Dubious deal

Published : Nov 03, 2006 00:00 IST

The CBI files a case on the allegations of corruption in the Barak missile system deal with Israel in 2000.

V. VENKATESAN in New Delhi

IN the Central Bureau of Investigation's (CBI) vocabulary, preliminary enquiry (PE) denotes the first stage of the investigation of a complaint to ascertain the facts vis-a-vis the commission of a cognisable offence. The next step is the registration of a regular case (RC) in the form of a First Information Report (FIR) in a court. The FIR leads to further investigation of the allegations and inferences drawn in it in relation to the commission of a cognisable offence.

Put in this context, its FIR filed on October 9 against former Defence Minister George Fernandes, former Chief of the Naval Staff Admiral Sushil Kumar, and others in the case of procurement of the Barak missile system in 2000 from Israel Aircraft Industries Ltd. (IAI) provides the reasonable basis to suspect that they committed offences under the Prevention of Corruption Act, 1988, and Section 120-B (criminal conspiracy) of the Indian Penal Code (IPC).

The Barak deal was one of 15 defence deals that figured in the Tehelka tapes, which were entrusted to the Justice K. Venkataswami Commission of Inquiry by the National Democratic Alliance (NDA) government in March 2001. In January 2003, Justice S.N. Phukan took over as the head of the commission. Its terms of reference included specifically the question of illicit gains by persons in public office, individuals and any other organisation. However, the Phukan Commission's Part Report submitted in February 2004 to Prime Minister Atal Behari Vajpayee did not cover this aspect at all.

The United Progressive Alliance (UPA) government rejected the Part Report and wound up the Phukan Commission on October 4, 2004. It later entrusted the entire inquiry to the CBI.

The Barak missile system employs vertically launched missiles to counter anti-ship sea-skimming missiles and attack by aircraft. It uses advanced radar techniques for target acquisition and tracking, besides own-missile tracking and guidance. It is a 98-kilogram missile, 2,175 mm long, with a 22-kg warhead. Barak, a Hebrew word for lightning, was developed in a joint venture between IAI and its sister concern Rafael and first launched in August 1991.

The process of acquisition of the missile was initiated in 1995, according to the FIR. It states that a team of officials of the Indian Navy and the Defence Research and Development Organisation (DRDO) attended the field demonstration of the Barak-1 AMD (Anti-Missile Defence) system in Israel in December 1995. After this field trial, Naval Headquarters (NHQ) forwarded in 1996 a draft Cabinet Committee on Security (CCS) note for the acquisition of six Barak AMD systems to the Defence Minister for approval.

The FIR states that the Scientific Adviser to the Defence Minister, A.P.J. Abdul Kalam (now the President), agreed to the NHQ proposal provided the Navy monitored and ensured the performance of the Barak system as claimed and installed it at the earliest and also placed an order for indigenous Trishul missiles and systems to give their production a thrust.

On December 16, 1996, Defence Minister Mulayam Singh Yadav desired to know the status of Trishul and whether it was not possible to import fewer Barak systems than proposed, so that foreign currency could be saved. His queries remained unanswered, the FIR said.

In 1997, NHQ initiated a fresh proposal for the Barak AMD system for aircraft carrier INS Viraat as part of the modernisation of the warship. The CCS approved it on October 3, 1997 and the Defence Ministry then referred it to the DRDO for its concurrence. This was the beginning of the tussle between the Defence Ministry and the DRDO over the Barak system.

On November 3, 1998, A.S. Pillai, Chief Controller, Research and Development (IGM Project), DRDO, wrote to the Defence Ministry that an indigenous solution would not only provide a light-weight option with large azimuth coverage but also meet the time schedule and requested that immediate go-ahead be issued for the project to commence activities and that the import option, of Barak, be closed.

Meanwhile, middlemen had become active to push the deal through. According to the FIR, in October 1998, Suresh Nanda, an agent, met Jaya Jaitly, George Fernandes' friend and colleague in the Samata Party, through party treasurer R.K. Jain, at Fernandes' official residence. The FIR says Suresh Nanda paid Rs.1 crore to R.K. Jain, who admitted to having received this amount from Nanda during his conversation with the representative of Tehelka.com, which is on tape. The FIR says the inquiry further revealed that R.K. Jain in turn paid the amount to Jaya Jaitly to seek the Defence Minister's favour in defence deals.

Indeed, this part of the FIR, dealing with the bribery, has not stated anything beyond what was already known from the Tehelka tapes. The value of the FIR lies in building this allegation on to the bedrock of circumstantial evidence pointing to favouritism. The FIR refers to a letter Fernandes received from the Chairman of IAI, dated November 2, 1998, seeking his intervention for the induction of the Barak system into the Indian Navy.

On November 26, 1998, NHQ wrote to the Scientific Adviser to the Defence Minister seeking early concurrence to import one Barak AMD system. Kalam replied on January 20, 1999, that in view of the CCS' approval dated October 3, 1997, the Navy would take a decision on a suitable missile system for INS Viraat only, without jeopardising the indigenous development of the Trishul system. Taking this reply as concurrence, the officers concerned sought early constitution of a Price Negotiation Committee (PNC) to finalise the import of one Barak module, says the FIR.

The FIR revealed that on June 15, 1999, Admiral Sushil Kumar, the then Chief of the Naval Staff, proposed importing two SAM (Surface-to-Air Missile, used as synonym for AMD) systems. Kalam opposed this in his letter to Fernandes dated June 23, 1999. The FIR does not contain the details of this letter, but an article in Tehelka weekly suggests that he essentially made two points: one, past experience has shown that 50 per cent of the imported systems have failed and if the country imports Barak, it will have to depend upon Israel for spares, which again depends on the nature of Indo-Israel ties. It is debatable whether this letter could be interpreted as a firm `No' to the import of the Barak system.

The FIR alleges that Admiral Sushil Kumar put up a fresh proposal to Fernandes on June 25, 1999, after a meeting with Kalam the same day. This proposal, says the FIR, was based on a misrepresentation of facts, suggesting that Kalam had concurred with an earlier proposal of NHQ in 1996 and that the current proposal for import of six Barak AMD systems was in accordance with that proposal. The FIR states that the 1996 proposal was finally approved as the clarifications sought by then Defence Minister Mulayam Singh Yadav were never replied to. The FIR alleges that Fernandes overruled Kalam's opinion, given to him on June 23, 1999, against the "import of any missile system", and gave the go-ahead to Sushil Kumar's proposal on June 28, 1999.

The FIR also refers to the objection put on record by the then Defence Secretary, T.R. Prasad, on August 30, 1999, that the CCS had returned proposals in respect of acquisition of some of the Precision Guided Missiles and it had decided to defer the proposals to be considered by the next government. Despite this note, Fernandes wrote back to Prasad on September 3, 1999, that the installation of the Barak AMD system on the INS fleet was absolutely essential and, therefore, the CCS might be apprised of the urgency of the requirement and its approval sought.

On March 2, 2000, the CCS approved its draft note with the objections of the DRDO (the FIR does not say what the objections are). The contract was signed on October 23, 2000, to procure seven Barak AMD systems at a total cost $199.50 millions and 200 missiles from Rafael at a cost of $69.13 millions. The FIR restates R.K. Jain's admission to Tehelka.com that 3 per cent of this cost went to Fernandes and Jaya Jaitley as commission, while he himself was given 0.5 per cent. These commissions were paid to them by Suresh Nanda, the middleman in the deal, according to the Tehelka tapes.

The CBI has found a huge amount of suspected payments from Motoren-und-Turbinen Union, GmbH (purportedly a supplier of diesel engines to IAI Vessels) in the bank accounts of Dynatron Services, a company managed by Suresh Nanda and his family members during the relevant period. It has also found that IAI had a close business relationship with Magnum International Trading Co. Ltd (MITCL) and Eureka Sales Corporation (ESC) of Sudhir Choudhary, a relative and a former business associate of Nanda.

Sudhir Choudhary and his companies have received a number of suspected remittances to the tune of millions of dollars from IAI during 1998-2001, the FIR states. The FIR, therefore, is also against unknown officials of IAI, apart from Fernandes, Jaya Jaitly, R.K. Jain, Sushil Kumar and Nanda. It is perhaps premature to surmise that the persons named in the FIR were the intended beneficiaries of these huge suspected payments by IAI. But it does suggest a plausible nexus, and this is a disturbing finding.

The FIR notes that the DRDO sought to block the import of the Barak system right until the end. On August 4, 2000, A.K. Kapur, former Project Director of the Trishul Project and a member of the team that witnessed the demonstration of the Barak AMD system in Israel, wrote to the then Vice-Chief of the Naval Staff in his capacity as a member of the PNC constituted for the import of the seven Barak AMD Systems.

Kapur claimed that the formal evaluation task was not assigned to the team that visited Israel in 1995. The manufacturer told the team that details would be given when India actually decided to acquire the system. "A more comprehensive system evaluation was required before procurement," Kapur wrote. The CBI apparently sees this letter as an objection to the deal and infers that it was not given due consideration.

The CBI's inquiry also revealed that the Barak AMD systems were acquired essentially on a single tender basis. "Indigenous alternative, that is, naval version of Trishul system, which was in an advanced stage of development, was not given a considered thought either by the then Raksha Mantri or by the then CNS," the FIR says.

According to the CBI, under the norms of procedure of defence procurement, 1992, the DRDO's concurrence is a prerequisite for the acquisition of any weapon system through import. The CBI's conclusion after going through the relevant documents is that the DRDO never concurred to the import option of the Barak AMD system during 1998-99.

Based on this finding, many analysts have questioned the DRDO's track record in delivering promptly on what it has promised as well as the quality of its Trishul system as compared to Barak. They may well be right, but does this justify a nexus among arms manufacturers, middlemen and those at the helm in the Indian Navy and the Defence Ministry?

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