The Andhra Pradesh High Court has given the state government a sharp reprimand while staying a Rs121 crore road project that was awarded to the tainted Maytas Infra even after the Satyam Computer Services scam was exposed.

A division bench comprising Chief Justice Anil Ramesh Dave and Justice Ramesh Ranganathan also pulled up the government for awarding the project on a 'nomination' basis, which means there was no competitive bidding. The road laying work in Kadapa district of the state was sanctioned 20 December last year.

The stay comes after the state government, in response to a writ petition filed by two village headmen of Kadapa district, asked the court for two weeks' time to review its decision. The government counsel told the court that it had reconsidered the matter of giving the work to Maytas, but had decided to go ahead with the contractor.

The AP government's argument that nomination basis was essential to ensure speedy execution of the road project as also the Gandikota reservoir project that Maytas is executing in the area, was not accepted by the bench. Kadapa, incidentally, is the home district of state chief minister Y S Rajasekhara Reddy.

"You had given the impression to us at the last hearing that you were in the process of cancelling the work," the bench observed and stayed the work till further orders. At the last hearing, the government counsel had said that the government would take a new look at the whole matter.

The government counsel's argument was that Maytas Infra Ltd had to be given the job on an express basis because construction of the Rs329 crore Gandikota dam was nearing completion; and that once the project was ready, parts of a state highway would be submerged, leaving several villages without any road link.

In these circumstances the government had entrusted the job of reformation of the state highway for a length of 30 km in the district to Maytas Infra to create a new pathway, the counsel said.

The counsel for the petitioners on the other hand said Maytas Infra had got huge benefits as it was given more than 20 construction contracts worth thousands of crores of rupees in various irrigation projects in the state. Moreover, since the Satyam scam broke, several state governments like Karnataka, Maharashtra and Orissa have cancelled work allocated to this company, the counsel pointed out.

No relief for lenders: Meanwhile, the Bombay High Court on Thursday dismissed a joint ICICI Bank-IDBI Bank appeal seeking an injunction on the various parties dealing with Maytas Infra. Financial institutions have lent about Rs4,000 crore to parties that have undertaken contracts with the scam-tainted company, and are seeking to limit their financial liability through the appeal.

A division bench comprising Chief Justice Swatanter Kumar and Justice Dhananjay Chandrachud heard the appeal where the lenders sought a court direction that none of the 31 parties, which have contracted with Maytas Infra for around 62 projects involving the construction of roads, bridges, industrial structures, oil and gas exploration, and power generation and transmission, are entitled to terminate the contracts.

They sought maintenance of status quo among the parties, and also asked for details of the 62 projects from Maytas Infra. The high court, however, dismissed the appeal in view of the earlier order passed by Justice Anand Nirgude, who upheld Maytas Infra's statement that the company was in good health, and has a number of work orders and sufficient staff to undertake the work.

The banks, however, argued before the division bench on Friday that there was an urgency to protect their interest, as the parties with which Maytas has contracted were threatening to terminate the contracts. In turn, the banks, being the guarantors for the company, would be held financially liable to the contractors.

In view of the perceived link between Maytas and Satyam, there has been negative publicity and loss of credibility to perform business operations of Maytas, the application stated.