Cover story: Rafale deal

The ghost of Rafale: Controversy surrounding the jets deal refuses to go away

Print edition : December 03, 2021

Defence Minister Rajnath Singh (right) listens to his French counterpart Florence Parly delivering a speech during a ceremony held for the delivery of the first Rafale fighter to the Indian Air Force at the factory of the French aircraft manufacturer Dassault Aviation in Merignac near Bordeaux, France, on October 8, 2019. Photo: Regis Duvignau/REUTERS

Eric Trappier, Chairman and CEO of Dassault Aviation, and Florence Parly with Anil Ambani, chairman of Reliance Group, at MIHAN Special Economic Zone, Nagpur, on October 27, 2017, for the foundation stone-laying ceremony of Dassault Reliance Aerospace Limited. Photo: AFP

Sushen Gupta, one of the key links to the Rafale saga, at the office of the Enforcement Directorate, in New Delhi on March 30, 2019. Photo: PTI

The spectre of the Rafale fighter jets deal refuses to dissipate for the Narendra Modi government. Damning new revelations belie its claims that the deal was above board and for the public good.

ON November 7, the French news portal Mediapart published details of invoices that were allegedly false but were used by aircraft manufacturer Dassault Aviation to secure the sale of 36 Rafale fighter jets to India for a record €7.8 billion. The investigative portal said that the deal involved “offshore companies, dubious contracts and false invoices”, adding that Dassault paid €7.5 million in secret commissions to middleman and defence contractor Sushen Gupta between 2007 and 2012 during the bid process.

Not only that, Sushen Gupta also received kickbacks during the finalisation of the deal in 2015-16. In short, he continued to benefit from the deal even after a change in the government. Despite the dark cloud over Rafale, Prime Minister Narendra Modi announced the deal in April 2015 amidst much fanfare. The deal was signed in 2016 by Jean-Yves Le Drian, who was Defence Minister under President Francois Hollande, and Indian Defence Minister Manohar Parrikar.

In yet another shocking disclosure, the reporter Yann Philippin said that despite two Indian intelligence agencies, the Central Bureau of Investigations (CBI) and the Enforcement Directorate (E.D.), having proof of secret payments since October 2018, they neither pursued the matter nor began an investigation.

Also read: Rafale deal: Devil in the details

These three exposures, seen along with past revelations around the deal, advance the suspicion of a massive cover up. With the coming to light of inconsistencies in the defence deal involving an inter-governmental agreement, investigators have unearthed several disturbing information relating to the deal—high prices of the jet, unprecedented government concessions, procedural violations, waiver of anti-corruption clauses in the contract, deletion of integrity provisions, shady middlemen, choice of offset partners and suspicions over leakage of confidential documents. But the Rafale issue has not been taken to its logical conclusion in both France and India.

‘Bogus purchase’

Sushen Gupta, one of the key links to the entire saga, reportedly hails from a family whose members have acted as middlemen in the aeronautical and defence industries for three generations. Dassault hired him as a middleman in 2001 when India announced that it wanted to buy fighter jets. Defsys Solutions, one of Dassault’s subcontractors in India on the Rafale contract, belongs to the Gupta family. The company is said to have sold Rafale models to Dassault. According to Mediapart, this mid-sized company with 170 employees is not a specialist in making models. It assembles flight simulators and optical and electronic systems for the aeronautical industry, often under licence for foreign companies.

In 2017, when France’s anti-corruption agency, Agence Francaise Anticorruption, audited Dassault, it found an item of expenditure costing €508,925 entered under the heading “gifts to clients”. On further investigation, Dassault supplied the agency with a proforma invoice dated March 30, 2017, supplied by Defsys Solutions. The agency report said: “This invoice, which related to 50 per cent of the total order (€1,017,850), was for the manufacture of 50 models of the Rafale C, with a price per unit of €20,357.” The Dassault group was unable to provide the agency any document or even photograph to show that these models existed or were delivered. According to Mediapart, the inspectors suspected that this was a bogus purchase designed to hide hidden financial transactions. Thereafter, Defsys issued a statement terming Mediapart’s report as “wholly unsubstantiated, misleading and baseless”. The company shared tax invoices to claim that the 50 models were indeed supplied to Dassault. “Delivery challans, E-way bills and GST returns related to such delivery have been duly filed with the relevant authorities,” it said.

Secret payments

Mediapart accessed more than 12,000 pages of confidential documents from the CBI’s probe in the AgustaWestland case, which contained evidence of secret payments. Referred to as the VVIP Chopper Scam, the case involves alleged kickbacks paid to middlemen, possibly even politicians and bureaucrats, in the purchase of helicopters manufactured by the Italian defence manufacturing firm Finmeccanica for €550 million.

The contract for 126 Rafale aircraft was signed in 2010 with Mukesh Ambani as an “offset” partner when the Congress-led United Progressive Alliance (UPA) was in power at the Centre in India. The scam came to light in 2012. In 2014, the deal fell through, and in 2015, Dassault signed the deal and took on board Anil Ambani, Mukesh Ambani’s brother, as an offset partner.

Also read: Rafale deal: How not to buy a plane

As per the documents shared by Mediapart, Sushen Gupta received secret commissions from AgustaWestland via Interstellar Technologies Ltd, a shell company registered in Mauritius. The Mauritian authorities agreed to send numerous documents relating to this company, including contracts, invoices and bank statements, to the CBI and the E.D. “This was how Indian detectives discovered that Sushen Gupta had also acted as an intermediary for Dassault Aviation over the Rafale deal. Interstellar Technologies, his Mauritian company, received at least €7.5 million from the French aviation firm between 2007 and 2012, thanks to information technology contracts that were clearly overbilled, and from which most of the money was discreetly sent to Mauritius allegedly using a system of false invoices. Some of these invoices even got the name of the French company wrong, referring to it as ‘Dassult Aviation’,” according to the Mediapart report.

Politicking over revelations

The expose triggered a political storm in India. Both the Congress and the Bharatiya Janata Party (BJP) came out looking bad in the fresh revelations and took to politicking over it. The BJP spokesperson Sambit Patra tore into the Congress leadership and said that the Congress should be renamed “I Need Commission”. Addressing the media, he said: “We had seen the kind of canards, misinformation and lies that Mr Rahul Gandhi of the Congress party had tried to spread before the 2019 Lok Sabha election but the results are there for all to see.” Explaining parts of the Mediapart story, he said during which party’s tenure “corruption and commission took [sic] place as far as Rafale is concerned will be out” soon.

Accusing members of the Nehru-Gandhi family, Sambit Patra said: “The Mediapart story says that corruption, influence-peddling and favouritism marked the deal during the UPA government. Sonia Gandhi, Rahul Gandhi, Priyanka Gandhi Vadra, Robert Vadra, all say that I need commission.” Persisting in the same accusatory vein, he said that Rahul Gandhi should respond “to this from Italy”, and that corruption, which had become homeless after the BJP came to power, had found its new address at 10 Janpath, referring to the residence of Sonia Gandhi. He added: “The negotiation that took place over 10 years was not for a deal, but for commission. We didn’t see an agreement for purchase, but there was an ‘agreement of commission’. The commission was payable at the rate of 40 per cent.”

Also read: Modi government’s decision to drop offset clause in defence deals with foreign governments makes no strategic sense

In a separate press conference, Congress spokesperson Pawan Khera countered the BJP, saying that the ruling party had launched “operation cover up”. The Congress had demanded a Joint Parliamentary Committee probe into the deal, but the Modi government showed no signs of agreeing to institute one. Pawan Khera claimed that the BJP was instead busy burying the “black melting pot of corruption, kickbacks and collusion…. In doing so, the government has undermined national security, jeopardised the interests of the armed forces and caused a loss of Rs.41,000 crore to the exchequer. The corruption can be tracked to Prime Minister Modi’s own doorstep.”

‘Rafale Papers’

On October 4, 2018, Arun Shourie and Yashwant Sinha, two former BJP Union Ministers, along with Supreme Court lawyer Prashant Bhushan, presented evidence on what came to be known as the “Rafale Papers”.

An official complaint on the matter was filed with the then CBI Director Alok Verma. The complaint alleged that Modi had abused his office and his position as a public servant to obtain a valuable thing in the nature of “offset” contracts for Anil Ambani. The misuse resulted in a hike in the price of procurement and provided a pecuniary advantage to both Dassault and Ambani’s Reliance Aerostructure Limited (RAL). According to the complaint, this would amount to criminal misconduct under Section 13(1)(d)(ii) of the Prevention of Corruption Act. Alok Verma reportedly wrote to the Defence Ministry concerning the documents mentioned in the complaint, seeking their comments.

Shortly after that, on October 11, the Attorney General of Mauritius sent documents about Sushen Gupta to the CBI. In the heightened drama, around midnight on October 24, Alok Verma was sacked, and a raid was conducted at the CBI headquarters. N. Nageshwar Rao was made the interim CBI chief. He took possession of all the locks of rooms and file cabinets before transferring 11 other top officers. Whether there was a connection between Rafale and the midnight drama is not known but it certainly added to the intrigue around the Rafale scam and was seen as the reason for Alok Verma’s removal.

Also read: L’affaire Rafale

On March 26, 2019, the E.D. raided Sushen Gupta in connection with the AgustaWestland case and reportedly recovered incriminatory documents. Pawan Khera said at the press conference that the documents included the benchmark price document of August 10, 2015, a record of discussions by the Indian Negotiating Team of the Defence Ministry, the Excel sheet of calculations made by the Defence Ministry and Eurofighter’s counter-offer of 20 per cent discount to the Government of India. A note dated June 24, 2014, sent by Sushen Gupta to Dassault offering a meeting with “the political high command” was also recovered. Pawan Khera wanted to know whether such a meeting had taken place with the “high command” in the Modi government.

He alleged that “this was nothing short of endangering national security, sedition and a gross violation of the Official Secrets Act”. The documents of the Indian Negotiating Team giving details about how it calculated the price of the aircraft was especially disturbing. In the charge sheet against Sushen Gupta, the E.D. said he had gained “sensitive data which should have only been in possession of the Ministry of Defence”. It is unclear how Sushen Gupta got hold of these documents, said Mediapart. But in a note dated September 2012, which was recovered by the E.D. during its raid, Sushen Gupta suggested that he had handed over money to some Indian officials on Dassault’s behalf. “The risk is taken, you have an agent we have paid, now make sure it is legal clean and defendable. […] No money no decisions […] People sitting in office asking for money. […] Those people will, if we don’t pay, put us in Jail.” In March 2019, the E.D. arrested Sushen Gupta. After spending two months in custody, he was charged with money laundering in the AgustaWestland case and then released on bail. Sushen Gupta has denied any wrongdoing.

In December 2018, a three-member Supreme Court bench comprising the Chief Justice of India Ranjan Gogoi and Justices S.K. Kaul and K.M. Joseph declined to order a probe into the corruption allegations in the aircraft deal. In November 2019, the same bench dismissed review petitions filed by Arun Shourie, Prashant Bhushan and Yashwant Sinha against the previous judgment, putting a lid on the “Rafale Papers”. The review petitions were prompted by investigative reports in The Hindu by N. Ram, who relied on Defence Ministry documents to highlight inconsistencies in the Rafale deal. The then Attorney General K.K. Venugopal alleged in court that the documents were stolen and, therefore, the court should not consider them. Making a strong rebuttal, Ram said that they had not stolen the documents from the Ministry but got them from reliable sources. He said: “No force on earth can make me or us reveal the source of the documents, because we have given our word. We are fully protected by Article 19(1)(a) of the Constitution, the fundamental right of freedom of speech and expression and also by the Right to Information Act, specifically 8(1)(i) and 8(2), which override the Official Secrets Act…. There is no question of any national security interest being compromised by it.”

French investigation

While the Supreme Court gave a clean chit to the government on any wrongdoing with regard to the Rafale deal, a report by the French anti-corruption agency found that Dassault had paid more than €1million as bribe to Defsys for the manufacture of 50 models of the Rafale and more than €7 million in secret commissions to offshore accounts and shell companies. It confirmed that Sushen Gupta had supplied classified documents relating to the deal to Dassault even as talks between the company and the Indian Negotiating Team were frozen over the issue of benchmark pricing.

Also read: Rafale debate in a new light

In February 2019, the Comptroller and Auditor General of India tabled its audit report in Parliament pointing out procedural violations in defence procurement. As per the report, Dassault’s technical bid was at first rejected but later allowed to incorporate India-specific enhancements that met bid-compliant qualitative requirements. The report also unequivocally stated that the defence acquisition process needed reforms and streamlining.

In France, a judicial investigation was launched in July this year by judges Virginie Tilmont and Pascal Gastineau, indicating that the curtain will not be brought down on the Rafale issue too soon. While 36 Rafale jets were delivered to India more than a year ago and are safely ensconced in Indian territory, the persistence of French journalists and law-keepers might keep the ghost of Rafale alive for the ruling dispensation in India despite the clean chit given by their own investigative agencies.