Transparency, procedural compliance and security will decide Rafale judgment

After a day-long hearing on a bunch of petitions seeking an independent investigation into the decision-making process for the acquisition of 36 Rafale aircraft on Wednesday, the Supreme Court bench of Chief Justice of India Ranjan Gogoi and Justices Sanjay Kishan Kaul and K.M. Joseph reserved its verdict. 

The Centre, through Attorney General K.K. Venugopal, cautioned the bench not to oblige the petitioners as the case, it claimed, was not judicially reviewable  in view of its implications for national security.

The hearing also saw the bench posing questions to senior personnel of the Indian Air Force on the latest acquisition of aircraft and weaponry in order to satisfy itself that the Centre’s claims that the current acquisition could not wait any longer were justified. The bench noted with concern that the last acquisition was in the mid-1980s.

The Centre is of the view that India’s adversaries can infer the nature of the aircraft and the weaponry from the pricing details—a point that one of the petitioners, former Union Minister Arun Shourie, refuted. He made separate submissions before the bench. Shourie and Prashant Bhushan told the bench that pricing of procurement cannot be a secret. Earlier, the Centre presented to the bench, in a sealed cover, the information it had sought on the deal,  

On November 18, 2016, Minister of State for Defence Arun Jaitley told the Lok Sabha that as per the agreement signed between India and France, the cost of each Rafale aircraft was approximately Rs.670 crore. Dassault Aviation and the Reliance group of companies, however, revealed the price to be about Rs.1,660 crore per aircraft, leaving the discrepancy unexplained. Whether the Centre sought to satisfy the court by sharing the details of pricing in a sealed cover will be known when the judgment is out.

The petitioners, who included advocates Manohar Lal Sharma, Prashant Bhushan and Vineet Dhanda, former Union Ministers Arun Shourie and Yashwant Sinha, and Aam Admi Party leader Sanjay Singh, submitted that the deal was struck without following the Defence Procurement Procedure. Prashant Bhushan argued that three conditions that are the sine qua non of this procedure were not satisfied. Of these, the Law Ministry flagged the issue of the French government not providing the sovereign guarantee. Initially, the Law Ministry insisted that if it was an Inter Governmental Agreement (IGA), then the French government must give a sovereign guarantee. Later, the Ministry left it to the government to decide at the “appropriate level”. Attorney General K.K. Venugopal told the bench that the “Letter of comfort” provided by the French government was considered sufficient by the Centre in the absence of the sovereign guarantee.

The Law Ministry, Prashant Bhushan claimed, also objected to the seat of arbitration being outside India and to the fact that in the event of a dispute the Indian government would have to first take recourse to arbitration with the vendor, that is, Dassault Aviation, a process that could take years to conclude. The Law Ministry was concerned that under the agreement huge payouts were required to be made by the Indian government whereas the delivery of the equipment would be years away. The response to the Centre’s affidavit, filed by Bhushan, annexed the Law Ministry’s note in this regard.

Non-conclusion of earlier deal

Tracing the stages in the deal, Bhushan focussed on the non-conclusion of the earlier deal between Hindustan Aeronautics Ltd (HAL) and Dassault Aviation. The Centre’s position is that HAL requires 2.7 times more man-hours compared with the French side for the manufacture of the aircraft in India and that issues relating to contractual obligation and responsibility for 108 aircraft to be manufactured in India could not be resolved. 

Prashant Bhushan, however, rebutted this and said under a “work share” agreement signed between HAL and Dassault, the latter was responsible for 30 per cent of the work and HAL for 70 per cent. The then lead technical negotiator on behalf of HAL, T. Suvarna Raju, had confirmed that differences between Dassault and HAL had been resolved. Raju had retired as Chairman of HAL and had also dared the Centre to put the files in the public domain.  Bhushan also drew attention to the statement of the CEO of Dassault that he was completely satisfied with having HAL as their partner.

Arun Jaitley’s statement

Even after the Modi government came to power, in August 2014 the then Defence Minister Arun Jaitley’s statement in Parliament confirmed that the Centre was proceeding with the original procurement process with no hint of any emergent situation that required the drastic overturning of the deal as was done by the Prime Minister suo motu in Paris a few months later.  

The new deal was a bolt from the blue, Bhushan observed. He pointed out that the Centre’s note was silent on who determined that all 36 aircraft were to be purchased in a “fly-away” condition from France and Make in India by HAL and Transfer of Technology with the most important goal of self-reliance in manufacture of advanced fighter aircrafts were to be summarily jettisoned. He questioned the sudden unilateral announcement by the Prime Minister on April 10, 2015, on the new deal.

The Centre has repeatedly claimed that the new deal for 36 aircraft had many new “India specific enhancements” and additions that were not present in the old procurement process for 126 aircraft in order to justify the huge escalation in price of procurement of the 36 aircraft. Bhushan drew the attention of the bench to statements in the Centre’s note which contradict this claim.

Reliance Defence’s lack of prior experience in manufacturing defence aircraft was cited to argue that its choice as offset partner for Dassault Aviation was suspect. The Centre’s excuse that it had not yet been informed about whom Dassault had chosen as its offset partner was also questioned as lacking in bona fides.

Senior counsel Sanjay Hegde, representing Aam Admi Party leader Sanjay Singh, told the bench that as the deal exposed deviations from standard procedure, suggesting criminality, an independent agency should investigate to disclose facts in order to “satisfy the judicial conscience”.