New Delhi: London-based India-born arms dealer Sudhir Choudhrie, his son Bhanu, and British aerospace major Rolls Royce were booked by the Central Bureau of Investigation (CBI) in a corruption case pertaining to the procurement of Hawk jets for the training of Indian Air Force pilots, CBI sources said Monday.
It is learnt that a case has also been registered against unknown public servants, including from the Defence Ministry and Hindustan Aeronautics Limited (HAL), the manufacturer of the Hawk trainers in India. The case dates to the era when the United Progressive Alliance (UPA) government was in power in India.
Choudhrie and his son both reportedly figure in a list of “undesirable middlemen” in the Defence Ministry and that of the CBI.
However, while Sudhir Choudhrie has been probed by investigative agencies in the past, including by the CBI, he has never been convicted or arrested in India.
He is now a British citizen and runs a large business empire with interests in the hospitality, aviation, and healthcare sectors. Choudhrie is also reportedly a big political donor in the UK.
According to sources, the CBI case dates to 2003-2012 and involves allegations against the then Rolls Royce India director Tim Jones and others of engaging in a criminal conspiracy to deceive the Government of India in the procurement of Hawk aircraft.
Notably, the ongoing CBI investigation, which has spanned several years, has found that crucial documents related to the purported transaction were seized from the premises of M/s Rolls Royce India Pvt. Ltd. during a survey conducted by the Income Tax Department in 2006-07.
However, the accused individuals, allegedly deliberately caused the “disappearance” of these documents in order to evade a probe, according to the CBI FIR, which ThePrint has seen. It says that “in furtherance of the conspiracy and to evade investigation by Indian agencies into the alleged bungling in the deal, (the accused) caused disappearance/removal/destruction of such vital documents”.
Further, Rolls Royce is alleged to have paid kickbacks to public servants in India, including tax officials, to prevent investigation into its tax affairs and use of advisors. An amount of GBP 1.85 million was allegedly paid to intermediaries through Commercial Contractual Agreements (CCAs).
What was the Hawk deal?
In September 2009, the Cabinet Committee on Security (CCS) granted approval for the procurement of 66 Hawk 115 aircraft and the signing of an Inter-Government Agreement between the governments of India and the UK for long-term product support.
The key approvals granted by the CCS included the procurement of 24 BAE Hawk 115Y AJT aircraft in flyaway condition, complete with spares, ground-support equipment, and training aids.
In addition, materials for the manufacture of 42 aircraft by HAL were authorised, with a total cost of GBP 734.21 million, equivalent to Rs 5,653.44 crore (at an exchange rate of Rs 77 per GBP).
The deal also involved these 42 aircraft being license-manufactured by HAL at an additional cost not exceeding GBP 308.247 million, equivalent to about Rs 1,944 crore.
Furthermore, an approximate payment of GBP 7.5 million was made to Rolls Royce as a manufacturer’s license fee for the manufacturing of engines.
The contracts dated 26 March 2004, and subsequently in different phases, contained clauses prohibiting the payment of agent/agency commissions.
These clauses were to the effect that the supplier (Rolls Royce/BAE) shall confirm that it has not engaged any agent or middlemen to intercede, facilitate, or in any manner recommend to the Indian government for award of the contract, and also that no payments were made to any such individuals.
Revelations of corruption
The FIR registered by the CBI says that media reports alleging corruption in the civil business operation of Rolls Royce surfaced in 2012, leading to a probe by the Serious Fraud Office (SFO), an investigative government department in the UK.
Subsequently, Rolls Royce prepared a Statement of Fact (SoF) in which it disclosed corrupt payments made in various transactions with countries including Indonesia, Thailand, China, Malaysia, and India.
A Deferred Prosecution Agreement (DPA) was then reached between Rolls Royce and the SFO in London.
Following this, on 17 January 2017, the Crown Court at Southwark in the UK issued a judgment on the DPA between the SFO and Rolls Royce.
The judgment revealed that Rolls Royce had concealed the involvement of intermediaries in its defence business in India between 2005 and 2009, despite the restrictions imposed by the Government of India through the Integrity Pact (IP) on payment of commissions or fees to intermediaries.
“There are reasons to believe that significant amounts paid to the intermediaries/middlemen by Rolls Royce were routed to public servants in India. The Crown Court Judgment specifically mentions payment of GBP 1 million by Rolls Royce to Intermediary for increase of License Fee of Rolls Royce from GBP 4 million to GBP 7.5 million,” (sic) the CBI FIR said.
The Statement of Fact (SoF), which formed the basis of the aforementioned 2017 Crown Court judgment, stated that a payment of 1.85 million GBP was made to an intermediator in order to retrieve a list of intermediaries that had been seized by the Income Tax Department during its 2006 survey of Rolls Royce India in New Delhi.
There were two purported reasons for trying to retrieve this list. One was to prevent it from reaching the Ministry of Defence (MoD), which could have resulted in the contract being terminated, and the second was to avoid a CBI investigation against Rolls Royce.
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