Day 3 Arguments

Rafale Fighter Jet Deal

November 14th 2018

On Wednesday 14.11.2018, a 3 Judge Bench of the Supreme Court substantially heard the petitions seeking a judicial probe into the Rafale Fighter Jet Deal. The Court had earlier asked the Central Government to submit records of the process adopted for finalisation as well as the pricing details of the Rafale Jets and the same had been submitted to the Court in a sealed cover.


Pointing to the procedural irregularities in the case, Mr. M L Sharma submitted that the Rafale deal was a serious fraud by the government. He further requested that the government file a detailed response explaining how the announcement of the deal and the joint statement issued by the French & Indian Prime Minister could have been made almost a year prior to its approval by the Cabinet in March 2016. The petitioner further alleged that the deal had already been finalised before seeking approvals from the Defence Acquisition Council as well the Cabinet Committee on Security and requested that the Attorney General submit a clarification of this aspect. The Petitioners further requested that the question  of whether the Indian Government can enter into such contracts must be referred to a Constitution Bench.


In the Petition filed by Mr. Sanjay Singh, AAP Member of Parliament in the Rajya Sabha, it was contended that the arguments presented by the Government for the last minute revision of the deal were logically inconsistent. As of  March 2015, the deal between Dassault and HAL was in the stages of finalisation, when at the last stage the terms of the deal were significantly altered and Reliance was introduced as the Offset partner. Further, the earlier number of 126 Rafale Jets was reduced to 36 which is contrary to the argument of the Government of India that the changes in the deal were made to augment combat potential. It was also argued that the documents placed on record by the Government did not address whether proper procedure had been followed at every stage of finalising the new deal for 36 jets announced in April 2015. With respect to pricing details being disclosed, Mr. Sanjay Singh’s council submitted that the price had been revealed twice in parliament and could therefore be placed on record publicly in the Court. He further requested the Court for additional time to file a detailed response to the documents submitted by the Government.


Mr. Prashant Bhushan argued next, appearing for Mr Yashwant Sinha. He submitted a rejoinder to the document filed by the Central Government. Mr. Bhushan presented his arguments on primarily 3 aspects. He first dealt with the Centre’s submission that the Indian Government did not have any role in the selection of the Indian Offset Partner as this was solely within the domain of the vendor, i.e. Dassault. Referring to the offset guidelines under the Defence Procurement Policy of 2013, Mr. Bhushan submitted that the argument of the Government that Dassault could be permitted to select the offset partner without seeking prior approval from the Ministry of Defence could not be accepted as several clauses in the guidelines required the contrary. Mr. Bhushan further highlighted that a hasty retrospective amendment to clause 8.2 of the guidelines could not override the requirement under several other clauses of submitting all proposals for offset contracts to the Defence Ministry.


Secondly, making his submissions on the procedure adopted in the Rafale deal, Mr. Bhushan referred to the sequence of events beginning from 2007 when the Request for proposal for 126 Rafale Jets was first submitted by the Indian Government. He argued that the Rafale deal did not meet the three conditions of an intergovernmental agreement and it was an attempt by the government to short circuit the proper procedure by adopting the intergovernmental agreement route and omitting the requirement for inviting bids and tenders. The government had failed to provide a satisfactory explanation as to what compelling circumstances had warranted their actions of entering into an intergovernmental agreement as opposed to adopting the standard procedure for Defence procurement deals as per the policy.


On the question of pricing and the details of the same being revealed, Mr. Bhushan requested permission to refer to certain clauses of the Secrecy Agreement stating that only such information which has a certain level of security was to be kept confidential. Despite Attorney General K K Venugopal’s objection to his request, Mr. Bhushan submitted that the pricing details having been revealed twice in parliament and hence were not a matter of national secrecy and must therefore be discussed to address why there was an almost 40% increase in the pricing in the new deal.


Ranjan Gogoi CJI said that the aspects on pricing need not to be discusses now and needed to be debated only if the Court decides that aspects on pricing needs to come in public domain. Next Mr. Arun Shourie made brief submissions arguing that a company of the experience of Dassault which was set up in 1929 would not have chosen a company like Reliance, which had no experience at all. Further even the Defence Minister Mr. Manohar Parrikar had claimed the he was unaware of this deal.


Before the Bench rose for lunch, Gogoi CJI informed AG Venugopal that the Court would like to meet someone from the Indian Air Force, as it was them that the Court was dealing with. Once the hearing resumed, Air Vice Marshal Chalapathi was present in Court to interact with the Bench.


Mr. KK Venugopal resumed his arguments on behalf of the government. He repeated that all the steps in procurement procedure were duly complied with and the Defence Acquisition Council (DAC) had approved of the purchase of the 36 Rafale jets. KM Joseph J questioned the AG as to how the Prime Minister could announce a new deal in April 2015 when the Request For Proposal of the earlier deal was pending. At this point, the CJI interjected to point out from the government’s written note that the process for withdrawal was put into motion in March 2015, only to be closed in June.


Mr. Venugopal further submitted that the entire earlier scheme was different. 18 jets were to be received in a flyaway condition while 108 were to be made in India HAL was to be vehicle for the manufacture. It not only quoted a 2.7 times higher time-slot, but was also unable to ensure that it would achieve the competency requirement. The Government needed to ensure a high level of sophistication and it was a management decision taken after a consideration of the availability of technology and technicians.


On the issue of the selection of the Indian Offset Partner (IOP), Mr. Venugopal submitted that as per the offset clause of the government, it is not necessary that the equipment manufactured by the IOP would be of the same aircraft which is being procured, the only purpose of the clause being that upto 50% of the benefit of the deal accrues to India. The offset partner is to be selected by the vendor who would inform the government of its decision only in 2019. In the agreement, it has been specifically agreed that the vendor will choose the IOP. The vendor and the governments of France and India have accepted these terms.


So far as the amendment to the Offset Partner Guidelines was concerned, the amendment was recommended in 2013 to ease the burden of the supplier. The AG also indicated that in the amended Paragraph 8.2, where the vendor discloses the IOP at the time of seeking offset credit and the Partner is found to be ineligible, penalty is imposed by treating the transaction as invalid. Where the details of the IOP are furnished one year prior to the discharge of the offset obligations and the chosen entity is considered to be ineligible, the vendor incurs the risk of re-phasing with consequent 5% enhancement in the obligations.


Earlier in the day, Mr. Bhushan had questioned the government’s justification to short-circuiting the process of tendering in respect of these 36 jets. He had also raised the concern that that the law ministry had flagged the issue regarding the Inter-governmental Agreement-that no sovereign guarantee was offered by the government of France in the event Dassault failed to deliver, despite huge payments to being made to the French company. The AG concluded on the note that it was a sensitive issue the  Court was dealing with and it should restrict the scrutiny to some areas only.


The Bench then gave the petitioners the opportunity to present their rejoinder arguments before reserving the case for judgment.