ISLAMABAD: A local court on Friday handed over custody of three top officials of Railway Construction Company (Railcop) to the Federal Investigation Agency (FIA) on two days physical remand in multi-billion rupees scam involving fake bank guarantees.

The officials were taken into custody by the FIA’s Anti-Corruption Circle on Thursdayand produced before Duty Magistrate Muhammad Asif Hanjra. The magistrate approved a two-day physical remand and directed the FIA to submit a progress report at the next date of hearing.

The arrests were made under FIR No. 37/2025 registered on June 30, invoking sections 109 (abetment), 409 (criminal breach of trust by public servant), 420 (cheating), 468 (forgery for purpose of cheating), and 471 (using forged document as genuine) of the Pakistan Penal Code (PPC), read with Section 5(2) of the Prevention of Corruption Act, 1947.

According to FIA Investigating Officer, the accused, in connivance with Irfan Hameed Khan — Chairman of a private firm Indus Valley Industrial Junction (IVIJ) — prepared and submitted 14 fake bank guarantees amounting to Rs1.167 billion. These forged guarantees, allegedly issued in the names of United Bank and Bank Al Habib, were used to illegitimately qualify Railcop for various public sector contracts.

Accused prepared 14 fake bank guarantees amounting to Rs1.167 billion

In return, IVIJ reportedly received Rs164.96 million in commissions from Railcop for providing the counterfeit securities, resulting in direct losses to the national exchequer.

The FIA said the scam came to light following internal reports by Railcop’s chief engineer and chief internal auditor, who flagged the suspicious bank documents. The company’s internal audits later confirmed that the fake guarantees — complete with logos and headers of reputable banks — were never verified by the finance, commercial, or taxation departments before being used in the tendering process.

The defense counsel argued in court that the accused were educated professionals who had already filed a Section 22-A petition regarding the matter, claiming that no action had been taken by the FIA. He said that the responsibility for issuing guarantees rested with the engineering department, and accused the FIA of ignoring the actual perpetrators. However, the court dismissed the plea, citing the need for further investigation and rejecting the FIA’s request for a 10-day remand.

The alleged fraud also exploited Rule 42(f) of the Public Procurement Regulatory Authority (PPRA) rules, which allows direct contracting with state-owned enterprises without public advertisement. By using fake guarantees and undercutting competitors, RAILCOP allegedly secured contracts it would not otherwise have qualified for — effectively bypassing financial prerequisites and funneling kickbacks to IVIJ.

Documents reviewed by Dawn reveal that this financial scandal played a pivotal role in the Ministry of Railways’ abrupt decision to dissolve RAILCOP, a nearly 50-year-old subsidiary of Pakistan Railways. The move, officially framed as part of a “right-sizing” policy, was announced amid the FIA’s widening probe.

Earlier in June, the ministry also ordered the closure of Pakistan Railways Advisory & Consultancy Services (PRACS) and Pakistan Railway Freight Transportation Company (PRFTC), as part of its broader restructuring initiative.

Meanwhile, tensions rose on the court premises during Friday’s proceedings when family members of the accused reacted angrily over media crews move to record footage of the arrested officials. A cameraman from a private TV channel was allegedly threatened, his phone snatched, and all videos and data forcibly deleted .

Published in Dawn, July 5th, 2025