The CBI has booked British Aerospace (BAE) Systems and Rolls Royce India Pvt Ltd, for allegedly paying bribes through arms dealers Sudhir Choudhrie and his father Bhanu Choudhrie to clinch a deal in 2004 from India for 66 Hawk advanced jet trainers (AJTs).

The case comes as a setback to BAE Systems and Rolls Royce given the UK’s keen interest in exploiting opportunities in the Indian defense sector.

The CBI has registered a case against Tim Jones, Director Rolls Royce India, alleged arms dealers Sudhir Choudhrie and his son Bhanu Choudhrie, Rolls Royce Plc and British Aerospace Systems under IPC section 120-B (criminal conspiracy), 420 (cheating) and provisions of Prevention of Corruption Act after completing a six-year-old preliminary inquiry registered in December 2016.

In an FIR registered on May 23, the CBI charged that the Choudhries are “unregistered Indian agent/middlemen who worked for Rolls Royce and BAE Systems, UK” and allegedly used their “influence on Indian Public Servants to induce the government of India to approve the (Hawk) deal” despite the signing of integrity pacts that barred paying commission, influence peddling and engaging agents.

On September 3, 2003, the Cabinet Committee on Security (CCS) approved the purchase of 66 Hawk 115 AJTs. As part of this approval, 24 BAE Hawk 115Y AJTs in flyaway condition with all necessary equipment as well as material for 42 aircraft to be manufactured by HAL were approved for GBP 734.21 million, which is equal to Rs 5653.44 crore (calculated at Rs 77 per GBP).

A payment of GBP 7.5 million to Rolls Royce as a Manufacturer's Licence Fee and the purchase of 42 aircraft, to be licensed manufactured by HAL at an additional cost of GBP 308.247 million, equivalent to Rs 1944 crore, were also approved.

Later contracts with Rolls Royce/BAE contained an integrity clause that prohibited hiring any middlemen or making payments to them.

In case of violation, the company could have been debarred for any Government of India work for the next five years besides penalty.

The HAL delivered 42 aircraft to the IAF between August 2008 and May 2012.

In 2012, media reports alleging corruption in the Rolls Royce operations surfaced, resulting in an investigation by the Serious Fraud Office, London. The company prepared a statement of fact that disclosed its illegal payments concerning transactions with countries like Indonesia, Malaysia, and India.

The statement disclosed that during a survey on January 9, 2006, the Income Tax Department had seized vital documents pertaining to the list of intermediaries who were paid for securing the deal.

“The department had recorded the statement of Jones. Rolls Royce PLC was involved in bribing tax officials and others to prevent an investigation by Indian authorities into its tax affairs and use of intermediaries in the deal,” alleged the CBI, adding that there were reasons to believe that significant amounts paid to intermediaries were routed to public servants in India.

The Statement of Fact was cited in a judgment by Crown Court Southwark, UK which showed that a sum of GBP 1.85 million was paid to an intermediary to retrieve the list of intermediaries seized by the IT department during a survey of Rolls Royce India during 2006 to prevent the list falling into the hands of Defence Ministry which could have resulted in the termination of the contract and a CBI probe.

The Crown Court Judgment specifically mentions payment of GBP one million by Rolls Royce to an intermediary for increasing the license fee from GBP 4 million to 7.5 million, it alleged.

The CBI also alleged that GBP 100 million were paid by Russian Arms companies into a Swiss account in the name of Portsmouth, a company associated with Sudhir Choudhrie for defence deals with Russia for the purchase of MIG aircraft.

"Out of this amount, the companies in the name of Choudhrie's family, namely Belinea Services Ltd, Cottage Consultants Ltd and Carter Consultants Inc. received GBP 39.2 million, GBP 32.8 million and GBP 23 million, respectively, between October 2007 and October 2008," the FIR alleged.

Rolls-Royce Plc office in London issued a statement saying the firm is assisting Indian authorities. 

Image source: HAL