New Delhi: The Arunachal Pradesh government on July 16 this year told the Supreme Court that just four companies linked to chief minister Pema Khandu’s family and close relatives secured government contracts worth over Rs 380 crore in a single district of the state in a little over the past decade.

Of these, 59 contracts – amounting to more than Rs 17 crore – were awarded without competitive bidding.

The disclosure, part of a counter-affidavit to a petition that flags rampant corruption and cronyism in public works contracts in the northeastern state, focuses solely on Tawang, one of the state’s 28 districts. The companies named are directly linked to Khandu’s close relatives, and the revelations raise serious questions about the scale of favouritism beyond Tawang, which is the only district that was examined in the petition calling for an SIT probe into high-level graft.

The petition was filed on January 15, 2024, by Save Mon Region Federation, a civil society organisation from Tawang district, and Voluntary Arunachal Sena, an NGO fighting against corruption issues in the state.

Meanwhile, the Comptroller and Auditor General (CAG) of India has flagged several irregularities in the awarding of contracts to firms owned by Pema Khandu’s relatives. A copy of the CAG report, obtained from the lawyers of the petitioners shows that it has found that the process of competitive bidding was bypassed in many instances across decades and contracts were awarded through work orders, as opposed to tenders. In several other instances, the competitive bidding process was followed but government departments failed to produce supporting evidence for the bidding process. The CAG shared the details of these contracts with the apex court through an affidavit filed on July 21, in response to the petition.

On March 18, 2025, a Supreme Court bench comprising then Chief Justice of India Sanjiv Khanna along with Justices Sanjay Kumar and KV Viswanathan had asked the Arunachal Pradesh government to respond to the allegations of corruption and cronyism while the CAG was asked, too, to submit an audit report of the companies. The bench had asked the CAG to examine the award of government contracts to firms allegedly linked to the family members of Pema Khandu.

The court had also “specifically” demanded details of contracts awarded to firms linked to Khandu’s relatives Rinchin Drema and Tsering Tashi. Drema is the second wife of former Arunachal Pradesh chief minister Dorjee Khandu who was killed in a chopper crash in April 2011. She is the stepmother of Pema Khandu. Tsering Tashi is a nephew of Pema Khandu and was the BJP MLA of the state’s Tawang assembly constituency in between 2019 and 2024.

The petition had listed scores of public works, awarded primarily to the firms Brand Eagles, RD Construction, Frontier Associates and Alliance Trading Company. As per the response of Arunachal Pradesh to the apex court, the firms Brand Eagles and Frontier Associates are owned by Pema Khandu’s wife Tsering Dolma. His son, Tashi Khandu, owns RD Constructions. Tsering Tashi’s wife Nima Drema is the proprietor of Alliance Trading Company.

Part of the information disclosed by the state government corroborates what affidavits submitted by Pema Khandu and Tsering Tashi to the Election Commission of India prior to Arunachal Pradesh assembly polls in 2019 and 2024 had said. In his 2019 affidavit, Tashi had disclosed that Alliance Trading Company had only two contracts with the government. The state government’s affidavit lists as many as 91 contracts that the firm has received in Tawang district alone, within the last 13 years.

Questionnaires have been emailed by this correspondent to Pema Khandu and Tsering Tashi seeking details of all companies of their close relatives which have obtained government contracts across the entire state. This article will be updated on receipt of responses, if any.

What does the CAG audit say?

The CAG report is not clear about the exact time periods of the works in which it has pointed out irregularities, either in quality of work or in award of tenders. It has focused on nine different allegations that were raised in the writ petition and has presented point-wise responses to those specific allegations. 

At the centre of CAG’s findings are contracts awarded to the four privately-owned firms – Brand Eagles, RD Constructions, Frontier Associates and Alliance Trading Company – linked to Pema Khandu. Certain contracts were awarded directly to Pema Khandu in his capacity as an individual. In addition, the CAG report says, different government departments have also funded co-operative societies headed by Pema Khandu.

The audit found that comparative bid statements – the document which contains a comparison of bids of different bidders – were missing for a contract worth Rs 24.76 crore handed out to Alliance Trading Company, belonging to Tsering Tashi, by the state’s rural works department in October 2006. The contract was for constructing a road between Telikhet and Bongleng villages in Tawang. The road was made, the CAG team found in a site visit.

The three firms – Brand Eagles, RD Constructions, Frontier Associates – were recipients of as many as 23 contracts for restoration works undertaken in different parts of Arunachal Pradesh following damages caused by floods. These contracts totaling approximately Rs 2.38 crore, were awarded without competitive bidding. The Department of Relief & Rehabilitation, which handed out the contracts, told CAG that the bidding process was bypassed because the works, petty in nature with values ranging in between Rs 4 lakh and Rs 20 lakh each, did not require high technical competence. They were, as per the department’s claims, awarded to local people for employment and income generation.

Audits of three road projects, undertaken by the state’s public works department in between 2002 and 2006, throw up interesting findings. These audit reports were attached to the CAG’s affidavit to the apex court. The Khandu-linked firms were amongst contractors awarded different work components of the three roads. In one instance, the audit team found no trace of a road – a porter track between two locations, Jang and Sulungthi, which was reportedly improved and realigned at a cost of Rs 2.55 crore – during field investigations. Porter tracks are walking paths that can be used by porters to carry loads in places where there are no motorable roads. Although the work was supposed to have been executed between December 2002 and March 2004, thick vegetation covered the area where the porter track was supposed to exist. Moreover, the public works department, the project’s nodal agency, could produce invoices for works only against Rs 1.46 crore. Frontier Associates and RD Constructions were amongst 43 contractors that were awarded these contracts without bidding.

In another instance, the department failed to produce invoices against Rs 12.24 crore for a road project, undertaken at a total cost of Rs 17.56 crore to connect two villages, Lhou and Mukto in Tawang district. Work for the remaining amount of Rs 5.19 crore was awarded in 2006-07 to 10 different contractors, including, amongst others, the firms Brand Eagles, RD Construction and Frontier Associates. Brand Eagles was awarded the lion’s share of the work at Rs 3.89 crore, apparently through competitive bidding. However, documents pertaining to the bidding process do not exist. The remaining work totaling Rs 1.3 crore was awarded to contractors, including other Khandu-linked firms, without inviting bids. The department said it bypassed bids and awarded the contracts to local contractors in lieu of compensation against village community lands over which the projects were executed.

Competitive bidding process was bypassed for another project undertaken to improve road network in Tawang town with a budget of Rs 3.75 crore from the central government. During audit, the Department of Urban Development & Housing could produce invoices only against Rs 2.9 crore. Work on the project was executed between January 2006 and March 2008. A sum of Rs 2.76 crore – the remaining dedicated to miscellaneous expenses like televisions, inverters and computers – was awarded to 56 different contractors without competitive bidding. Brand Eagles had received a work order of Rs 7.88 lakh.

Brand Eagles was one of the biggest contractors in the execution of a water supply project in Tawang town. The project was undertaken by the Department of Public Health, Engineering and Water Supply at an approximate cost of Rs 9.5 crore. There is no record of how Rs 2.74 crore was spent out of this amount. Invoices were available only for Rs 6.9 crore. Documents show that Brand Eagles was awarded certain components of the works, at an amount of Rs 63,000 higher than the estimated cost of Rs 2.49 crore put to tender!

The CAG found irregularities in a road project undertaken to connect Sarong Gompa, a Buddhist monastery in Tawang district, with the rest of Arunachal Pradesh. Work orders, without inviting tenders, were awarded by the Rural Works Department to 43 different contractors out of which, Brand Eagles and RD Constructions, besides Pema Khandu in his individual capacity, secured contracts worth Rs 3.15 crore, approximately. The total cost of the project was Rs 4.50 crore out of which no records exist for an amount of more than Rs 11 lakh. This road was constructed in between August 2002 and March 2006.

No bidding documents exist with the Rural Works Department for a road contract, worth Rs 1.49 crore approximately, which was awarded to Brand Eagles, apparently through a competitive bidding process. This work was for constructing a road to connect Jang and Gyamdong villages of Tawang district. The construction work took place in between February 2006 and February 2007.

A co-operative society, set up in August 1997 with Pema Khandu as its chairman, had received a grant-in-aid of Rs 45.58 lakh from the North East Council, a statutory body under the central government for development of the northeastern states. However, the society, which, as per its prospective agenda, is engaged in animal husbandry and dairy development activities reported a loss of Rs 44.59 lakh in 2007-08. It never submitted its statement of accounts to the government thereafter. The Registrar of Cooperative Societies of Arunachal Pradesh told the CAG that the society is no longer functional. It also informed that a CBI investigation in the past had failed to establish allegations of fund misappropriations from the society.

In October 2003, the Arunachal Pradesh government sanctioned a sum of Rs 3 crore to yet another society, headed by Pema Khandu, for the promotion of Bodhi language and literature. The CAG found that, as per the terms and conditions of state government’s MoU with the society, the corpus of Rs 3 crore is intact in a fixed deposit with a public sector bank. However, there exists no record of where the interest earned, a sum of Rs 3.7 crore, has been spent. The registration of the society, which came into being in 1993, has also expired!

Genesis of the case

On the last hearing of the case on March 18, former CJI Khanna had said: “We must have a clear-cut answer as to who are the parties to whom the contracts were awarded and what was the process. Whether tenders were not called for or not? It must be stated. Both the ministries [finance and home] must come out clear.”

A key element in this unfolding scandal seems to be a little-noticed 2015 state law, which after being amended under Pema Khandu’s administration, opened the door for certain government-funded works to be handed out without competitive bidding. Counsels appearing in court on behalf of Arunachal Pradesh have, in the past, maintained that the state government is empowered to hand out certain work orders without undertaking a bidding process vide this Act. The state government too has harped upon this Act in its counter-affidavit to the apex court, and its potential role in the all-round economic development of Arunachal Pradesh.

In November 2020, Khandu’s government had amended the 2015 Act – the Arunachal Pradesh District Based Entrepreneurs and Professionals (Incentive, Development & Promotional) Act, 2015 – to enable awarding of state government works below Rs 50 lakh, which require “no special technical know-how”, without a bidding process. The categories of works that can be awarded without inviting tenders are listed in a Schedule of the Act. However, the amended Act contains no definition as to what comprises “special technical know-how” or the lack of it.

The Act was put in place by a former Congress government of Arunachal Pradesh led by the then chief minister Nabam Tuki. The original purpose of this Act was to give preference to “district-based entrepreneurs and professionals to secure equitable distribution of State Developmental work”. This includes architects, engineers, contractors, doctors and so on who are domiciled in any district of Arunachal Pradesh. The original Act did not contain any provision regarding awarding of government works without tenders.

The state government has stated in its counter-affidavit: “Award of government contract work through work order system has been practiced in the state of Arunachal Pradesh right since beginning and is still continuing in the larger interest of employment of local villagers and contractors.”

During the last hearing, the counsel for the Arunachal government had sought to discredit the petition by asking as to why the complaints of Save Mon Region Federation pertained only to Tawang district though there are 28 districts in the state. Alleging that similar petitions are being filed repeatedly with a political motive to defame the government and to impede development of the state, the counsel had also said that Arunachal Pradesh, being a border state, is very different from the rest of the country.

In October 2023, while hearing upon a separate Special Leave Petition (SLP) by Voluntary Arunachal Sena, a division bench of the apex court comprising Justices Aniruddha Bose and Bela M Trivedi had directed the CAG to ascertain as to whether very close relatives of the executive head of a state can be awarded government contracts and norms, if any, for awarding these types of contracts. The NGO had appealed in the Supreme Court in 2010 after Gauhati High Court dismissed its public interest litigation (PIL) alleging arbitrary awarding of contracts by the state government without floating tenders. The PIL, which had alleged Pema Khandu’s father Dorjee Khandu of alleged irregularities in awarding of government works, had been filed in the high court in 2007. Pema Khandu had submitted his response to the bench in a “sealed envelope” in this matter.

In March 2024, the division bench had dismissed the appeal after directing the CAG to examine the allegations of favouritism in awarding of contracts to the Khandu family. In November 2024, the court refused to entertain a plea by Voluntary Arunachal Sena seeking directions to the CAG to provide a status report into its examination of the government contracts.

Khandu himself had, in the context of the 2007 PIL, brushed aside allegations of favouritism in awarding of works saying that those are “false”. He had told the media that there exists no law in the country prohibiting family members and close relatives of a person occupying a Constitutional post from undertaking business activities with the government.

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