Rafale Verdict : Flawed, Confused & Contradictory

The Supreme Court’s judgment in the Rafale case raises more questions than it answers.

To dismiss the petitions, the Court cited jurisdictional limitations and lack of domain expertise in reviewing the merits of the defence procurement agreement. But that did not restrain the Court from proceeding further to  undertake a merit-review, virtually putting a stamp of approval on all contentious issues like decision making process, pricing and induction of offset partner.

What made the Court entertain the petition in the first place?

The first petition regarding Rafale case was filed by lawyer M L Sharma, who is known for filing PILs on almost all main issues of the day. Recently, the SC imposed costs of Rs. 50,000 on him for filing a frivolous PIL.

Sharma’s petition alleged that the deal for procurement of 36 Rafale jets from French company Dassault was a result of corruption. So he sought for quashing the deal and also for registering FIR against PM, Defence Minister and other officers.

The petition filed during the tenure of previous CJI Dipak Misra was adjourned on a few occasions. When the petition was listed on October 10 before the bench of CJI Ranjan Gogoi, the Court sprang into action, stating that it wished to be apprised of the details of the decision making process. This is despite the Court observing that the averments in the petitions were ‘grossly inadequate’.

Also listed on that day was a petition filed by Vineet Dhanda. Dhanda’s petition was bizarre in nature, as it sought to direct the Government to reveal the pricing details of the deal, so that the allegations against PM Modi could be cleared. Dhanda’s grievance was that PM was being branded as a “thief” due to Rafale allegations. “The  way  the  Prime  Minister  and  the  Government  are criticised sends a wrong signal in the World. The people in the whole world will not take a good impression”, Dhanda’s petition stated. So, his interest was to clear the name of PM.

If the averments in the petitions were “inadequate and deficient”, as noted by CJI Gogoi in the order, the Court should have simply dismissed the petitions then and there itself. What prompted the Court to delve into the matter? The Court ought to have been doubly circumspect on that occasion before plunging into the issue, especially when the bona fides of the petitioners were yet to be established. The tactical device of ‘ambush petitions’, whereby frivolous petitions are deliberately filed on controversial issues with the sole intention of suffering dismissal in order to create an impression of judicial approval of the issue, is not unknown in court circles. Therefore, the very first step taken by the Court in the case was problematic.

It was after the order on October 10 that the PIL by Yashwant Sinha, Prashant Bhushan and Arun Shourie was filed. They did not seek to quash the deal. Rather, they sought probe on their complaint alleging corruption by high functionaries involved in the deal. AAP MP Sanjay Singh also filed a petition seeking similar prayers.

Review Of Decision Or Decision Making Process?.

In the beginning of the judgment itself, the Court said that it will not review the soundness of the decision, and will only examine if proper process has been followed. This is in accordance with the well settled principles of judicial review, which gives more leeway to the executive in policy matters, especially those concerning defence and national security. But, how was this stated principle applied in the case? Let’s see.

The petitioners argued that the decision announced by PM Modi in France in April 2015 to purchase 36 Rafale jets was made without following the Defence Procurement Procedure(DPP). According to them, the earlier Request for Proposal for 126 jets(18 in fly away condition and 108 to be made by HAL in India), announced in 2007, was still under negotiation when PM announced the deal in April 2015. They relied on a purported statement made by Dassault CEO in March 2015 that the discussions with HAL for manufacture of aircrafts in India were nearly finalised.

They also stated that the then Foreign Secretary Jaishankar had announced on April 9, 2015( eve of PM’s France visit)that talks between Dassault and HAL were underway. In this backdrop, the PM unilaterally announced the deal, without following the process, alleged the petitioners.  The petitioners further alleged that even the PM's announcement took the then Defence Minister Mohan Parikkar by surprise.

The reply of the Government admits that the procedure under DPP 2013 was initiated only after the announcement of PM. The approval for Inter-Governmental Agreement(IGA) was taken from the Defence Acquisition Council(DAC) on 13^th May 2015. Negotiations started after that in May 2015 and continued till April 2016.  The Cabinet Committee for Security approved the IGA for purchase of 36 aircrafts on 24^th April 2016. After the approval, the IGA was signed on 23^rd September 2016.

So, one may wonder whether the procedure under DPP was initiated to give post-facto sanction to PM’s announcement. The natural sequence of event should have been sanction-negotiation-announcement. But in Rafale deal, it seemed that the events happened in the reverse.

Anyhow, this unusual course of events constituted a prima facie doubt about the decision making process. It was incumbent on the Court to address this issue.

The answer to this issue provided in paragraph 22 of the Court is wholly unsatisfactory. Without addressing the core of the issue, the Court simply dismissed it with hollow categorical statements such as"We are satisfied that there is no occasion to really doubt the process, and even if minor deviations have occurred, that would not result in either setting aside the contract or requiring a detailed scrutiny by the Court"

The issue was trivialised as “minor deviations”.

To further befuddle the judgment, the Court then goes on a totally irrelevant discourse on the need to strengthen the Air Force."Our country cannot afford to be unprepared/underprepared in a situation where our adversaries are stated to have acquired not only the 4th Generation, but even 5th Generation, of which, we have none" ,the judgment said. However, the utility of the aircrafts and their suitability to the force were not at all questioned in the petitions, as acknowledged in the beginning of the judgment. So, these statements invoking militaristic need appear like red-herrings to confound the issue.

The Court then weaves a web of immunity around the deal stating that its a “defence procurement”.

"We cannot sit in judgment over the wisdom of deciding to go in for purchase of 36 aircrafts in place of 126.We cannot possibly compel the Government to go in for purchase of 126 aircraft", the judgment goes on to add. But the comparative merits of the two deals was not at all an issue in the case. The Court simply had to undertake one exercise- to see whether proper decision making process was followed with respect to deal for 36 aircrafts. Unfortunately, that issue is not seen addressed in the judgment.

“Broadly, the   processes   have   been followed”- this was the Court’s observation. This blank statement, without supporting reasons, is not sufficient to satisfy an inquisitive mind.

Under the garb of reviewing decision making process, the Court in effect endorsed the decision to purchase 36 jets, and omitted to scrutinise the decision making process.

Why the secrecy surrounding pricing?

Pricing was another contentious issue in the case. The petitioners alleged that in the new deal, the price was artificially inflated to accommodate vested interests. An alleged statement by the Defence Minister made in April 2015 was referred to state that the price was initially pegged at Rs.715 crore per aircraft.  As per the petitioners, a subsequent joint statement made by Reliance and Dassault revealed the price to be Rs.1,600 crores per jet. On this basis, it was alleged that the price was hiked by 1000 crores per aircraft. The allegation was that the price hike was to accommodate the increase of offset obligation of Dassault towards Reliance as 50% from 30% of the contract value.

The Government stoutly maintained that the pricing details were highly confidential and sensitive and cannot be revealed.

The Court initially expressed that it will not examine the pricing aspect. Yet,the Court later sought for the pricing details through sealed covers. The Court mentioned in paragraph 25 of the judgment that "The pricing details have, however, been shared with the Comptroller and Auditor General and the report of the CAG has been examined by the Public Accounts Committee"

This statement in the judgment is now alleged to be factually incorrect. The opposition parties are contesting the existence of such a CAG report. Public Accounts Committee Chairman Mallikarjun Kharge has said that the CAG report had no reference to Rafale deal. Widespread criticism is arising from different quarters that the Court was misled to refer on a non-existent CAG report and PAC report. As per a Times of India report, the CAG will submit its report on Rafale deal only by end of January 2019. If that be so, which is the CAG report the Court is referring to?

Whatever be the merits of the opposition claim, this points out to the drawback of relying on ‘sealed cover’ adjudication. Here, the Court merely went by the word of the Government, without affording an opportunity to the petitioners to cross verify the claim. The present controversy regarding this CAG report is deeply embarrassing, and was avoidable.

Anyhow, the corruption allegations levelled by the petitioners were intricately linked with the pricing. The statements by the Defence Minister and  the joint statement by Reliance & Dassualt, which indicated hike in price, are in public domain. The petitioners were after all asking for a probe. In this backdrop, the endeavour of the Court ought to have been confined to examining whether a prima facie case is made out for a probe. Instead, the Court went a step ahead, to unilaterally satisfy itself of the pricing details, shutting out the petitioners' participation. The Court chose not to question the version of the Government that the new deal had economic advantage.

Th other contents of the sealed cover which persuaded the Court to reach its conclusions will remain a mystery.

Blind assumption that Govt did not breach Offset Guidelines

The allegations that Reliance Defence was inducted as an offset partner at the instance of Government of India were simply shut out by the Court by stating that the Offset Guidelines did not provide any role for Government in selection of the offset partner.

It is true that the Offset Guidelines do not give any role to the Government in selection of offset partner. However, the issue before the Court was whether the Government exerted any extra pressure to benefit Reliance, in a manner not contemplated by Offset Guidelines.

The petitioners relied on the statement by ex-French president Hollande that there was pressure from Indian Govt to induct Reliance. It was also argued by them that a recently formed company of Reliance(Reliance Aerostructure Ltd), which had no experience in defence sector, would not have been selected as offset partner by Dassault without any pressure from the Government. They pointed out that the Offset Guidelines mandated that the Indian Offset Partner should be  having experience in manufacture and supply of defence materials. RAL was incorporated only in April 2015 and when the offset agreement was signed in September 2016, it had no experience in defence sector.

The Court held:-"On the basis of materials available before us, this(the claim that India forced France to induct Reliance) appears contrary to the clause in DPP 2013 dealing with IOPs which has been extracted above.Thus, the commercial agreement, in our view, does not assign any role to the Indian Government, at this stage, with respect to the engagement of the IOP"

Here again, the Court seemed to have disregarded the fact that the petitioners were seeking for a probe and not a final determination. They had presented certain materials and factual situations casting a cloud of doubt on the induction of Reliance Defence. The Court was called upon to determine whether it warranted any probe.

But, the Court did not care to address that aspect, and chose to simply go by the terms of the offset contract. The Court also wholly accepted the statement in Government’s statement in the press release that it was yet to receive information about the offset partner.

"The point remains that DPP 2013 envisages that the vendor/OEM will choose its own IOPs. In this process, the role of the Government is not envisaged and, thus, mere press interviews or suggestions cannot form the basis for judicial review by this Court, especially when there is categorical denial of statements made in the Pres, by both the sides", this statement by the Court is again indicative of the fact that the Court misdirected itself. The Court was not called upon for a judicial review of the deal, but to decide whether a probe is necessary.

"We do not find any substantial material on record to show that this is a case of commercial favouritism to any party by the Indian Government, as the option to choose IOP does not rest with the Indian Government"-this conclusion that Government could not have influenced the induction of offset partner as the offset guidelines do not give Government any such role is too simplistic. It is wishful thinking to assume that all written guidelines are followed to the hilt without deviation.

The judgment itself notes that Reliance Aerostructure Ltd came into being in the "recent past". But the Court did not give much weightage to this fact by stating that Dassault tried agreement with parent Reliance company in 2012("It is no doubt true that the company, Reliance Aerostructure Ltd, has come into being in the recent past, but the press release suggests that there was possibly an arrangement between the parent Reliance company and Dassault starting from the year 2012", observed the Court in this regard) 

Many people have point out that the Court committed a grave factual error here. The purported agreement which Dassault had in 2012 was with Mukesh Ambani's company Reliance Industries. It was not the parent company of RAL. The parent company of RAL is Reliance Infrastructure, which belongs to Anil Ambani.

It is also curious to see the Court choosing to rely on press releases to support the deal; however, the press reports raising questions about the deal are curtly discarded.

The Court had to answer the issue in relation to the factual circumstances raised by the petitioners, instead of casually dismissing them with sweeping remarks that "no substantial material was on record". Throughout the judgment, the Court repeatedly loses sight of the fact that petitioners' demand was for an independent court-monitored probe, which could unearth more materials.

Inter Governmental Agreement.

During the hearing, the petitioners had argued that Inter-Governmental Agreement was entered only to circumvent tender process. They had also highlighted the concerns flagged by the Law Ministry about the IGA – that there was no sovereign guarantee from French Government for IGA and that the venue of arbitration was fixed as Geneva.

The Attorney General had admitted in the Court that there was no sovereign guarantee for the IGA. If there was no sovereign guarantee, what is the significance of an IGA concerning a procurement deal from a private company? This is a relevant question, which is not seen addressed by the judgment.

The judgment also mentions that in 2007 Defence Acquisition Council had expressed Acceptance of Necessity of 126 26  Medium  Multi   Role   Combat   Aircrafts. If that is situation, what is the rationale in reducing the number of aircrafts by 36 in 2015?

Such questions remain unanswered in the judgment.

“It cannot be lost sight of, that these are contracts of defence procurement which should be subject to a different degree and depth of judicial review”, the Court expressed in the judgment.“The scrutiny of the challenges before us, therefore, will have to be made keeping in mind the confines of national security, the subject of the procurement being crucial to the nation’s sovereignty”,the judgment went on to state.

However, in application of these principles, the Court seemed to have got confused. To analyse the issue whether the alleged procedural irregularities in the deal gave raise to doubts of corruption, which warrant a court-monitored probe, there is no need to review the merits of the deal. However, the Court went on to do that.

The above mentioned limited scope of jurisdiction did not deter the Court from declaring that decision making process was proper, accepting the government's version on pricing and concluding that Government did not interfere in selection of Reliance as offset partner.

This approach of endorsing the merits of issue while declining jurisdiction on ground of limited scope of judicial review is deeply flawed and contradictory. Because, it forecloses the issues forever, without providing proper course of adjudication.

Similar thing happened in the Loya case too, which was equally controversial with high political stakes. There, the Court conclusively settled factual questions under Article 32 of the Constitution, acting like a trial court but without following a fair process of trial. Here, the Court says that its views "are primarily from  the   standpoint  of   the   exercise   of   the   jurisdiction   under Article 32". However, the views expressed- which are mostly unilateral, taking the word of the government as gospel truth- give ultimate imprimatur to the issues surrounding the deal.

When there are conflicting versions of facts presented by two sides, the proper course would have been to entrust the job of facts collection to an independent agency. Instead, the Court took the denial of one of the contesting parties at face value and sealed the issues with a seemingly conclusive force

Towards the end, the judgment marks with a bit of condescension that "Perception of individuals cannot be the basis of a fishing and roving enquiry by this Court, especially in such matters"

Had the Court busted the perception through a sound and fair process of adjudication, the above statement could have been bought. The perception lingers, unfortunately, despite the categorical dismissal of the petitions.