Explaining the Rafale Deal Controversy

Introduction- Rafale Deal Controversy

The Rafale deal controversy is a political controversy in India related to the purchase of 36 multirole fighter aircraft for a price estimated at €7.8 billion by the Defence Ministry of India from France’s Dassault Aviation. The origin of the deal lies in the Indian MMRCA competition, a multi-billion dollar contract to supply 126 multi-role combat aircraft to the Indian Air Force (IAF).

In the Supreme Court of India

CIVIL/CRIMINAL ORIGINAL JURISDICTION
WRIT PETITION [CRIMINAL] NO.225 OF 2018

MANOHAR LAL SHARMA (PETITIONERS)

VERSUS

NARENDRA DAMODARDAS MODI & ORS. (RESPONDENTS)

WITH W.P.(C) NO.1205/2018 W.P. (CRL) NO.297/2018 W.P. (CRL) NO.298/2018

RANJAN GOGOI, CJI

On 14 December 2018, the supreme court upheld the Rafale deal, stating that no irregularities or corruption have been found. The Supreme Court delivered the final legal judgement on the controversy on 14 November 2019 and dismissed all the petitions seeking a review of its December 2018 judgement.

Facts

Indian Air Force (IAF) raised the requirement for Medium Multi-Role Combat Aircraft (MMRCA) in 2007.
This was to replace the aging fleet of MiG aircraft.
Tender – Tenders for 126 Medium Multi-Role Combat Aircraft (MMRCA) fighters were issued by India in 2007.
It was an open competition between companies including Dasault Aviation of France.
Dassault was announced as the lowest bidder in 2012.
Earlier Deal – Of the 126 jets required, 18 fighters were to be imported in a fly-away condition.
Hindustan Aeronautics Ltd (HAL) would manufacture the remaining 108 jets.
This was agreed to be with Transfer of Technology (ToT) from Dassault.
Stall – India and France were unable to decide on a price for the jets.
The workshare agreement between HAL and Dassault Aviation was signed in 2014.
But with the new NDA government in place, clarity on the progress of the deal remained unclear.
The new deal – On PM’s visit to France in 2015, India’s intention to buy 36 Rafale aircraft in the “fly-away” condition was announced.
Defence Minister announced the previous 126 fighter jet deal to be dead.
Subsequently, the deal for the acquisition of 36 aircraft was signed by the Defence Ministers of India and France in 2016.
This was done through a government-to-government deal.

Issue

In November 2017, Congress alleged a ‘huge scam’ in the Rafale fighter jets deal. Saying that the contract violated the procurement procedure, the Congress party blamed the government for promoting ‘crony capitalist friends’ at the cost of a defense public sector unit, Hindustan Aeronautics Limited NSE -1.06 %.

Background

UPA deal

India began the process to buy a fleet of 126 Medium Multi-Role Combat Aircraft (MMRCA) in 2007 after the Defence Ministry, headed then by Congress leader A.K. Antony, cleared the proposal from the Indian Air Force.

The contenders for the mega deal were Lockheed Martin’s F-16s, Eurofighter Typhoon, Russia’s MiG-35, Sweden’s Gripen, Boeing’s F/A-18s, and Dassault Aviation’s Rafale.

After a long-drawn process, bids were opened in December 2012 and Dassault Aviation emerged as L-1 (lowest bidder). In the original proposal, 18 planes were to be manufactured in France and 108 in India in collaboration with the Hindustan Aeronautics Ltd.

There were lengthy negotiations between the then UPA government and Dassault on prices and transfer of technology. The final negotiations continued till early 2014 but the deal could not go through.

Details of the re-negotiated price per Rafale were not officially announced, but it was suggested by the then UPA government that the size of the deal would be USD 10.2 billion. The Congress claimed per aircraft rate including avionics and weapons was zeroed in at Rs 526 crore (As per Euro exchange rates prevailing then).

What was the deal finalized by the Modi government?

During his visit to France, Prime Minister Narendra Modi on April 10, 2015, announced India will purchase 36 Rafale jets in a government-to-government agreement. After the announcement, questions were raised by the Opposition on how the PM finalized the deal without the approval of the Cabinet Committee on Security.

A joint statement issued on April 10, 2015, after talks between Modi and then French President Francois Hollande, said they agreed to conclude an Inter-Governmental Agreement for the supply of 36 Rafale jets on terms that would be better than conveyed by Dassault Aviation as part of a separate process underway.

The statement said the aircraft and associated systems and weapons would be delivered on the same configuration as had been tested and approved by Indian Air Force, in a clear reference to negotiations and testing process for the Rafale jets under the UPA government.

The Final deal

India and France signed a Euro 7.87-billion (Rs. 59,000 crores approximately) deal on September 23, 2016, for 36 Rafale jets. The delivery of the aircraft will start in September 2019.

The deal was finalised on the basis of the procurement procedure followed under the UPA government.

The Allegations

The Congress has been accusing massive irregularities in the deal, alleging that the government was procuring each aircraft at a cost of over Rs 1,670 crore as against Rs 526 crore finalized by the UPA government. The party has also demanded answers from the government on why state-run aerospace major HAL was not involved in the deal.

The Congress has also sought to know price details of the aircraft and how the rate per aircraft has gone up from Rs 526 crore to Rs 1,670 crore. The government has refused to share the details, citing a secrecy clause of a 2008 pact between India and France.

Congress’ A. K. Antony, who was defense minister in 2008 when India and France inked an inter-governmental agreement on defense procurement, said the government’s claim that the secrecy clause was forcing it to not reveal price details of the deal was “totally wrong”.
The party claimed that Qatar had purchased 12 Rafale fighter jets in November 2017 for USD 108.33 million per aircraft (Rs 694.80 crore).

The Congress has also alleged the government was benefitting the Reliance Defence Ltd (RDL) through the deal as the company has set up a joint venture with Dassault Aviation to execute the offset obligation for the Rs 59,000 crore deal.

The has party alleged Reliance Defence was formed just 12 days before the announcement of the Rafale deal by the prime minister on April 10, 2015. The RDL has rejected all the charges.
Under India’s offset policy, foreign defence entities are mandated to spend at least 30 percent of the total contract value in India through the procurement of components or setting up research and development facilities.

On October 3, 2016, RDL and Dassault Aviation announced a Joint Venture (JV) in the aerospace sector, and a year later, the foundation stone of a manufacturing facility was laid in Mihan, Nagpur.

The Government’s Response

Around two years back, Minister of State for Defence, while replying to a question in Parliament, had said the cost of each Rafale aircraft is approximately Rs. 670 crore but did not give details of prices of associated equipment, weapons, and services.

Later, the government refused to talk about the prices. It has been maintaining that the cost of 36 Rafale jets cannot be “directly compared” with the original proposal to buy 126 combat aircraft as “deliverables” were significantly different.

Finance Minister Arun Jaitley wrote a Facebook post today, accusing Congress and its leader Rahul Gandhi of “peddling untruth” and carrying out a “false campaign” on the deal. He said the deal signed by the NDA government was on better terms than the one agreed to in 2007 under the UPA regime.

Judgement

In September 2018, the Supreme Court of India agreed to hear a public interest writ petition seeking cancellation of the inter-governmental agreement alleging corruption. Congress leader Kapil Sibal said that the Congress would wait until the required documentation is in hand before approaching a court. On 10 October The Supreme Court asked the Central government to provide details of the decision-making process in the Rafale deal with France in a sealed cover by 29 October.

On 14 December 2018, the court dismissed all the petitions seeking a probe into the alleged irregularities in the deal and gave a clean chit to the Union government on all the three aspects, viz., the decision making, pricing, and selection of Indian offset partner. In its ruling, the court said it has “studied the material carefully” and is satisfied with the decision-making process, and that it found no evidence of wrongdoing. It expressed its satisfaction on the pricing aspect, after investigating the details, which were provided to it by the government. It said that it had reluctantly asked the government to provide the details pertaining to the pricing in a sealed envelope, after initial reservation, coupled with the government’s invocation of a confidentiality clause under the intergovernmental agreement. “We have examined closely the price details and comparison of the prices of the basic aircraft along with escalation costs as under the original RFP (UPA regime’s) as well as under the inter-governmental agreement. We have also gone through the explanatory note on the costing, item wise,” the court said while ruling that it did not consider it necessary to repudiate the government’s assertion that “there is a commercial advantage in the purchase of 36 Rafale aircraft”. It further added that it found no fault with the government’s assertion that it got better terms relating to maintenance and weapons package. “It is certainly not the job of this court to carry out a comparison of the pricing details in matters like the present. We say no more as the material has to be kept in a confidential domain,” the court said.

On the aspect of offset partner, the court rejected allegations of commercial favoritism, citing the lack of any substantive material. “We do not find any substantial material on record to show that this is a case of commercial favoritism to any party by the Indian government, as the option to choose the IOP (Indian offset partners) does not rest with (it),” the court said. The court said “we find no reason for any intervention by this court on the sensitive issue of purchase of 36 defense aircraft [sic] by the Indian government,” adding that the “perception of individuals cannot be the basis of a fishing and roving inquiry by this court, especially in such matters.”

Chief Justice of India Rajan Gogoi while writing the judgement for the three-member bench, ruled that “Adequate military strength and capability to discourage and withstand external aggression and to protect the sovereignty and integrity of India, undoubtedly, is a matter of utmost concern for the nation. The empowerment of defense forces with adequate technology and material support is, therefore, a matter of vital importance.”

Reaction

Notwithstanding the Supreme Court’s verdict, the main opposition party, Congress, repeated its allegations of corruption against the government and continued to demand a Joint Parliamentary Committee (JPC) to probe the deal, saying that the supreme court was “not the forum to decide the issue of such a sensitive defense contract”. The Indian government promptly rejected the demand. congress questioned the court’s justification of the selection of Anil Ambani’s Reliance Defence as offsets partner in the Rahul Gandhi, the Congress president, speaking at a press conference, reiterated the demand for a JPC probe, and alleged that the government misled the court on the issue, stating that the Comptroller and Auditor General (CAG) report was not shared with the Public Accounts Committee (PAC) as yet, and in fact, no such report is in the public domain, contrary to the court’s order Mallikarjun Kharge, a senior Congress leader and the chairman of the PAC, who was present along with Gandhi at the press conference, citing personal communication with the deputy CAG, said that neither the PAC nor the CAG was in possession of the said report

The ruling party BJP, on the other hand, welcomed the verdict, while saying that the falsehood on the issue was exposed to Dassault Aviation, on the same day of the verdict, issued a statement to the press welcoming the Indian Supreme Court’s verdict. “Dassault Aviation welcomes the decision of the Supreme Court of India rendered today dismissing all petitions filed on the Rafale Contract signed on 23rd September 2016 in the frame of an Inter-Governmental Agreement between India and France,” the statement read. It also reiterated its commitment to ensuring successful production in India through Dassault Reliance Joint Venture in Nagpur as well as through a full-fledged supply chain network”.

The petitioners in the case, former minister Yashwant Sinha, former journalist Arun Shourie, and lawyer Prashant Bhushan, issued a press statement expressing ‘shock’ and ‘disappointment’ over the court’s decision to dismiss their petitions and said that the verdict “neither addressed the documented facts nor dealt with their main prayer seeking an investigation into the deal to purchase the French fighter jets”. adding that “some of the facts mentioned in the court judgment are not only not on record but are patently incorrect”. While claiming that “no portion of the CAG report has been placed before Parliament or placed in the public domain,” the trio accused the court of taking a “conservative view of judicial review in cases of defence deal corruption involving high functionaries.” The trio claimed that the verdict had used as facts, the statements by the government through affidavits and the sealed covers handed only to the court and not with the petitioners, and that these factually incorrect statements were based on the statements made by the government to the court in sealed covers and the factual inaccuracies show how dangers associated in a verdict based on unverified statements. They demanded “full public disclosure of all the facts” along with “a comprehensive and independent investigation into the deal”.

On 16 December 2018, the Indian Prime Minister Narendra Modi launched a “sharp attack” on Congress for its refusal to accept the Supreme Court’s decision to reject the petitioners’ demands of probes, and accused it of lying, saying: “The country’s defense ministry is also a liar. The country’s defense minister is also false. Officers of the Indian Air Force are also liars. The French government is also false. Now they have started to call the highest court of the country a liar too” The BJP, on the same day, announced that it will be held as many as 70 press conferences across different areas of India to “expose” the Congress for what it said was plotting conspiracy against the Modi government on the issue of Rafale deal.]

Samajwadi Party chief Akhilesh Yadav, who had previously demanded a JPC probe, took a stance contrary to that of the Congress after the court’s verdict, saying that the decision on the issue has been given by the Supreme court, which “is supreme in the eyes of people”, and hence doubts, if any, should be raised in that court. Upon being asked about the change in his party’s stance, Yadav said that his party had demanded a JPC probe before the Supreme court’s verdict. “I had said JPC should be set up as there can be many things in it. But now the verdict has come and the Supreme Court has deliberated on all angles,” he said, “Communist Party of India (Marxist) supported the calls for a JPC”.

Plea for Correction in Verdict

On 15 December 2018, the Union Defence Ministry in a press conference suggested that the Supreme court may have misinterpreted the government’s statements on the Rafale deal and requested corrections. The ministry during the press conference had pointed to the mixing of the tenses, “perhaps on account of misinterpretation of a couple of sentences in a note handed over to this Hon’ble Court in a sealed cover.” The government filed an eight-page application for corrections in the verdict by the Supreme Court stating “observations in the judgment have also resulted in a controversy in the public domain.” By proposing these corrections, the government tried to rectify that the CAG report had not yet submitted its report and the PAC has not examined it. No redacted portion has been placed either in the Parliament or in the public domain ministry claimed that the note simply mentioned the procedures followed on CAG reports and the note was not specific to the Rafale deal CAG report The verdict had mentioned four steps related to the CAG report out of which 3 were incorrect. The court has not responded to the government’s application as it is closed for winter.

On 16 December, the Congress asked the Supreme Court, not to entertain the Government application of rectification of judgment. Congress also urged the court to recall the Rafale judgment as being “self-contradictory” and to issue notices to the government for “perjury and contempt of court as it provided false information to the top court.” The Chairman of the PAC Mallikarjun Kharge and the Congress stated that “no portion of the CAG report has been placed before Parliament or was in the public domain”.

Final Supreme Court Judgement

On 14 November 2019, the Supreme Court of India dismissed all the petitions seeking review of its verdict delivered on 14 December 2018 on the controversy and upheld the previous judgment stating that no irregularities or corruption have been found in the deal.

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