Rafale deal | €1 mn paid to middleman in Rafale deal, says French report

Congress demands probe but BJP terms charges baseless.

Rafale was originally shortlisted in the Medium Multi-Role Contract Aircraft (MMRCA) deal for 126 jets, but the deal got held up over pricing and technology transfer issues.

A French media report that stated that France’s anti-corruption agency, Agence Française Anticorruption (AFA), had found that aircraft manufacturer Dassault Aviation had paid €1 million to an Indian company in connection with the 2016 Indo-French Rafale deal , prompted the Congress on Monday to demand an independent investigation and answers from Prime Minister Narendra Modi.

However, Union Law Minister Ravi Shankar Prasad dismissed the reports of pay offs to middlemen in the €7.87 bn fighter aircraft deal as “completely baseless”. He reiterated that the Supreme Court had rejected a demand for a probe in the purchase of the fighter aircraft and the Comptroller and Auditor General (C&AG) had also found nothing wrong.

Congress general secretary Randeep Surjewala, however, claimed the latest revelation by the French news portal — Mediapart — is a vindication of former party chief Rahul Gandhi’s allegations of corruption in the Rafale aircraft deal.

The Congress was quick to hold a press conference to ‘reiterate’ its earlier allegations of corruption and sought fresh answers from Mr Modi, a day before the third phase of voting in Assam and West Bengal and polling in Tamil Nadu, Kerala and Puducherry.

In the run up to the 2019 Lok Sabha elections, former Congress chief Rahul Gandhi had made alleged corruption in the Rafale deal as the party’s main poll plank but BJP’s thumping victory made the issue it politically ‘unsustainable’.

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The latest investigations by Mediapart could, however, revive the issue in the election season, especially in West Bengal where there are five more phases of voting.

The French portal reported that an Indian company owned by a middleman, being investigated for another defence deal in India, received payment to the tune of € 1.1 million euros.

“That middleman is now accused of money laundering in India in another defence deal. The company said the money was used to pay for the manufacture of 50 large replica models of Rafale jets, even though the inspectors were given no proof that these models were made. Yet against all apparent logic, the AFA decided not to refer the matter to prosecutors,” according to an investigation by Mediapart.

Dassault had provided AFA with a “proforma invoice” dated March 30, 2017 supplied by an Indian company called Defsys Solutions which according to the AFA investigation report was related to 50% of the total order (€1,017,850), for the manufacture of 50 models of the Rafale C, with a price per unit of €20,357.

However, the report claimed, Dassault was unable to provide the AFA with a “single document showing that these models existed and were delivered, and not even a photograph” when AFA inspectors subsequently found these details in mid-October 2018 and asked the company for an explanation. “The inspectors thus suspected that this was a bogus purchase designed to hide hidden financial transactions,” it said.

The Indian company in question, Defsys Solutions — one of Dassault’s sub-contractors in India for the Rafale deal — specialises in assembles flight simulators and optical and electronic systems for the aeronautical industry, often under licence for foreign companies, according to the report. The company belongs to the Gupta family, one of whom is being investigated in the AgustaWestland VVIP chopper deal .

Sushen Mohan Gupta was arrested by Enforcement Directorate in March 2019 for kickbacks in the AgustaWestland deal and was later released on bail. Mr. Gupta is also alleged to have worked for Dassault and obtained confidential documents from the Defence Ministry in India.

“Does it now not require a full and independent investigation into India's biggest defence deal to find out as to how much bribery and commission in reality, if any, was paid and to whom in the Indian government? Will Prime Minister Narendra Modi answer to the nation now?” asked Mr. Surjewala.

“How can middleman and payment of commission be permitted in a ‘government-to-government Defence Contract’ or in any Defence procurement in India in violation of the mandatory Defence Procurement Procedure,” he added.

Mr. Surjewala said the Defence Procurement Procedure (DPP) as well as the “Integrity Clause” in government of India’s policy regarding defence purchases explicitly bars commission for middleman or any such payments that can be construed as bribe.

“Has it not vitiated the Rafale deal entailing imposition of heavy financial penalties on Dassault, banning of the company, registration of an FIR and other penal consequences,” he said.

Dismissing the latest claims, the Law Minister suggested that the report in the French media about the alleged financial irregularity may be due to “corporate rivalry” in that country.

Mr. Prasad also added that the Congress had raised the issue had raised this issue in the 2019 Lok Sabha polls but lost badly.

Under the Congress-led United Progressive Alliance (UPA), Rafale was originally shortlisted in the Medium Multi-Role Contract Aircraft (MMRCA) deal for 126 jets but the deal got held up over pricing and technology transfer issues. In April 2015 Prime Minister Narendra Modi announced the direct purchase of 36 jets citing “critical operational necessity” of Indian Air Force during a visit to France. The MMRCA deal was subsequently scrapped.

In September 2020, the IAF inducted the batch of five Rafales of 36 jets contracted from France under the €7.87 billion Inter-Governmental Agreement between India and France signed in September 2016 with 13 India Specific Enhancements (ISE).