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How Middlemen are involved in India’s defence deals?

Middlemen or defence agents were banned for years after the multi-million dollar scandal in the 1980s involving alleged kickbacks paid to politicians and officials in the purchase of Bofors guns when Congress was in power. India keeps learning the wrong lessons from defense scams. It must first stop being the world’s largest importer of arms and take a strategic turn towards indigenous procurement

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A French portal Mediapart alleged that their investigation, within the framework of OECD guidelines, has revealed that Dassault Aviation paid kickbacks amounting to at least 7.5 million euros (Indian Rs. 650 million) to an intermediary, Sushen Gupta, in Mauritius between 2007 and 2012. The secret commissions were paid to clinch the Indian Rs 59,000-crore ($9.3-billion) inter-governmental deal with India for the supply of then 36 (now 126) Rafale fighter jets.

Mediapart revelation elaborates that “It involves offshore companies, dubious contracts and false invoices”. That “detectives from India’s federal police force, the Central Bureau of Investigations (CBI), and colleagues from the Enforcement Directorate (ED), which fights money laundering, have had proof since October 2018”.

An independent French judge has been appointed to ferret out any element of criminal conspiracy. However, a Mediapart investigating journalist himself, in an interview, expressed pessimism about an early judgment from the French court. He pointed out that without India’s cooperation, the case could hardly make a head start.

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Past cases reflecting the delay

The mechanisms of public accountability in India have collapsed. Corruption has become a serious socio-political malady as politicians, bureaucracy and Armed Forces act in tandem to receive kickbacks.

Because of lethargic investigation, the anti-corruption cases, filed in courts, drag on for years without any results. The Bofors guns and the HDW (Howaldtswereke Deutsche Werft) submarines are cases in point.

The Bofors-gun case was filed on January 22, 1990. And the court served the charge sheet on the nominated accused after a lapse of nine years and nine months on October 22, 1999. The key accused included S.K. Bhatnagar, W.N. Chaddha (middleman), Octavio Quattrocchi, Martin Ardbo, S.P. Hinduja, G.P. Hinduja and P.P. Hinduja. There were neither convictions nor recoveries until the closure of the case as “infructuous”.

The prosecution revolved around the story that a conspiracy was hatched among executives of Bofors, middlemen and officials of the then government of India to consummate a deal for the purchase of  410 FH-77 guns for Rs. 1,437.72 crores (SEK 8410.66 million). A secret commission (bribe) of Rs. 64 crore (SEK 319.40 million) was paid to middlemen and other beneficiaries.

Rajiv Gandhi, then prime minister, denied the allegations but his image as “Mr. Clean” was tarnished in the public eye. As such the Congress, which had won the biggest majority ever in 1984, lost the polls in 1989.

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The Rs. 32.55 crore HDW submarine case

Like the Bofors case, this case filed on March 5, 1990, had to be closed as “infructuous” without any convictions or recoveries. India’s premier investigative agency, the Central Bureau of Investigation itself recommended the closure of the case.

This case was about four HDW submarines, ordered by India in 1981 from Germany at Rs 465 crore, to be delivered by 1987. But, by 1987 only two were delivered, leading the then defense minister V.P. Singh to order a re-negotiation.

The Germans refused, citing the payment of a seven per cent commission. Singh ordered a probe on April 9, 1987, before resigning three days later. The accused, among others, included S.S. Sidhu, former additional secretary of India’s defense ministry, S.K. Bhatnagar, secretary MoD, G.C. Hinduja of Messrs Sangam, London, and the HDW. The CBI charged them with conspiracy in signing the deal in return for a hefty commission of DEM 101.3 million (Rs 32.55 crore). But letters rogatory sent to Switzerland and Germany failed to yield any evidence.

Who are these Middlemen?

Fighter jet deal is caught in a web of overpricing, abuse of authority and cronyism (Anil Ambani’s friendship with Modi). In Rafale’s case, Sushen Gupta’s name has come into the limelight. Earlier Wen Chaddha had figured in Bofors deal. The ruling BJP-led coalition has shrugged off the allegation as it relates to the Congress-ruled period itself. The BJP ignores the brutal fact that it was not the Congress-led government that finalized the deal. The BJP government itself consummated the deal. The Congress has demanded a joint parliamentary investigation to find answers to several thorny questions.

The French media says that Dassault paid one million euros to a ‘middleman’ in the Rafale deal. The Mediapart claimed the money was paid for the manufacture of 50 large replica models of Rafale jets. But,  Dassault could not provide any proof to inspectors of French anti-corruption agency AFA that these models were actually made.

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Overpricing, abuse of authority, cronyism and flouting 

The IAF insisted on the early replacement of its aging fleet. The Congress-led United Progressive Alliance (UPA) government then put out a tender for 126 fighter jets with anti-corruption clauses. Congress government planned to buy 18 Rafales in “fly-away” condition from Dassault, with the remaining to be built in India by the same firm in a joint venture with the state-owned Hindustan Aeronautics Limited (HAL). Mediapart Rafale-deal report claims that anti-corruption conditions were dropped in the final deal.

The government changed hands in 2014. Since then, the deal has been shrouded in controversy. In October 2018, French investigative journal Mediapart claimed Anil Ambani’s Reliance Defence was dictated by India under Modi as Dassault’s “offset” partner. Mediapart based its claim on an internal document of Dassault Aviation, makers of the Rafale jets. Mediapart alleges Ambani was a “trade-off” for the 36-jet deal.

Earlier, India’s Tehelka Commission of Inquiry headed by Mr. Justice S N Phukan had suggested (Apr 15, 2004) that a sitting Supreme Court Judge should examine all defence files since independence. Concerned about rampant corruption in defence purchases, he desired that the proposed Supreme Court Judge should be assisted by the Central Vigilance Commission and the CBI.

He stressed that unless the existing system of defence procurement was made more transparent through corrective measures, defence deals would continue to be murky. He submitted his report to the then prime minister Atal Behari Vajpayee on February 4. The Commission examined 15 defence deals including the AJT, Sukhoi, Barak missiles, T-90 tanks, tank navigation systems, simulators, hand-held thermal imagers, Karl Gustav rocket and Kandla-Panipat pipeline. The irregularities in the scrutinised defence deals compelled the Commission to suggest de novo scrutiny of all defence purchases since independence.

Clean chit for Modi by the top court

But, India’s Supreme Court dismissed (December 14, 2018) a petition for a probe into the country’s decision to buy 36 Rafale fighter jets from French company Dassault. PM Narendra Modi thus avoids an investigation over the deal. The court order was seen as a victory for the BJP government in India.

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Rampant corruption, particularly in defense purchases, is a source of deep concern, to the Indian electorate. The courts absolved then Rajiv Gandhi of involvement in the BOFORS scam (as the present Supreme Court absolved Modi). The BJP, then in opposition, exploited Rajiv’s acquittal as an election issue. Kuldip Nayyar, in his article “The gun that misfired” (Dawn dated February 14, 2004), lamented, “There was practically no discussion on Bofors-guns kickbacks in the 13th Lok Sabha which has been dissolved for early elections. Once Rajiv Gandhi died the main target – the non-Congress parties lost interest in the scam”.

Like Modi, the previous prime ministers kept the recommended reforms on the backburner. For instance, then Central Vigilance Commissioner P Shankar alleged (October 2003): “The CVC had submitted its defence deals report on March 31, 2001. Yet a year later, the government has not conducted the mandatory departmental inquiry to fix responsibility”. Shankar explained that the CVC had examined 75 cases apart from specific allegations made by former MP Jayant Malhotra and Rear Admiral Suhas V Purohit Vittal. Malhotra’s allegations were about middlemen in defence deals. After his report, the ministry lifted the ban on agents in November 2001 to regularise the middlemen.

The controversial Rafale deal has become an albatross for Modi as was Bofor’s deal for the previous Congress-led government. It may affect the outcome of the next elections. There is a growing perception that Modi, a self-conceited “strong” leader, is contemptuous of all procedural checks and balances inherent in democracy.

 

Mr. Amjed Jaaved has been contributing freelance for over fifty years. His contributions have been published in the leading dailies at home and abroad (Nepal. Bangladesh, Sri Lanka, et. al.). He is the author of seven e-books including Terrorism, Jihad, Nukes and other Issues in Focus published by Smashwords.com.

The views expressed in this article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space.