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Deals under scrutiny

Print edition : Feb 19, 2000



Defence Minister George Fernandes orders an inquiry into all post-1985 defence procurement deals, but the case of Rear Admiral Purohit shows that he may have much to hide.

FOR sheer drama, few official announcements could quite match Defence Minister George Fernandes' decision to order a sweeping inquiry into all procurement deals in his Ministry since 1985. Requested to take up the onus of this inquiry, Chief Vigilance Co mmissioner N. Vittal accepted with little hesitation. Since his office lacks the resources and the machinery to conduct the inquiry, Vittal proposes to bring the Central Bureau of Investigation (CBI) into the picture. On a parallel track, the Ministry of Defence (MoD) has asked the Comptroller and Auditor General of India (CAG), to examine all the emergency procurement decisions that were made in connection with the Kargil conflict last year.

The CAG is already investigating a number of minor purchases transacted over the years, which have allegedly created a massive stockpile of unused and worthless spare parts with the three services. The division of labour between the investigating agencie s is clear - the CVC will handle the high-value acquisitions of major equipment and munitions, while the CAG will look into the smaller-scale everyday purchases of the supplies and spares that keep the armed forces functioning.

Alleged improprieties in defence purchases were always a subject of murmured conversation. The Bofors howitzer deal made them a topic of political heat and acrimony, of elaborate investigations and complicated judicial processes straddling the globe. Fer nandes' action has now transformed defence procurement into an open-ended political controversy which could rage indefinitely and consume several reputations.

In a note detailing the rationale of the decision, the MoD drew attention to the numerous questions that were raised in connection with contracts yet to be finalised. These include the Air Force's long-pending project to acquire an advanced jet trainer ( AJT), the Army's intent to purchase a number of T-90 battle tanks from Russia, and the Navy's proposal to buy the decommissioned Russian aircraft carrier, the Admiral Gorshkov.

On a note of pique, the MoD states: "While on the one hand the Government is criticised for not expediting decisions on these vital projects, which have in some cases been pending for years, on the other hand, completely unsubstantiated allegations and i nsinuations are levelled, even though final decisions are yet to be taken." The parallel probes by the CVC and the CAG, the note concludes, would help to "ascertain the truth about such allegations and introduce transparency in defence purchases."

SUSPICIONS that defence procurements were a domain of rampant irregularities were considerably aggravated by the events following the precipitate dismissal of Chief of the Naval Staff Admiral Vishnu Bhagwat in December 1998. Since then, there has been a flurry of correspondence at the highest level and much media attention on the propriety of various defence purchase plans. In the battle for pre-eminence between the MoD and service headquarters, there was an unseemly torrent of adverse stories on corrup tion at high levels. Former Prime Minister H.D. Deve Gowda's intervention in the debate over the acquisition of the T-90 battle tank and Fernandes' retaliatory effort casting aspersions on the probity of the Sukhoi Su-30 deal, kept these issues in public focus.

Away from the glare of publicity, Jayant Malhoutra, an independent member of the Rajya Sabha, began peppering the Defence Minister with letters. In March 1999, he placed on record a number of reservations about the proposal to buy the T-90 battle tank. T o Fernandes' protestations that the "ongoing controversy" was misplaced since a decision was yet to be taken, the M.P. responded with a broader thrust. Was it a fact, Malhoutra asked, that a number of overseas defence contractors were blacklisted by the MoD, leaving the field clear for middlemen who operate through circuitous routes and enjoy a large slice of the take from each purchase. Further, he asked, could the MoD clarify whether large quantities of spare parts were bought with little regard for t heir technical specifications, contributing to an accumulation of useless inventories that cost several thousand crores.

Malhoutra also urged a review of the blacklisting of Bofors AB of Sweden, which he alleged, had ceased to have any practical benefit. Following a succession of corporate mergers and acquisitions, Bofors had mutated into Celsius AB, a company controlled b y the Swedish Government. Rather than sustain the blacklisting, which only contributed to the enrichment of various middlemen, Malhoutra urged that the MoD resume commercial transactions with the successor company.

In his replies, Fernandes sought to reassure Malhoutra on the various points he had raised. He did though demur at the proposition that normal trading relations be resumed with Bofors' firm. This would, he said "be violative of the existing ban on dealin gs with this company."

Malhoutra though was playing for bigger stakes. In a letter dated April 21, 1999, he went beyond mere allegation: "I am charging that there is no defence deal without the presence of middlemen, agents, traders and middle companies... I would suggest that you ask your senior officials as to the role of the Nanda's, the Chaudhary's, the Khanna's, the Jajodia's, the Hinduja's and the Mittal's etc. (sic) in the procurement of strategic defence equipment."

As the Kargil war overwhelmed all other concerns and the country moved in its aftermath into the electoral mode, Malhoutra's letter-writing zeal waned. He returned to these themes though during the winter session of Parliament, vigorously joining a Rajya Sabha debate on defence procurement with the demand for a comprehensive inquiry by a Joint Parliamentary Committee. In raising the supposed intimacy between various arms dealers and Deputy Chief of Naval Staff Vice Admiral Harinder Singh, Malhoutra also gave a clear signal that the ghosts of the Bhagwat matter are yet to be laid to rest.

SIMMERING controversies over the high-profile defence purchases - such as the AJT, the T-90 and the Admiral Gorshkov - have undoubtedly motivated Fernandes. But there is little doubt that his main compulsion comes from a civil writ petition filed in the Delhi High Court by Rear Admiral Suhas V. Purohit, seeking a direction to the Defence Ministry that his long-delayed claim to promotion be granted.

As an issue, corruption may appear incidental to Purohit's claim for a promotion. The nexus emerges in all its stark details when it is recalled that Fernandes had himself, in his moral crusade against Bhagwat, repeatedly invoked the Purohit case as a ca se of wrongdoing by the former Naval chief. Bhagwat, in the Defence Minister's narration of matters, was unduly protective towards a subordinate officer who had been accused of serious corruption. Fernandes in an extensive interview with a national newsp aper sought to justify his actions against Bhagwat saying: "One of the first things that the Prime Minister spoke to me personally about was the Purohit matter. And it was stonewalled. So I went back to what had happened earlier, the CBI inquiry that had been ordered by my predecessor. The CBI wanted files, they were refused. And the responses that one got was (sic) that the Chief of the Naval Staff has taken a decision and that is the final decision... The PMO was still after me, the CBI was doing its inquiry, they had not closed the case. But the Chief of the Navy was to tell me that 'I have closed the case, and there was nothing to it"' (The Indian Express, Delhi, April 19, 1999, page 9).

THE allegations against Purohit first surfaced in the form of an anonymous letter dated June 21, 1997, which was delivered to the MoD, the Naval Headquarters (NHQ) and also reportedly, the Prime Minister's Office. The letter made out a case that as Assis tant Chief of Logistics in the NHQ, Purohit was sustaining an unsavoury relationship with various arms brokers, notably Super Trade, Alfa Stone and Makalu.

Despite a clear-cut government directive that anonymous complaints should not be dignified with an official inquiry, the NHQ was compelled to institute an investigation headed by chief of personnel Vice-Admiral J.C. DeSilva. In October 1997, NHQ replied to persistent inquiries from the MoD, and dismissed all the charges against Purohit as baseless. Shortly afterwards, Purohit was cleared for the next higher rank of Vice-Admiral by the Navy's Promotion Board. He was to assume the rank with the responsibi lity of Controller of Logistics, on the retirement of the incumbent, Vice-Admiral Verghese Koithara on January 31, 1998.

The MoD, for reasons unclear, refused to accept the Promotion Board's recommendations, insisting instead that the full record of the NHQ's internal inquiry be placed before it. The NHQ responded, with some asperity, that the demand was "violative of the basic principles of administrative law".

As the stalemate persisted, the NHQ relented. On April 14, 1998, Admiral Bhagwat and the chief of personnel met the Defence Minister and handed over a copy of the findings in the Purohit matter. It was around this time that the CBI was brought into the p icture, although the official record fails to register this decision. To date, there has been no communication from the MoD to the NHQ about the reference of the matter to the CBI. This is, as experts in administrative law maintain, a gross contravention of norms.

In June 1998, a committee comprising the Defence Secretary, the Financial Advisor (Defence Services) and the Vice-Chief of Naval Staff, completed its own inquiry, holding all allegations against Purohit to be baseless. The MoD showed little inclination t o listen. In August, it demanded that the NHQ hand over all the relevant records immediately for scrutiny and investigation. Another long standoff ensued, with the NHQ repeatedly protesting against the Ministry's "delaying tactics". Again, it was forced to relent and hand over all the required documents in October 1998 for perusal by the CBI.

There are indications that the CBI inquiry has failed to unearth anything adverse against Purohit. But this did not prevent Fernandes from tampering with the truth in his crusade against Bhagwat. In a self-justificatory document circulated to members of Parliament in April 1999, the Defence Minister made the astounding claim that a "self-contained note" had been submitted by the CBI in the Purohit matter. The contents of the supposed note were damning, and should have in normal circumstances, warranted summary dismissal: "Requisitions/orders placed on suppliers in Russia by Naval Headquarters are conveyed in advance to the above mentioned firms (i.e., Super Trade, Alfa Stone and Makalu) to enable these firms to manipulate their prices to the disadvanta ge of the Indian Navy. CBI has obtained copies of fax messages exchanged between the trading firm and the supplier, which on comparison with the Naval Headquarters request and the date of such requests corroborate this information. Sources have also info rmed that such advance information is passed on by (Rear Admiral) S.V. Purohit from the fax machine installed at his residence or through an officer".

Curiously though, with such a scathing indictment in its possession, the MoD chose not to proceed against Purohit. Instead, it lapsed into its accustomed pattern of stonewalling his promotion.

On June 16, 1999, chief of personnel in the NHQ Vice-Admiral Arun Prakash wrote to the MoD asking among other things, for definitive confirmation of a CBI inquiry against Purohit. If such was indeed the case, suggested Vice-Admiral Prakash, then it would be necessary "in the interest of natural justice that a formal query be made of the CBI, regarding the progress (if any) of their investigations and whether there is a likelihood of a chargesheet being filed within a reasonable time frame".

The query remained unanswered. On September 6, Vice-Admiral Prakash wrote to Purohit, virtually conceding defeat: "NHQ has so far received five representations from you in a period of three months. All issues of relevance raised by you have been forwarde d in writing to MoD and regular queries are being made to elicit a response from them. The undersigned has personally brought to the notice of the RM (Defence Minister) and Defence Secretary the long delay that has occurred in the CBI secret verification as well as on the question of your promotion to the rank of Vice Admiral. It is for your information that no written response has been received from the MoD to date. You may also note the NHQ view that nothing more can be done at this juncture to progre ss the case".

It was this final capitulation of NHQ that compelled Purohit to move the Delhi High Court for redress. Abruptly awakening to the inherent hazards, the MoD served him with a show-cause notice on November 24. As his petition shows, the notice pertains to a transaction effected in November 1997, in which the aggrieved party had failed to win sustenance from a single-judge bench and a division bench of the Delhi High Court. A subsequent effort to take the matter to the Supreme Court through special leave pe tition was also dismissed.

IF the evidence marshalled by Purohit in his petition is any indication, then his principal fault has clearly been his expertise in naval logistics and his sense of probity. The boot, in other words, is on the other foot. Far from being complicit in wron gdoing, Purohit's fault was that he has often blocked the efforts of the flourishing nexus between arms dealers and certain officials in NHQ and the MoD, to fix procurement decisions to their mutual pecuniary advantage. Far from being in league with firm s such as Makalu, Purohit was the first to blow the whistle on their unsavoury business practices. His continuing victimisation is perhaps as good an indication as any, of the bizarre inversions of values and procedures in the MoD under George Fernandes.

In ordering a sweeping inquiry into all defence deals since 1985, Fernandes is clearly seeking to divert attention and to create a bond of culpability with some of his predecessors. The effort will not wash. Irrespective of what the CVC or the CAG find, the Purohit matter has acquired its own momentum which can no longer be stalled.



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