orpheum and on April 30, 2001 when

1,635,892 barrels of oil were lifted by the vessel M T Arcadian.

13.7 The oil under this Contract was not lifted by Masefield AG

but by a company by the name of M/s. Vitol SA who had entered

into a contract with it sometime in March, 2001 for a price of

USD 0.36 per barrel over and above the price fixed by the UN.

Out of this, Vitol SA assigned 1,700,000 barrels of oil to Vitol

Asia Private Limited (Vitol Asia) who lifted 1,635,892 barrel of

oil. Against the invoice dated May 11, 2001 raised by Masefield,

Vitol Asia paid an amount of USD 588,921.12 on the lifted

quantity of 1,635,892 barrels of oil at 36 cents per barrel. The

balance of 3,00,000 barrels of crude oil was lifted by Vitol at a

52

premium of 41 cents per barrel over and above the official selling

price fixed by the United Nations. Vitol Asia paid a premium of

USD 1,23,000 against invoice dated April 20, 2001 of M/s.

Masefield AG into Masefield’s account at Societe General, Paris.

13.8 The oil under the contract M/09/54 was for the destination

to the United States of America and / or Far East. This was

approved by the letter of the UN Overseer to Masefield dated

March 30, 2001. It will be recalled that there was a difference in

the rates 30 cents per barrel for supply to the USA and 25 cents

per barrel for supply to the Far East.

13.9 For the share of five cents per barrel of oil which was the

agreed commission payable to Hamdaan Exports Limited by

Masefield at the time of assigning the contract, an amount of

USD 96,785.99 was transferred by Masefield AG into the

account of INDRUS on June 6, 2001. The said money was paid

into the account of INDRUS Trading Company Limited, Jersey

in its account with Barclays Bank PLC, 13 Library Place, Jersey,

Channel Islands in Account No. 73427968. Of this amount an

amount of USD 7,000 was paid to Sehgal Consultants on June

11, 2001 into a Bank Account in India. A further sum of USD

89,000 was transferred to a company by the name of Coburg

Associate. On June 29, 2001, Coburg Associate transferred into

the bank account of Hamdaan Exports, New Delhi a sum of USD

40,000. The account of Sehgal Consultants to which the transfer

was made in the first instance is located in the Standard

Chartered Grindlays Bank, Greater Kailash, Part-I, and the

53

Account No. is 26329887. The details of the Bank Account of

Hamdaan Exports to which a transfer of USD 40,000 was made

by Coburg Associate SA through their bank Lloyds TSB,

London, is the State Bank of India, New Delhi branch bearing

Account No. 01000561249. Thus an amount of USD 47,000 was

received by Hamdaan Exports as the commission payable to it

for the execution of the Contract M/09/54.

13.10 In this regard it may be mentioned that George E. Curmi

raised an invoice of USD 9,679.46 in relation to Contract No.

M/09/54 at the agreed rate of US cents 0.5/bbl on a total quantity

of 1,935,892 barrels of oil. This invoice was dated May 22, 2001

and was raised on Masefield AG. Masefield, on its part,

authorized the payment to George Curmi on June 1, 2001 in

Pounds Sterling and authorized a sum of GBP 6,826.14 to be

paid as broker’s commission. Thus for his role in the negotiation

of Contract No. M/09/54, George Curmi received a sum

equivalent to USD 9,679.46.

CONTRACT No. M/9/120

14.0 At the time when Contract No. M/09/54 was being

implemented, Shri Andaleeb Sehgal wrote to SOMO on April 3,

2001 stating therein that Condition No. 2 of the letter dated

February 11, 2001 (referred to above) was in the process of

getting implemented and that he along with Shri Jagat Singh of

the Congress Party of India would like to visit Baghdad and

personally thank all the SOMO personnel concerned with the

54

Contract. The letter further stated that the two would like to

discuss the possibilities of roll-over quantities to be allocated to

them after successful lifting of the first tranche. For this purpose

he requested SOMO to give Visa support in his favour and for

Shri Jagat Singh of the Congress Party of India.

14.1 On April 13, 2001 Shri Andaleeb Sehgal once again wrote

to SOMO stating therein that Condition No. 2 of the letter dated

February 11, 2001 had been fulfilled and that all the conditions

of the letter dated February 11, 2001 stood satisfied.

14.2 On April 18, 2001, Masefield wrote to the Executive

Director General of SOMO giving authority to Shri Andaleeb

Sehgal to sign for a contract of crude oil under the UN Oil-for-

Food Programme. The authority was valid until May 14, 2001.

14.3 It appears that after the execution of the contract and during

the successful lifting of oil under Contract No. M/09/54,

negotiations had been held between Masefield and Shri Sehgal

for obtaining another contract from SOMO for the allocation of

oil. In this, it seems that Shri Jagat Singh also joined. The

modus followed was similar to the one followed in the earlier

contract. It is possible that in view of the success of the parties

in obtaining and lifting oil, and the payment of the surcharges to

the officials of SOMO, they decided to continue obtaining

contracts of oil from SOMO. To this end, a letter of authority

was given by Masefield in favour of Shri Andaleeb Sehgal to

negotiate, execute, deliver and sign a contract for and on behalf

55

of Masefield AG. It needs to be mentioned here that though the

letter of authority is issued by Masefield, it would not have

obtained an allocation of oil had Shri Andaleeb Sehgal not been

involved in the procedure since the officials of SOMO were to

allocate oil only to Hamdaan Exports, a company which had the

confidence of Shri Natwar Singh when he had recommended the

same to the Minister of Oil, Iraq during his visit there in January,

2001.

14.4 The preparations for the visit of Shri Jagat Singh and Shri

Andaleeb Sehgal to visit Iraq during the month of April-May,

2001 started to fructify sometime around the middle of April

2001. A letter was issued by Shri Natwar Singh on the letter-

head of the All India Congress Committee on April 26, 2001.

The letter is addressed, like the previous one, to the Minister of

Oil, Iraq. The letter reads as follows:

“Excellency,

I am sending this letter with my son K. Jagat Singh who is

General Secretary of the Youth Wing of the Congress Party. He

and his cousin Andaleeb Sehgal were with me when I called on

you about three months ago. Jagat and his cousin will tell you

how much I have appreciated your help and cooperation which I

hope will continue.

56

With warm regards and greetings on the occasion of the

birthday of H.E., The President of Iraq.

Yours sincerely, Sd/- (K. Natwar Singh)

H.E. Dr. Amer Rasheed Minister of Oil Iraq”

14.5 Attached to this letter of Shri Natwar Singh was a

resolution on the letter-head of the Indian Youth Congress

bearing the name K. Jagat Singh, General Secretary. The

resolution was an extract from “Foreign Policy Resolution

Concerning the Middle East.” Also mentioned on the letter was

“All India Congress Committee Plenary Session, Bangalore – 14-

15 March, 2001. The essence of the extract was that the

Congress Party supported Iraq and Palestine in their struggle in

the Middle East. It stated that, “the Indian National Congress

supported the Government’s bilateral attempts to restore whole-

some relationship of India with Iraq……… The Congress Party

unequivocally calls for termination of sanctions.” The letter

further mentioned the visit of the Congress Party delegation to

Iraq and that it was fortunate to interact closely with the Iraqi

leadership and receive warm gestures of friendship from the

people of Iraq.

57

14.6 It is clear that this was an attempt to show to the officials of

Iraq that the policies of the Indian Congress were “Iraqi friendly”

and Shri Natwar Singh and Shri Jagat Singh enjoyed a

significant standing in an important political party, which was

well-known in the world, and which was ardently friendly and

sympathetic to the cause of the Iraqi Government, party and

people, and was actively involved in their support.

When asked about this letter, Shri Natwar Singh admitted his

signature on it but stated that he did not remember at any point of

time having written this letter. He also pointed out that in the

letter Shri Andaleeb Sehgal is wrongly referred to as “cousin” of

Jagat Singh, which in fact he is not. Be that as it may, once Shri

Natwar Singh admits the signature on the letter to be his, there

can be no doubt that he was the author of the letter. The letter

was carried by Shri Jagat Singh personally when he visited Iraq

between April 29, 2001 to May 4, 2001. Even Shri Andaleeb

Sehgal visited Iraq at the same time alongwith Shri Jagat Singh.

The copy of the letter clearly shows in Arabic that it was

received by the concerned officials in Iraq.

14.7 Shri Jagat Singh and Shri Andaleeb Sehgal were asked

about this letter and they both denied possessing any knowledge

about it. In fact, Shri Jagat Singh stated he did not travel with

Shri Sehgal and that he had gone for a separate and independent

purpose to Iraq which was a political purpose, namely to attend a

Conference. Shri Andaleeb Sehgal stated that he had gone to

Iraq quite independently to further his business interests in

58

various commodities and that he did not meet Shri Jagat Singh

while he was there.

14.8 A crucial piece of evidence which speaks about the visit of

Shri Sehgal and Shri Jagat Singh to Baghdad in connection with

oil is a letter dated May 5, 2001 written by Shri Andaleeb Sehgal

on behalf of Hamdaan Exports to the Executive Director

General, SOMO. The subject matter of the said letter is two

million barrels Basrah Light. The letter states that Shri Sehgal

would like to thank all persons concerned for the cooperation

during the recent visit to Baghdad and then states as follows:

“This refers to our meeting with His Excellency Dr. Ameer

Mohd. Rasheed (Honourable Minister of Oil) where we were

allocated two million barrels Basrah Light. As decided in your

offices on Thursday the 3rd May, in the presence of Mr. Jagat

Singh of the Congress Party, we await by fax a copy of the

contract by Monday/Tuesday next week.”

14.9 The aforesaid letter clearly states that a meeting was held in

the offices of the Iraqi Oil Minister where Shri Jagat Singh of the

Congress Party was also present. In the said meeting a decision

was taken by the Iraqi Oil Minister to allocate two million barrels

of oil to Hamdaan Exports. It is thus clear that the letter speaks

not only about the meeting but also about the presence of Shri

Jagat Singh with the particular emphasis that he belonged to the

Congress Party. It is evident that the making of the allocation

was influenced by Shri Natwar Singh’s letter to the Iraqi Oil

59

Minister to which letter an extract was appended of a resolution

of the Congress Party at its Plenary Session.

14.10 The fact that Shri Jagat Singh and Shri Andaleeb Sehgal

traveled together to Iraq is testified by Shri H.C.S. Dhody, the

then Ambassador of India to Amman. Shri Dhody stated before

the Inquiry Authority that he recalled that sometime in April end-

early May 2001, Shri Jagat Singh accompanied by Shri Andaleeb

Sehgal had called upon him at his residence in Amman and

sought his help to enable them to travel to Baghdad. Shri Dhody

further stated that he extended all the necessary help to them to

travel to Baghdad but did not hear from the two again.

14.11 The other material to show that the visit of Shri Jagat

Singh and Shri Sehgal was for the purpose of obtaining oil, is a

letter written by Mr. Nick Swan of Masefield Ltd. The letter was

written on June 4, 2001 to SOMO and it refers to the meeting

Shri Sehgal had with the officials of SOMO in May concerning

the “Political allocation” of two million barrels of Basrah Light

Crude Oil. The letter went on to say that Shri Sehgal would be

visiting again soon and would like Nick Swan to accompany him

with particular reference to Contract No. M/09/120.

14.12 The Inquiry Authority is conscious of the fact that

Contract No. M/09/120 does not fall within the scope of its

Terms of Reference. The reason why the aforesaid Contract has

been treated in detail here is to demonstrate that there was a

ready and constant willingness in Shri Natwar Singh to provide

60

such support as he could to the efforts of Shri Jagat Singh and

Shri Andaleeb Sehgal to obtain allocations of oil from the Iraqi

Oil Minister and SOMO.

14.13 Another reason for dealing with Contract M/09/120 is to

close the gap between Contract No. M/09/54 and M/10/57 and

with Contract M/09/120 in between to demonstrate the existence

of a continuity of interest of modus and of interaction with Iraqi

authorities between M/09/54 and M/10/57.

14.14 The close support which Shri Natwar Singh provided to

Shri Jagat Singh and Shri Sehgal provided an impression in the

minds of the Iraqi authorities that it was Shri Natwar Singh who

was the principal actor in the entire project. That impression

appears clearly in the letter dated May 9, 2001 written by the

Executive Director, SOMO to the Oil Minister in which a

reference has been made to two million barrels of oil having been

allocated to Masefied in favour of Shri Natwar Singh of the

Congress Party. The part played by Shri Natwar Singh may have

been more limited in fact, that of a facilitator, but the Iraqi

authorities saw no such limitation.

14.15 Reverting to the actual events on the ground, it may be

mentioned that Shri Andaleeb Sehgal wrote to SOMO on May

31, 2001 in connection with Contract No. M/09/120 and stated

that they were ready to fulfill the initial conditions under the new

contract as per the nominated procedures and structures detailed

in Baghdad. For this purpose he requested for Visa support not

61

only in his favour but also in favour of Shri Jagat Singh and one

Shri Mohd. Asad Khan. The proposed dates of visit were June 7

to June 15, 2001. Once again he wrote that they would want to

personally thank the SOMO personnel and discuss possibilities

of other future contracts.

14.16 It is in this connection that the letter dated June 4, 2001

was written by Masefield to SOMO in which reference had been

made to the visit of Shri Andaleeb Sehgal to Baghdad. This

letter had already been dealt with above.

14.17 For the execution of this contract bearing No. M/09/120 a

Deed of Assignment was entered into on May 2, 2001 between

Hamdaan Exports Limited, British Virgin Islands and Masefield

AG wherein, like in the case of Contract No. M/09/54, all the

rights of Hamdaan Exports Limited stood assigned to Masefield

AG for the payment of a fee to Hamdaan Exports Limited. This

contract was signed by Shri Andaleeb Sehgal on behalf of

Hamdaan Exports, who also executed a Power of Attorney dated

May, 2001 in favour of Masefield AG. The fee payable under

this contract is identical to the one paid under Contract No.

M/09/54 referred to above. A copy of this letter has been made

available to the Inquiry Authority by Shri Aditya Khanna, who

annexed it to his affidavit dated March 18, 2006.

14.18 Now, it appears that Contract No. M/09/120 did not result

in the lifting of the oil. It is in this regard that Shri Sehgal wrote

to SOMO on May 21, 2001 seeking visa support for himself, Shri

62

Jagat Singh and Mohd. Asad Khan. As stated earlier the

proposed visit to Baghdad was scheduled to take place between

June 7 to 15, 2001. However, on June 6, 2001, SOMO wrote to

Masefield in response to a letter of Masefield dated June 4, 2001,

and suggested that Masefield postpone the visit. In the event, the

visit of Shri Sehgal, Shri Jagat Singh and Mohd. Asad Khan did

not take place between June 7 to 15, 2001

14.19 However, since the contracts stood executed on May 24,

2001 Shri Andaleeb Sehgal wrote to Masefield AG on behalf of

Hamdaan Exports Limited, British Virgin Islands under the

subject “Request for initial payments”, stating:

“Pursuant to our assignment dated 2nd May, 2001 under SOMO

contract No. M/9/120 covering the lifting of 2 million barrel of

Basra Light Crude, we hereby request that you please arrange to

make an initial payment to us of USD 3 cents per barrel, being a

sum of USD 60,000.”

14.20 It appears that the said payment was made by Masefield

into the account of Hamdaan Exports. It seems. however, that no

further payments were made into this account. An amount of

USD 59,973 was received into the account of Hamdaan Exports

Limited bearing No. 12367 with the Jordan National Bank,

Cyprus. This amount was further transferred upon the

instructions of Shri Sehgal to the Account No. 500320/02 with

the Jordan National Bank. What followed thereafter is lost in the

mists of mystery. It does not appear that any oil covered by this

63

contract was lifted. It appears that the contract strayed into the

sand.

CONTRACT No. M/10/57

15.0 The events for the execution of Contract No. M/10/57

began sometime in July, 2001 and overlapped with the events

relating to Contract No. M/09/120. Shri Andaleeb Sehgal wrote

on July 26, 2001 asking as to what dates would be suitable to

SOMO for Shri Sehgal and possibly others to visit the office in

Baghdad.

15.1 On July 30, 2001, Masefield AG wrote to the Executive

Director of SOMO informing it that Shri Andaleeb Sehgal had

full authority and power to sign for and in the name of Masefield

AG and to represent it in connection with the negotiation,

execution, delivery and signing of a contract.

15.2 On August 11, 2001 upon request being made by Shri

Andaleeb Sehgal for the issuance of a visa in his favour and in

favour of Mohd. Asad Khan, SOMO wrote to the Iraqi Embassy

at New Delhi requesting the issuance of a visa for the two.

It appears that after due preparation, Shri Andaleeb Sehgal

and Mohd. Asad Khan traveled to Baghdad to visit the offices of

SOMO to seek and obtain another allocation of oil.

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15.3 As was done in respect of all previous contracts, this time

too Shri Andaleeb Sehgal obtained a letter written by Shri K.

Natwar Singh addressed to the Oil Minister of Iraq. The letter

was dated August 16, 2001 and was, as were the earlier two

letters, written on the letter head of the All India Congress

Committee. The only difference on the letter head this time was

that the printed figure of “24” preceding “Akbar Road” had been

crossed out and in place the numeral “1” was substituted. The

address now read: “1, Akbar Road”. When the said letter was

shown to Shri K. Natwar Singh, he admitted his signature on it

but denied writing the contents of the letter. He pointed out also

that the said crossing of “24” and it being replaced by “1”

indicated that it was unlikely that he could have written the said

letter.

15.4 Now, it appears that when Shri K. Natwar Singh attended

the dinner at the residence of the Indian Ambassador at Amman,

he signed the Visitor’s Book kept at the Embassy. Against his

name and signature in the Book he himself set down his address

as “1, Akbar Road, New Delhi”. When Shri K. Natwar Singh

was confronted with this fact, he stated that he was working for

the Indira Gandhi Trust, the office of which was located on 1,

Akbar Road.

65

15.5 The letter dated August 11, 2001 reads as follows:

“Excellency,

I would like to present my greetings and congratulate you on

the re-election of His Excellency President Saddam Hussein as

the Leader of the Arab Ba’ath Socialist Party. I am sending this

letter with Mr. Andaleeb Sehgal, who has come to Baghdad to

continue the cooperation extended by yourself.

I would like to take this opportunity to reaffirm our solidarity

with the Arab Ba’ath Socialist Party and the people of Iraq.

With warm regards and greetings,

Yours sincerely

(K. Natwar Singh)

H.E. Dr. Amer Mohammed Rasheed, Minister of Oil Government of Iraq Baghdad

15.6 Armed with the aforesaid letter, Shri Sehgal and Mohd.

Asad Khan left for Baghdad and arrived there on or about August

18, 2001. On August 20, 2001, Mohd Asad Khan, on the letter

head of Hamdaan Exports, wrote to the Executive Director

General, SOMO on behalf of Hamdaan Exports with reference to

one million barrels Kirkuk Crude Oil respecting which Hamdaan

Exports had authorized Masefield AG to sign and execute a

66

contract on his behalf. At the same time, Hamdaan undertook to

fulfill all conditions as required by SOMO.

15.7 Contract No. M/10/57 was entered into on August 21, 2001

for one million barrels of Kurkut Crude Oil. The contract was

signed by Shri Sehgal on behalf of Masefield AG. Shri Sehgal

gave an undertaking to SOMO on behalf of Hamdaan to issue a

bank guarantee for the payment of the surcharge in respect of one

million barrels, which bank guarantee was to be submitted to

SOMO 10 days prior to the date of each lifting. He also

undertook to pay into an account nominated by SOMO the

surcharge in the amount of 0.25USD/bbl net for the quantities

loaded for Europe and 0.30USD/bbl net for the quantities loaded

for US destinations, which payment would be effective within 30

days from the Bill of Lading for each shipment to be loaded

under Contract M/10/57.

15.8 It remains to be stated here that on August 21, 2001 the

Executive Director, SOMO wrote to the Iraqi Oil Minister

seeking the approval of the allocation of 1 million barrel of

Kirkuk Crude Oil under Contract M/10/57 “for the benefit of the

Indian Congress Party”. The said letter was approved by the

Iraqi Oil Minister and Contract No. M/10/57 was sent for

approval to the United Nations Overseer.

15.9 How the name of Indian Congress Party came to be

mentioned in this letter is not known. However, what appears to

be the reason is that Shri K. Natwar Singh and Shri K. Jagat

67

Singh so projected themselves that the Iraqi authorities formed

the impression that Shri K. Natwar Singh and Shri K. Jagat Singh

were representatives of the Congress Party. The Inquiry

Authority has absolutely no evidence whatsoever to link the

Congress Party to the transactions discussed in this Report and

except for the fact that Shri K. Natwar Singh and Shri K. Jagat

Singh belonged to the Indian Congress Party there is not a shred

of evidence to link the Congress Party to the said transactions.

The Inquiry Authority believes upon examination of all the

documents and material which exist before it that no wrong-

doing can be attributed to the Congress Party.

15.10 The lifting of the oil under this Contract, after the

necessary approvals had been obtained from the United Nations,

was done on November 10, 2001 when the vessel M T Front Sun

Loaded 1,000,896 barrels of oil. Thus the entire oil contracted

under this contract was loaded and taken away in one day. For

this purpose it may be stated that Masefield entered into a

contract with M/s. Vitol Bahrain EC at the official selling price

fixed by the UN plus 35 cents as premium. For this purpose they

paid an amount of USD 350,313.60 @ 35 cents per barrel to

Masefield AG.

15.11 As regards the payments to be made to Hamdaan Exports

for their role in the procurement of contract and for the payment

of surcharge to SOMO, Shri Andaleeb Sehgal on the letter head

of Hamdaan Exports Limited, British Virgin Islands, wrote to

Masefield AG on December 4, 2001 seeking payment of a sum

68

of USD 250,224 @ 25 cents per barrel for 1,000,896 barrels.

From the total due, an amount of USD 60,000 was deducted and

the total due was USD 190,224. This payment was brought into

the account No. 12367 in the name of Hamdaan Exports Limited

in the Jordan National Bank, Cyprus and for the reference of

Mrs. Nawzat. The letter stated further that another 5 cents per

barrel would be due separately in favour of INDRUS Trading

Company Limited.

15.12 For the fee due at US 5 cents per barrel, a separate invoice

was raised by Shri Andaleeb Sehgal on the letter head of

Hamdaan Exports Limited, British Virgin Islands. The amount

mentioned in this letter of December 4, 2001 was USD

50,044.80. Instructions were sent to pay the said amount to

Barclays Bank PLC, Jersey, Channel Islands in the account of

INDRUS Trading Company Limited bearing Account No.

734279666.

15.13 At this point it may be mentioned that the deduction of

USD 60,000 claimed in the first invoice appears to relate to the

payment already made in the month of June 2001 under Contract

No. M/09/120, which, it seems, did not go through, and since

payment had been effected to the officials of SOMO it was

difficult to get it reimbursed from them. It is for this purpose

that the amount payable under the new Contract M/10/57 was

reduced accordingly.

69

15.14 On December 4, 2001 George Curmi wrote to Harvey

Foster of Masefield informing him that he had spoken to

Andaleeb Sehgal and it was necessary to split the two amounts

since they went to “different areas”. It also mentioned that USD

60,000 had been deducted. In response to this, on December 5,

2001, Mr. Curmi was informed about the receipt of the two

Hamdaan invoices. It was, however, stated that Masefield would

like to pay the total amount of the two invoices to Hamdaan’s

account per the larger invoice. Masefield, it appears, did not

want to pay to the account of a third party with whom they had

no relationship. It also mentioned that the two invoices be

generalized with thedescription, “To consultancy fees in respect

of crude oil loaded in November, 2001, being US

Cents………per barrel on 1,000,986 net barrels lifted”.

15.15 Accordingly, a revised invoice was sent by Shri Sehgal to

Masefield AG. This invoice was a consolidated invoice unlike

the previous two invoices that had been raised. As per this

invoice a sum of USD 300,268.80 was raised. Reduced from this

amount was an amount of USD 60,000. The total balance due

and payable by Masefield was USD 240,268.80, which was to be

paid into the account of Hamdaan Exports Limited, maintained

in the Jordan National Bank, Cyprus in account No. 12367.

15.16 Accordingly, Masefield issued a payment authorization

dated December 6, 2001 ordering that an amount of USD

240,268.80 be paid into the aforesaid bank account of Hamdaan

Exports Limited. The reference given in the authorization slip

70

was M/10/57 and the purpose of payment was shown as

“broker’s commission”.

15.17 The amount of USD 240,241.80 was received into the

account of Hamdaan Exports Limited on December 10, 2001.

Shri Andaleeb Sehgal wrote to the Manager of the Jordan

National Bank on December 10, 2001 on the letter head of

Hamdaan Exports Limited, British Virgin Islands informing him

that an amount of USD 240,268.80 would be received on

December 10, 2001. Of this amount, an amount of USD

190,224.00 was to be paid to the credit of Account No.

500320/02 of the Jordan National Bank and reference was to be

made to Mrs. Nawzat A. Al Qudsi. Accordingly, on December

12, 2001 an amount of USD 190,450 including commission was

debited from the account of Hamdaan Exports Limited and the

amount was transferred to the Account No. 500320/02.

15.18 For the balance amount of about USD 50,000 Shri Sehgal

wrote on the very same day to the Manager, Jordan National

Bank, Cyprus asking him to debit a sum of USD 49,500/- and

transfer it to the account in Barclays Bank PLC, Jersey, Channel

Islands. It was to be credited to the account of INDRUS Trading

Company Limited in the Account No. 734279666. As per the

instructions received the Jordan National Bank, Cyprus

transferred the said amount to the account of INDRUS Trading

Company Limited. The amount of USD 49,461.24 was received

in the accounts of INDRUS on December 14, 2001. Of this

amount, a sum of USD 17,500 was transferred to the account of

71

Hamdaan Exports in India. A sum of USD 14,500 was paid to a

Consultant by the name of John Ball of Fynnmores on December

21, 2001. The remaining money was retained by INDRUS.

16.0 At this point the Inquiry Authority has been compelled to

conclude its examination of the matter having regard to its

inability to obtain further evidence. The Inquiry Authority

proceeds now to answer the Terms of Reference.

TERMS OF REFERENCE ANSWERED

16.1 First Term of Reference

To inquire into the sources of information, materials and

documents that were available with the Independent Inquiry

Committee (appointed by the Secretary General of the United

Nations to investigate the administration of the UN Oil-for-Food

Programme) in its Fifth and Final Substantive Report (including

the Tables) pertaining to contracts bearing number M/09/54 and

number M/10/57 and to give its opinion on the authenticity and

reliability of the said sources, materials and documents, and

whether, in its opinion, the purported transactions in oil are

genuine or not.

16.2 To answer the first part of the First Term of Reference it

appears that the sources of information, materials and documents

were the documents, copies of which were prepared and

authenticated under the seal of the United Nations and made

available to the Directorate of Enforcement in the Ministry of

72

Finance, Government of India. These copies were received in

two sets. The first set was received in November, 2005 and the

second set was received in January, 2006. They were made

available to the Directorate of Enforcement on condition that

they would be put to official use only and not be made public in

any form. Thereafter copies were supplied by the Directorate to

the Inquiry Authority.

The documents sent by the Independent Inquiry Committee, New

York, in November 2005 to the Directorate of Enforcement are

set out in Annexure-A hereto. The documents sent by the

Independent Inquiry Authority, New York, in January, 2006 are

set out in Annexure-B hereto.

16.3 As mentioned earlier, in July, 2006, Shri Siddhartha Dave,

legal counsel to the Inquiry Authority with Mrs. S. Pillai, IAS,

Secretary to the Inquiry Authority, were deputed to meet Mr.

Paul Volcker, Chairman, Independent Inquiry Committee and

members of the staff involved in the preparation of the

Independent Inquiry Committee Report for clarification relating

to various aspects of the Report. During Shri Dave’s interaction

with the Members of the Independent Inquiry Committee, New

York, various sources of information and documents were

explained in the following manner:

A) Oil-for-Food Programme Documentation;

B) Iraqi Documentation;

C) Company Documentation;

D) Financial Documentation.

73

Oil-for-Food Programme Documentation

Under this heading the following documents were included:

1) The Contract for allocation of oil;

2) The UN Oil Overseer’s approval;

3) The various correspondence that may have been exchanged

between the company with whom the contract was signed and

the UN;

4) The Bills of Lading;

5) Invoices;

6) Letters of Credit;

7) Any other documents.

The aforesaid documents helped to establish as to who had been

allotted the oil, for what quantity, when the UN approval was

given, when the Letter of Credit opened, and on which date was

the oil loaded.

B. Iraqi Documentation

1) These consisted of documents obtained directly from the

Ministry of Oil and the Record Facilities i.e. the Archives,

where all the records of SOMO were stored.

These documents had been independently authenticated, at

times, by the authors of the documents i.e., the persons who

actually wrote the documents when they were interviewed

by the IIC. For example, the IIC interviewed Ameer Mohd.

Rasheed, the Iraqi Oil Minister, who was shown the

approval letters, which were prepared by SOMO showing

the names of the non-contractual beneficiaries. He agreed

74

and identified the practice and the approval letters shown to

him.

The records were reviewed in details and were found:

-internally consistent;

-consistent across Ministries in Iraq;

-consistent with the records kept by the UN, banks,

parties and independent account of transactions and

related events.

2) Iraqi Oil Allocation Lists – prepared for each phase of the

Oil-for-Food Programme by the Iraqi officials, which

consisted of the summary of the allocations made by the

Ministry of Oil.

Started at the beginning of each phase except for the IX

Phase.

Presented to the Iraqi Leadership or the “Command

Council”

Modified if necessary and approved by the leadership.

3) Approval letters from Director of SOMO - sometimes the

letters of recommendations themselves were attached to the

Approval letters so as to indicate to the Oil Minister upon

whose insistence had the allocation been made. In other

case, there were oral requests by the concerned Minister to

the Oil Minister or by the Oil Minister directly. These were

sent by the Director of SOMO to the Minister of Oil and

usually done within days of conclusion of contract. It

included a summary of the contract.

75

4) Correspondences:

Nomination letters – Letter from beneficiary or his

representatives to SOMO nominating a company or an oil

company to lift the oil;

Letters undertaking to pay surcharge, which remained with

the company to whom the allotment was made by SOMO

and may have subsequently assigned to a UN approved

company. Normally done when Iraqi did not trust the

company.

Letters introducing beneficiaries.

Letters referring to meetings with beneficiaries or his/her

representative,

5) Surcharge payments:

Bank advices and SWIFT instructions from Jordan National

Bank or Fransbank (Labanon), being the two main banks

which were used for payment of surcharges;

Iraqi Embassy cash receipts for cash payments;

SOMO Surcharge payment ledger (database) – Ledger of

collection of surcharges by SOMO, which was prepared

during the Programme but printed out after the Programme;

Opening of a bank account in Jordan or Lebanon.

6) SOMO Summary Report – prepared in February 2004 by

SOMO. It explains the operation of the Oil-for-Food

Programme and the oil allocation system from the Iraqi

perspective. It includes attachments with lists of oil

allocation and surcharge collections.

7) Iraqi Oil Allocation Lists.

76

C. Company Documentation

1) This included the correspondences the company to whom the

allotment had been made or the company which lifted the oil

with:

SOMO

Other Companies

Middlemen/Traders

Financiers

2) Contracts between the ultimate buyer or financier

3) Underlying Letter of Credit.

D. Financial/Bank Documentation

1) Surcharge Payments:

Collection of Surcharges at SOMO

Bank records for payments of surcharges

2) Bank records related to financier or purchaser of oil.

Thus, it is evident from the above data and the documents listed

above, that the information and material available with the

Independent Inquiry Committee was considerable and sufficient

to carry out its inquiry. The members of the Independent Inquiry

Committee were asked whether any documents other than the

ones provided by the Independent Inquiry Committee were

available with it. The answer provided was all those documents,

77

which pertained to the two contracts being inquired into by the

Authority, had been made available to the best of their ability. It

may be possible that documents other than those provided to the

Authority may exist but the Independent Inquiry Committee was

not aware of them and they had provided all the materials that

were available with them.

16.4 The second part of the first Terms of Reference requires

the Inquiry Authority to give its opinion on the authenticity and

reliability of the sources, materials and documents available with

the Independent Inquiry Committee, New York, on the basis of

which it prepared its Report in relation to Contracts No. M/09/54

and No. M/10/57. In regard to this aspect, the Independent

Inquiry Committee, New York, explained that all the documents

which were available with it had been obtained through and with

the help of the United Nations directly from Iraq. They have

been obtained primarily from the Ministry of Oil, State Oil

Marketing Organization (SOMO) and some other sections of the

Iraqi Government Regime. These documents in Arabic had been

translated into English with the help of the United Nations.

Some of the documents were available with the United Nations

itself, for example, the contracts and approvals that were to be

provided by the United Nations Overseer. There is no doubt

about the authenticity of these documents since they were

available in original. The Independent Inquiry Committee stated

that the Committed had conducted interviews of many officials,

some of whom continue to work in Iraq, to establish the

authenticity of the documents. These witnesses were confronted

78

with the documents and on no occasion did anyone raise any

objection in regard to the said documents. So far as it was

concerned, the Independent Inquiry Committee, New York,

stated that the authenticity of the documents stood established.

The Independent Inquiry Committee, New York, pointed out that

the names of the officials interviewed could not be made public

on account of consideration of their safety since they continue to

work in Iraq.

It is observed further that if any discrepancy was found in the

documents, it looked into the matter with great care and

conducted a due diligence in it. It also availed the services of the

Forensic Accounting Unit to solve the financial aspects of the

inquiry. It also had the assistance of the Jordan National Bank,

which helped in establishing the financial aspects of the matter.

The Committee went on to observe that the pattern was

established by the witnesses from Iraq, who informed the

Committee about the modus operandi followed by the Iraqi

regime in levying and collecting surcharges. This was

corroborated by the information that was made available by the

Companies involved and the banks through which the money

was routed. After examining these, the Independent Inquiry

Committee, New York, discerned a clear pattern followed in

almost all the cases.

16.5 From the aforesaid, the present Inquiry Authority is of

opinion that the documents available with the Independent

Inquiry Committee were authentic and reliable. The documents

79

were genuine and full reliance could be placed upon them by the

Inquiry Authority.

16.6 The question whether the purported transactions in oil

covered by Contracts No. M/09/54 and No. M/10/57 were

genuine or not is resolved when regard is had to the material

examined by the Inquiry Authority and its findings as herein

above recorded in the substantive text of this Report, the Inquiry

Authority finds that the aforesaid transactions in oil were

genuine.

16.7 Second Terms of Reference

To inquire into the aforesaid information, materials and

documents and any other material or evidence that may be

obtained by the Inquiry Authority, and to give its opinion

whether the refernces to Indian entities and individuals

pertaining to Contracts bearing Number M/09/54 and Number

M/10/57 are justified or not.

16.8 The narration of events set out earlier in this Report

contains a comprehensive analysis of the sequence of events

drawn from the documentary evidence before the Inquiry

Authority which consisted of authenticated copies of documents

available with the Independent Inquiry Committee, New York,

and also documents obtained from different sources both in India

and abroad. The Inquiry Authority obtained documents from the

Government of Jordan relating to the Jordan National Bank,

Cyprus, documents received from the Government of Iraq and

80

documents received from the Ministry of External Affairs,

Government of India, New Delhi. Besides the aforesaid

documentary material, the Inquiry Authority referred to material

appearing in affidavits filed by a large number of persons who

appear to have been associated directly or indirectly with the

making of the two contracts under inquiry. The detailed analysis

made by the Inquiry Authority to all such material gives rise to

the finding that Shri Natwar Singh, mentioned as a non-

contractual beneficiary with respect to Contract No. M/09/54,

was a beneficiary in so far that the role played by him in

influencing and facilitating the procurement of the Contracts had

fructified. There is no material to show that Shri Natwar Singh

derived any financial or other personal benefit from the

contracts. As regards the Indian Congress Party, it has been

shown as a non-contractual beneficiary with respect to Contract

No. M/10/57. The Inquiry Authority has found no evidence that

the Congress Party was involved in the Contract and that it

derived any benefit at all from the Contract. Indeed, there is

nothing to show that the Indian Congress Party had anything to

do with the Contracts M/09/54 and M/10/57. Apparently, it has

been shown as a non-contractual beneficiary because that was the

impression created in the minds of the Iraqi authorities by reason

of the conduct of Shri Natwar Singh and Shri Jagat Singh and the

documents which they employed including the letters written by

Shri Natwar Singh to the Iraqi Oil Minister.

16.9 Consequently, the reference to Shri Natwar Singh with

respect to Contract No. M/09/54 is justified in the sense

81

explained earlier, while the reference to the Indian Congress

Party with respect to Contract No. M/10/57 is not justified at all.

16.10 Third Term of Reference

To inquire into the question whether any Indian entity or

individual received any money or other consideration from, or

paid any money or other consideration to, any government,

agency, company, firm or individual in connection with the

purported transactions in oil under the United Nations Oil-For-

Food Programme pertaining to Contracts bearing Number

M/09/54 and M/10/57.

16.11 It is found that under Contract No. M/09/54, an amount

of USD 61,969 was transferred by a SWIFT MESSAGE from

Chase Manhattan Bank, New York, USA, in March 2001. The

said transfer was made on the instructions of BNP Paribas, Paris,

the ordering customer being Masefield AG, London. The

amount was transferred to Account No. 12349 with the Jordan

National Bank, Cyprus, held by Shri Andaleeb Sehgal.

16.12 Of this amount in the account of Shri Sehgal in the Jordan

National Bank, Cyprus, an amount of USD 60,000 was deducted

and transferred to the Jordan National Bank, Amman, to the

credit of Account No. 500320/02. The Account Number referred

last was in the name of Saddam Z. Hassan and Ibrahim Ali

Shaiyeb of SOMO. This was also done in March 2001.

82

16.13 A further amount was received by Shri Sehgal into the

account of Hamdaan Exports Limited, bearing Account No.

12367 in the Jordan National Bank, Cyprus. This amount of

USD 438,973 was received on May 15, 2001 from Masefield AG

through their bank Chase Manhattan Bank, New York, USA.

This amount was transferred on May 27, 2001 into Account No.

500320/02 mentioned above held in the name of the officials of

SOMO. Thus the total amount of surcharge paid to the officials

of SOMO under the Contract No. M/09/54 was USD 498,518.

This mount was paid by Shri Andaleeb Sehgal.

16.14 With regard to receiving the commission under Contract

No. M/09/54, it is stated that the entities which received monies

were: Shri Aditya Khanna, Shri Andaleeb Sehgal, Sehgal

Consultants and Hamdaan Exports.

16.15 The money, a sum of USD 96,785.99 was transferred by

Masefield AG into the account of INDRUS on June 6, 2001.

The said money was paid into the account of INDRUS Trading

Company Limited, Jersey in its account with Barclays Bank

PLC, 13, Library Place, Jersey in Account No. 73427968. Of

this amount, an amount of USD 7,000 was paid to Sehgal

Consultants on June 11, 2001 at the bank account in India. A

further sum of USD 89,000 was transferred to a company by the

name of Coburg Associate, the details of which are not available

with the Inquiry Authority. However, on June 29, 2001, Coburg

Associate transferred into the bank account of Hamdaan Exports,

New Delhi, a sum of USD 40,000. The account of Sehgal

83

Consultants to which the transfer was made in the first instance is

located in the Standard Chartered Grindlays Bank, Greater

Kailash, Part-I and the Account Number is 26329887. The

details of the Bank Account of Hamdaan Exports to which a

transfer of USD 40,000 was made by Coburg Associate SA

through their bank Lloyds TSB, London is the State Bank of

India, New Delhi Branch bearing Account No. 01000561249.

Thus an amount of USD 47,000 was received by Hamdaan

Exports as the commission payable to it for the execution of the

Contract M/09/54. This amount, however, does not include the

amount retained by Shri Aditya Khanna at 1 cent per barrel of oil

as his commission in the account of INDRUS, to which he

admitted.

On August 9, 2001, an amount of USD 3793.52 was received

into the account of Hamdaan Exports with State Bank of India,

New Delhi. This amount had been transferred from Coburg SA

to Hamdaan Exports.

16.16 As regards Contract No. M/10/57, it may be mentioned as

follows:

16.17 Payment was made by Masefield into the account of

Hamdaan Exports for Contract M/09/120. However, it appears

that no further payments were made under this Contract. An

amount of USD 59,973 was received into the account of

Hamdaan Exports Limited bearing No. 12367 with the Jordan

National Bank, Cyprus. This amount was further transferred

84

upon the instructions of Shri Sehgal to the Account No.

500320/02 with the Jordan National Bank, which belonged to the

SOMO officials to whom surcharges were paid.

16.18 Masefield issued a payment authorization dated

December 5, 2001 ordering that an amount of USD 240,268.80

be paid into the bank account of Hamdaan Exports Limited in the

Jordan National Bank, Cyprus, in Account No. 12367. The

amount of USD 240,241.80 was received into the account of

Hamdaan Exports Limited on December 10, 2001. Of this

amount, an amount of USD 190,224.00 was to be paid to the

credit of Account No. 500320/02 of the Jordan National Bank

and reference was made to Mrs. Nawzat A. Al Qudsi.

Accordingly, on December 12, 2001, an amount of USD 190,450

including commission was debited from the account of Hamdaan

Exports Limited and the amount was transferred to the Account

No. 500320/02.

16.19 For the balance amount of about USD 50,000 Shri Sehgal

wrote to the Manager, Jordan National Bank, Cyprus, asking him

to debit a sum of USD 49,500 and transfer it to the account in

Barclays Bank PLC, Jersey, Channel Islands. It was to be

credited to the account of INDRUS Trading Company Limited in

the Account No. 734279666. The Jordan National Bank, Cyprus,

transferred the said amount to the account of INDRUS Trading

Company Limited. The amount of USD 49,461.24 was received

in the accounts of INDRUS on December 14, 2001. Of this

85

amount, a sum of USD 17,500 was transferred to the account of

Hamdaan Exports in India.

16.20 Thus, under Contract No. M/09/54 the total surcharges

paid by Hamdaan Exports Limited were USD 498,518. For the

Contract No. M/10/57, an amount of USD 250,032 was paid as

surcharges. Therefore, the total amount paid as surcharges after

going through the various documents is a sum of USD 748,550.

16.21 For their part, Shri Aditya Khanna and Shri Andaleeb

Sehgal received a total sum of USD 146,000 which amounts to

about 5 cents per barrel of oil. The entire amount was received

in the bank account of INDRUS Trading Company Limited

located in Jersey, Channel Islands. This was to be distributed in

the ratio of 4:1 between Shri Andaleeb Sehgal and Shri Aditya

Khanna.

As stated above, out of USD 146,000 an amount totaling USD

68,293 was received in the accounts of Hamdaan Exports and

Sehgal Consultants in India. For his share, Shri Aditya Khanna

received USD 32,558 which he retained in the accounts of

INDRUS.

17. Before closing this Report, the Inquiry Authority wishes to

place on record its grateful appreciation of the considerable

assistance, willing cooperation and indefatigable industry

contributed by all involved in the conduct and completion of the

Inquiry. Senior counsel have given freely of their precious time

86

and expertise and provided invaluable guidance at every stage.

Junior counsel have risen to their responsibilities and unsparingly

worked throughout the term of the Inquiry Authority providing a

useful collation of materials. In particular, the Inquiry Authority

is specially thankful to the Senior Counsel and the Legal Counsel

especially appointed to the Inquiry Authority. By their intimate

knowledge of the case as it unfolded and their deft handling of

the oral examination statements of persons appearing before the

Inquiry Authority they succeeded in marshalling and putting

together an invaluable volume of oral evidence. The Inquiry

Authority recognizes the dedicated effort, which was constantly

in evidence, of its Secretary, Director and the Under Secretary of

keeping the proceedings in good order at all times, drawing from

the wisdom of long experience and providing sound

administrative advice. Finally, the Inquiry Authority records its

deep appreciation of the sincere devotion and discretion of its

Personal Staff who, even beyond the call of duty, uniformly

provided the conditions necessary for the successful conduct of

the Inquiry and the preparation of this Report.

Aug. 3, 2006 (R.S. Pathak) Justice R.S. Pathak Inquiry Authority

87

ANNEXURE – A

Documents sent by the Independent Inquiry Committee, New

York in November 2005 to the Directorate of Enforcement

SOMO Records (Hard Copy):

List of oil allocations to India for Phases 10 to 13 of the Oil-for-

Food Programme:

1. Selected and redacted pages from table of

allocation for Phase 10 dated 4/8/2001 (in

Arabic);

2. Selected and redacted pages from table of

allocation for Phase 11 approved on 9/1/2002

(in Arabic)

3. Selected and redacted pages from table of

allocation or Phase 12 approved on 21/5/2002

(in Arabic)

4. Selected and redacted pages from table of

allocation for phase 13 approved on 18/11/2002

(in Arabic)

Documents related to allocations made to Natwar

Singh, Indian Congress Party and Reliance:

5. Letter dated February 13, 2001 from Saddam

Z. Hassan to the Oil Minister regarding

approval of Contract M/09/54 (Masefield)

6. Letter dated May 9, 2001 from Saddam Z.

Hassan to the Oil Minister regarding approval

of Contract M/09/120 (Masefield)

88

7. Letter dated August 21, 2001 from Saddam Z.

Hassan to the Oil Minister regarding approval

of Contract M/10/57 (Masefield).

Bank records related to payment of surcharges

associated with:

8. Jordan National Bank credit advice dated

March 13, 2001 showing depositor as Andaleeb

Sehgal and SWIFT

9. Jordan National Bank credit advice dated May

27, 2001 showing depositor as Hamdaan

Export

10. Jordan National Bank credit advice dated June

11, 2001 showing depositor as Hamdaan

Exports Limited and SWIFT; and

11. Jordan National Bank credit advance dated

December 12, 2001 showing depositor as

Hamdaan Exports Limited and SWIFT

Accounting opening records at Jordan National

Bank:

12. Jordan National Bank Accounts 500113,

500320 and 500866

B. Contract records (in electronic format):

1. Masefield AG: UN Treasury documents for

Contracts Number M/09/54, M/10/57.

89

ANNEXURE-B

Documents sent by the Independent Inquiry Committee, New

York in January 2006:

1. SOMO – Table of Categorization of Companies for

Phase IX (6 Dec. 2000 – 3 July 2001)

2. SOMO – Oil Allocation Table Phase X (4 July – 30

November 2001)

3. SOMO – Oil Allocation Table Phase XI (1 Dec. 2001 –

29 May 2002)

4. SOMO – Oil Allocation Table Phase XII (30 May 2002

– 4 Dec. 2002)

5. SOMO – Oil Allocation Table Phase XIII (5 Dec. 2002

– 3 June 2003)

6. SOMO Contract Approval Letters

i) Approval Letter M-12-81

ii) Approval Letter M-13-05

90

ANNEXURE - C

REPORT OF SIDDHARATHA DAVE, COUNSEL TO

THE JUSTICE R.S. PATHAK INQUIRY AUTHORITY ON THE

VISIT TO NEW YORK TO MEET THE MEMBERS OF THE

INDEPENDENT INQUIRY COMMITTEE OF THE UNITED

NATIONS UNDER THE OIL-for-FOOD PROGRAMME.

DAYS OF VISIT:

4TH JULY 2006

TO

8TH JULY 2006

NEW DELHI

17.7.2006

I, along with the Secretary to the Justice R.S.Pathak Inquiry

Authority (hereinafter referred to as the Authority), visited New York

from 04/07/2006 to 08/07/2006. I was authorized by Justice

R.S.Pathak himself to undertake the said visit, the purpose of which

was to meet the officials of the United Nations and the members of

the Independent Inquiry Committee (hereinafter referred to as IIC)

under the Chairmanship of Mr. Paul Volcker set up to inquire into the

United Nations Oil-for-Food Programme.

The visit was occasioned by the need to properly and correctly

answer the Terms of Reference, more particularly the Term of

Reference No.1, as mentioned in the Notification appointing the

Authority published in the Gazette of India: Extraordinary, Part I-

Section 1, New Delhi, November 11, 2005.

It needs to be stated at this stage that the role of the Secretary

to the Authority in this visit was to primarily facilitate the

meetings taking place.

The work – of interacting with the officials of the United Nations and

the members of the Independent Inquiry Committee under the

2

Chairmanship of Mr.Paul Volcker – was entrusted to me and it was I,

who had to ask the questions and get the answers. It must be

mentioned that the Secretary to the authority was present at the

meetings.

We arrived in New York from New Delhi at 1540 hours (New York

Time) and proceeded to our hotel, where we were for the rest of the

day. Our meeting with the members of the IIC was fixed for 6th July,

2006 at 10 a.m. The meetings had been arranged with the help of

the Permanent Mission of India to the UN.

We reached the office of the IIC located at 825 Third Avenue,

Fifteenth Floor, New York, New York at 10 A.M., where we were

introduced to Ms. Susan M. Ringler, Counsel to Committee and

Aleksandr N. Shapovalov, Deputy Counsel to the Committee. We

were then introduced to Mr. Paul Volcker, Chairman of the IIC. It

may be mentioned that as per the schedule provided to us, the

meeting with Mr.Volcker was to take place at 10:30 A.M. However,

Mr. Volckler chose to be present at the meeting from the very

beginning i.e., 10 A.M. and was present till 11:45A.M. The meeting

with the other Members of IIC concluded at about 1:15 P.M.

3

As stated above, the primary objective of the meeting was to find

answers in relation to the First Term of Reference, namely, to inquire

into the sources of information, materials and documents that were

available with the Independent Inquiry Committee and to give its

opinion on the authenticity and reliability of the said sources,

materials and documents.

The meeting began with the query posed by the IIC about the nature

of inquiry undertaken by the Authority and the need to meet the

Counsel for the Authority separately after they had already interacted

with the Directorate of Enforcement. I explained to them that the

nature of inquiry, as contemplated by the notification, was far wide

than the one undertaken by the Directorate of Enforcement, which is

limited by theprovision of Foreign Exchange Management Act

(FEMA). TheTerms of Reference of the Authority were all

encompassing though there may be some overlap between the two

inquiries i.e., by the Directorate of Enforcement and the Authority. It

was further explained that the Inquiry was a statutory one, the report

of which would be tabled before the Parliament of India and the

conclusions reached by it would have far reaching consequences.

After this, the Members were satisfied that the

4

nature of work of the Authority was very different with that

undertaken by the Directorate of Enforcement and we proceeded

with the meeting.

The first query that was put to them was with regard to the Report

itself: why had the name of Shri Natwar Singh and the Indian

Congress Party (the two non-contractual beneficiaries) not been

discussed in the two earlier Reports but in the main Report itself

and had any notices been issued to them?

The answer of the IIC was that prior to the Final Report being

published there were two other Reports, being interim reports, had

been published by the IIC. The First Report was more concerned

with the administrative manipulations inside the United Nations itself

in relation to the Oil-for-Food-Programme. The Interim report (First)

was concerned with the Procurement Procedure, which involved:

Escrow Account with Banque Nationale Paris (BNP); the Oil

Inspectors; and the Good inspector. It the examined the activities of

on Benon Sevan in relation to the Oil allocations. It further

proceeded to the Internal Audit, the Administrative Expenditure to

conclude with the Methodology. It also dealt with

5

the historical background of the Oil-for-Food Programme and the

mandate of the IIC.

The Second Interim Report mainly concentrated on Cotecna

Inspection S.A. and Kojo Anan and the inter se relationship between

the two. This Report contained few other chapters dealing with some

other entities. It did not deal with the Programme in general.

It was the Report published last ( the one with which the Authority is

concerned with) i.e., the Final Report, which was saved for the

manipulations and the related aspects of the Programme. It was a

comprehensive Report, which was deliberately saved for the last as

the culmination of the functioning of the IIC. The information had

been gathered by the IIC all throughout but the due to the nature of

the inquiry i.e., the length of it and the various interviews of Iraqi

officials conducted by it, that the Final Report was published. The

Final Report dealt with all the individuals, companies, entities

involved in the manipulations of the Oil for Food Programme. The

Final Report had eight tables which supported the main text and were

to be read with it.

6

As to why there was no discussion of the persons mentioned in the

Tables or why only some persons were profiled in the main body of

the text, the answer of the IIC was that those persons, companies

or entities were mentioned in the main body of the text who were

repeatedly involved in the manipulation of the Programme. They

were big/large Companies, influential international

entities/personalities, etc. It was not within the resources of the IIC

to profile every person or company in the main body of the Report

since that would be a gigantic task.

It is in this regard, that the question with regard to the notices was

answered. The Members of the IIC stated letters were sent to the

non-contractual beneficiaries, who were mentioned in the text of

the Report since IIC was directly making accusations against these

persons. The others, like those mentioned in the Tables, had not

been issued any notices since they were not mentioned in the main

body of the Report and no accusations as such had been made

against them.

The next question was with regard to the sources and information

available with the IIC and the authenticity of the documents that

were available with it. In this regard, I was informed that all the

7

documents that were available with the IIC had been obtained

through and with the help of the United Nations directly from Iraq.

They had been obtained primarily from the Ministry of Oil, state Oil

Marketing organization (SOMO) and some other Iraqi Government

regime. These documents were in Arabic and had been translated

into English with the help of the United Nations. Some of the

documents were available with the United Nations itself for

example, the contracts and approvals that were to be provided by

the United Nations Overseer. There was no doubt about the

authenticity of these documents since they were available in

original.

For the IIC, the documents that were available with them were

authentic and reliable. I was informed that they conducted

interviews of many officials, some of whom continue to work in

Iraq, to establish the authenticity of the documents. These

witnesses were confronted with the documents and at no occasion

did anyone raise any objections in regard to the said documents.

Thus, for the IIC, the authenticity of the documents was

established.

8

The IIC could not make public the names of the officials interviewed

on account of their safety since they continued to work in Iraq.

If IIC found any discrepancy in the documents, it looked into the

matter with great care and conducted a due diligence in it. It also

availed the services of the Forensic accounting Unit to solve the

financial aspects of the inquiry. It also had the assistance of Jordan

National Bank, which helped in establishing the financial aspects

of the matter.

The pattern was established by the witnesses from Iraq, who

informed the IIC about the modus operandi followed by the Iraqi

regime in levying and collecting surcharges. This was corroborated

by the information that was made available by Companies involved

and the banks, through which the money was routed. After

examining these, a clear pattern emerged, which was followed in

almost all the cases.

On the specific issue as to who is a non-contractual beneficiary, I

was informed that a non-contractual beneficiary was a person who

either for himself or someone else obtained the contract allocating

oil. This person was normally an influential person, who had close

ties with the higher ups of the Iraqi Government like the President,

9

Prime Minister, Oil Minister, etc. The allocation of oil may have

been made (like Contract Nos.M/9/54 and M/10/57) in favour of

someone else. In any case, the non-contractual beneficiary never

signed the contract. He either recommended another company,

which would directly lift the oil if it were approved by the United

Nations or assign it to a UN approved company. To SOMO and its

officials the allotment in the name of the person for whom the

allotment was initially made stood in its records. This was their

way of knowing for whom the allotment had been made and by this

way they were able to distribute oil in favour of those persons with

whom they had good equation and who supported their cause. As

stated earlier, a non-contractual beneficiary may be directly

involved in getting an allotment in his favour or may recommend

the name of another person or company. But to SOMO, it was the

name of the non-contractual beneficiary, which was maintained in

the records.

I was then shown a slide presentation by Mr.Alexandr N.

Shapovalov as to the documents that were available with the IIC

during its inquiry.

A) Oil-for-Food Programme Documentation

10

B) Iraqi Documentation

C) Company Documentation

D) Financial Documentation

A) Oil-for-Food Programme Documentation

Under this heading the following documents were

included:

1) The Contract for allocation of oil;

2) The UN Oil Overseer’s approval;

3) The various correspondence that may have been

exchanged between the company within whom the

contract was signed and the U.N.

4) The Bills of Lading;

5) Invoices;

6) Letters of Credit

7) Any other documents.

The aforesaid documents helped to establish as to who had

been allotted the oil, for what quantity, when the UN approval

given, when the Letter of Credit opened, on which date was

the oil loaded.

11

B) Iraqi Documentation

1) These consisted of documents obtained directly from the

Ministry of Oil and the Record Facilities i.e., the

Archives, where all the records of SOMO were stored.

These documents had been independently

authenticated, at times, by the authors of the

documents i.e., the persons who actually wrote the

documents when they were interviewed by the IIC. For

eg. the IIC interviewed Ameer Mohd. Rasheed, the Iraqi

Oil Minister, who was shown the approval letter, which

were prepared by SOMO showing the names of the non

-contractual beneficiary. He agreed and identified the

practice and the approval letters shown to him.

The records were reviewed in detail and were found:

- internally consistent;

- consistent across Ministries in Iraq;

- consistent with the records kept by the UN, banks,

third parties and independent account of

transactions and related events.

12

2) Iraqi Oil Allocation Lists – prepared for each phase of

the Oil-for-Food Programme by the Iraqi official, which

consisted of the summary of the allocations made by the

Ministry of Oil.

Started at the beginning of each phase except for

the IX phase.

Presented to the Iraqi Leadership or the

“Command Council”

Modified if necessary and approved by the

leadership.

3) Approval letters from Director of SOMO – sometimes the

letters of recommendations themselves were attached to

the Approval letters so as to indicate to the Oil Minister

upon whose insistence had the allocation been made. In

other case, there were oral requests by the concerned

Minister to the Oil Minister or by the Oil Minister

directly. These were sent by the Director of SOMO to the

Minister of Oil and usually done within days of

conclusion of contract. It included a summary of the

contract.

13

4) Correspondences:

Nomination letters – Letter from beneficiary or his

representatives to SOMO nominating a company or

an oil company to lift the oil;

Letters undertaking to pay surcharge, which

remained with the company to whom the allotment

was made by SOMO and may have subsequently

assigned to a UN approved company. Normally done

when Iraqi did not trust the company.

Letters introducing beneficiaries

Letters referring to meetings with beneficiaries or

his/her representative.

5) Surcharge payments:

Bank advices and SWIFT instructions from Jordan

National bank or Fransbank ( Lebanon), being the

two main banks which were used for payment of

surcharges;

Iraqi Embassy cash receipts for cash payments;

SOMO surcharge payment ledger (database)

Ledger of collection of surcharges by SOMO, which

14

was prepared during the Programme but printed

out after the Programme;

Opening of a bank account in Jordan or Lebanon

6) SOMO Summary Report – prepared in February 2004 by

SOMO. It explains the operation of the Oil-for-Food

Programme and the oil allocation system from the Iraqi

perspective. It includes attachments with lists oil

allocation and surcharge collections.

7) Iraqi Oil Allocation Lists

C) Company Documentation

1) This included the correspondences the company to whom

the allotment had been made or the company or the

company which lifter the oil with:

SOMO

Other Companies

Middlemen/Traders

Financiers

2) Contracts between the ultimate buyer or financier

3) Underlying Letter of Credit

15

D) Financial/Bank Documentation

1) Surcharge payments:

Collection of surcharges at SOMO

Bank records for payments of surcharges

2) Bank records related to financier or purchaser of oil.

The members of IIC were specifically asked about whether the

documents that were given to the Inquiry Authority were the only

documents that were available with them or were there any other

documents with the? The answer was that the documents that had

been supplied by them appeared to them the only available

documents but they couldn’t say for sure whether any more

documents existed or not. For their part, they had given all the

documents that were available with them. They also agreed to

provide to the Authority, a copy of SOMO Summary Report and

Ledger or Surcharge Collection (referred to above) for the use of the

Authority in its inquiry.

16

The Underlying Financiers, mentioned in Table IV of the Report,

were tracked with the help of L/C numbers which were available

with the UN Bank data. It consisted of 70% of oil transactions.

The IIC had the records of the Jordan National Bank to establish

that surcharges had, as a matter of fact, been paid under contract

No. M/9/54 and M/10/57.

The members of IIC offered any other information which may be

necessary for the inquiry being conducted by the Authority. They

stated that as of date, 25 countries and 60 jurisdictions had

initiated some action pursuant to the Volcker Report.

On 7th July, 2006, I had a meeting with Ms. Barcena Allicia, Chef de

Cabinet to the UN Secretary General at about 3:30 pm in the

United Nations Secretariat, UN Building. This was attended by Mr.

Edric Selous, Senior Attorney, UN Legal Division. I discussed the

problem of authentication of documents. I was told that

authentication of documents was an on going problem given the

political events of Iraq. I was told that the documents that had been

17

provided by the IIC had been provided under the seal of the UN and

as such they were authentic.

With that my visit to New York concluded. I boarded the flight for

India on 8th July 2006 at 8:10 pm and arrived in India on the

morning of 10th July 2006.

(Siddhartha Dave)

Counsel

Justice R.S. Pathak Inquiry Authority

18