Two Nepali officials, a foreign national, and three foreign companies have been found guilty in the 2018 Mobile Device Management System (MDMS) procurement deal by the Nepal Telecommunication Authority (NTA), the country's telecom regulator.

This verdict comes a year after Nepal's anti-graft body filed the case.

In 2018, the government decided to implement the MDMS to eliminate mobile imports from the grey market that hurt the government’s revenue.

The bench of three justices, led by Special Court Chairman Tek Narayan Kunwar and members Ritendra Thapa and Bidur Koirala, delivered the verdict on Thursday.

The deal caused the government a loss of Rs232 million, said Yagya Raj Regmi, spokesperson for the Special Court. "It will take time for the court to produce the full text of its verdict."

The court sentenced former NTA chairmen Digambar Jha and Purushottam Khanal to one year and imposed penalties of Rs58 million each. Additionally, Jha and Khanal received an extra one-month prison sentence for serving as chairmen while the deal was signed.

Malaysian citizen Mohammad Nur Amin was also found guilty and sentenced to one year in jail with a Rs58 million fine.

A joint venture of the Malaysia-based Nuemera SDN Berhad, Singapore-based Namaste Global Communication, and OSI Consulting Pvt Ltd India involved was fined Rs58 million.

On March 28 last year, the Commission for Investigation of Abuse of Authority (CIAA), the country’s anti-graft body, filed a corruption case against 19 individuals, including Jha and Khanal, at the Special Court.

Former senior NTA director Ananda Raj Khanal, directors Dipesh Acharya and Min Prasad Aryal, and deputy directors Binod Chandra Shrestha, Surendra Lal Hada, and Rewati Ram Pantha were acquitted.

Assistant directors Pratikshya Poudel, Bijay Kumar Ray Yadav, Nirajan Koirala, Sandeep Adhikari, and Surya Prasad Lamichhane, as well as deputy director Achyutananda Mishra, were also acquitted.

Foreign nationals Datuk Mohamed Shihab and Mohamed Shihab Bin Kunhi were similarly acquitted.

The CIAA had demanded the recovery of Rs919.83 million from the accused, which the government allegedly lost, along with an additional penalty of Rs232.06 million.

The anti-graft body accused the officials of submitting the bidding documents without proper cost estimation and presenting baseless and fictitious documents.

According to the CIAA, the officials manually submitted the bid documents despite the Public Procurement Act 2007 mandating electronic bidding (e-bidding).

In June 2019, the NTA disqualified Mobillion, the lowest bidder offering $7.66 million for MDMS, and awarded the contract to the second-lowest bidder—a joint venture of Malaysian firm Nuemera, OSI of India, and Namaste Global Communication of Singapore.

Nuemera Sdn Bhd had previously faced controversy in 2017 when a phone-blocking system it developed for the Malaysian Communications and Multimedia Commission was linked to a data leak affecting 46.2 million subscribers in Malaysia. The company had no prior record of building such systems before the faulty Public Cellular Blocking Service was exploited in the dark web.

The court determined that during the MDMS procurement, the investment was unnaturally inflated without proper proof, and consulting services were hired without securing the construction site.

The Expression of Interest was issued without approving the investment cost projection and bidding document.

The charge sheet highlighted that the estimated investment cost was arbitrarily increased, goods were procured at inflated prices, and more equipment was purchased than required.

The tender process lacked transparency, with no independent evaluation or open bids. Fake letters were prepared, and crucial government documents were hidden and destroyed.

In May 2023, a Cabinet meeting decided to implement the MDMS to curb the grey market of mobile phones.

The NTA had planned to roll out the system in mid-July 2021, but the launch was delayed due to extended lockdowns and shipment delays of necessary equipment for establishing a data centre.

Implementation faced further hurdles when then-prime minister Pushpa Kamal Dahal ordered a halt following a public outcry, as the policy restricted Nepali citizens from bringing more than two mobile sets from abroad.

This triggered a 'no remittance' campaign by Nepali migrant workers, who threatened to stop sending money home.

In response, Dahal instructed the then-finance minister to suspend the decision.

The MDMS, aimed at tackling illegal mobile phone imports, was finally implemented in November 2023.

The court's verdict revealed that project expenses were unjustifiably categorised, and cost estimations lacked standard-based documentation.

Though the NTA blamed project delays on shipment issues and the unavailability of foreign experts due to the Covid-19 pandemic, training expenses were still approved.

The charge sheet stated that Nuemera Sdn Bhd, Namaste Global Communication, and OSI Digital colluded with Jha and Khanal to win the tender by concealing the partner companies' inadequacies and shortcomings.