As the hearing in connection with the controversial Rafale deal continued post lunch, Chief Justice Ranjan Gogoi interacted with Air Marshal V R Chaudhari and two other officers from Indian Air Force as to the requirements of the Airforce.
“What has been the latest induction in the IAF in terms of combat aircraft?”, he asked.
When the Air Marshall cited the relevant type, the Chief Justice inquired if the manufacture of the same is ongoing by HAL.
Replying in the affirmative, the officer stated that the process is carried out in Nasik and that the delivery is received every year.
If there are any other aircrafts being manufactured in India, the Chief Justice wanted to know. The Light Combat Aircraft which is being made in Bangalore and is to be inducted in the IAF, he was informed.
When Chief Justice Gogoi asked as what generation, the third or the fourth, the Air Marshall would describe these aircraft, he was told that they could be called “3.5-4th generation”
“So your requirement is of the fifth generation, if not the sixth?”, quizzed the Chief Justice. “We would say the technology is very niche in the fifth generation”, was the officer’s reply.
Thereupon, Attorney General K. K. Venugopal resumed his submissions. 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.
“The (earlier RPF of 2007) was withdrawn in June (2015) So How did the PM give a statement in April (2015) that 36 Rafale jets would be procured from France in a flyaway state?”, asked Justice K. M. Joseph.
As the AG attempted to respond, the CJI pointed 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.
When Justice Joseph indicated that 95% negotiations in respect of the earlier RPF have been claimed to be completed in early 2015 by the Dassault CEO, Mr. Venugopal advanced,
“That entire scheme was different- 18 jets were to be received in a flyaway condition while 108 were to be made in india. We needed a high level of sophistication in the manufacturing. HAL was to be vehicle for the manufacture. It not only Quoted a 2.7 times higher time-slot, it was also unable to ensure that it would achieve the competency requirement”
“At the stage when the decision was taken, we had to have a manufacturer who could produce. It was a management decision taken after a consideration of the availability of technology and technicians”, he continued.
Earlier in the day, Advocate Prashant Bhushan had touted as bogus the government’s stand that it has no role in the selection of the Indian Offset Partner as it is a matter between private parties and the time for a disclosure in this behalf by Dassault has not yet arrived.
He had pointed out the relevant portion of the Offset Guidelines of the Defence Procurement Procedure of 2013 which require all proposals for offset contracts to be processed in the defence ministry and be approved by the defence minister.
“Soon after initiating new deal, in August 2015, to ensure deniability, the GOI quietly amended the defence procurement policy as to offset contracts and that too with retrospective effect. But they forgot that there are other clauses in the offset guidelines which were not amended”, he had claimed.
He drew the bench’s attention to the amended Paragraph 8.2 of Appendix D to Chapter 1 of the DPP which now allows the vendor to furnish details of the IOP, including its eligibility, even at the delayed stage of seeking offset credits or one year prior to discharge of offset obligations.
“This has provided the government with the chance to say that they do not know who dassault’s partner is. So can Dassault execute the contract and get performance out of it without the defence ministry knowing?”, Mr. Bhushan had asked.
Responding to it, the AG advanced, “in September this year, because this was being raised as a political issue, it became necessary for the government of India to issue the clarification- that it has no role in the choice of the IOP which is the commercial decision of the original equipment manufacturer”
He also 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 up-to 50% of the benefit of the deal accrues to India.
“The offset partner is to be selected by the vendor who would let us know only in 2019. in this agreement, we have specifically agreed that the vendor will give the IOP. The vendor and the governments of France and India have accepted it”, he continued.
“Where there is a prescribed format for you to furnish certain information, You cannot say that the offset clause will take place from 2019 and as of now there is no information in that regard”, weighed in the Chief Justice.
“What happens if the production does not take place or the offset partner is not good enough? The Country’s interests are involved”, ventured Justice K. M. Joseph.
“If they give us the details of the IOP at the initial stage itself, We decide as to the eligibility of the partner and the specific products. Even if we are informed later, we may not accept the selection and penalty is imposed”, stated the Additional Secretary of the Defence Ministry.
When Justice Joseph inquired about the need for the amendment in the Offset Guidelines, the Additional Secretary said that the amendment was recommended in 2013 to ease the burden of the supplier, approved by the Raksha Mantri in principle and Finally, effected in 2015.
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.
Further, Mr. Bhushan had questioned the government’s justification to short-circuiting the process of tendering in respect of these 36 jets. The Centre has stated that as it has entered in an intergovernmental agreement with France, there is no need to issue a tender and invite bids.
Mr. Bhushan had contended that the Government has failed to disclose that as per the DPP, a resort to the Intergovernmental Agreement can be taken only in three cases-
1. When the equipment is of proven technology and capability, belonging to a friendly foreign country, and identified by the armed forces upon participating in joint international exercises;
2. Where a Very large value weapon system/platform in service in a foreign country is available for transfer or sale for a much lower cost; and
3. Where there is a specific state-of-art equipment/platform but the government of the Original Equipment Manufacture’s country might have imposed restriction on its sale and thus the equipment can not be evaluated on ‘No Cost No Commitment’ basis.
It was Mr. Bhushan’s case that the Rafale deal does not qualify on any of these conditions, the objective of the Intergovernmental Agreement being only to obviate the tendering process.
“If they (the petitioners) want a joint exercise technically, we have watched the Rafale in action on two occasions....if you have the aircraft and have subjected it to all technical evaluations, the need for joint exercises is omitted....You need to watch its performance and not see the firing of the missiles. As for Rafale, the same aircraft is being purchased by other countries and evaluated”, was the AG’s response.
When Chief Justice Gogoi inquired which those countries are, the Air Marshal submitted that while Egypt and Qatar purchased these jets in 2014, in France they have been in use since much before.
Finally, Mr. Bhushan had argued that the law ministry had fagged two issues regarding the Inter-governmental Agreement- One, 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; Two, any dispute with Dassault is to be resolved through arbitration with the the seat of arbitration being in Geneva and not India.
In his turn, the AG conceded that France has not tendered any sovereign guarantee, and only a letter of comfort.
“This is a sensitive area and Your Lordships should restrict the scrutiny to some areas only. The first aircraft will be received next year, we have fallen back so far as the IAF is concerned. The Air Chief is writing and complaining that there may be difficulty in defending ourselves against other countries....in the Kargil war, we lost several soldiers. If we had the Rafale then, we could targeted intruders from 60 km away....”, the AG signed off.
Advancing rejoinder submissions for Mr. Singh, Senior Counsel Sanjay Hegde replied to the AG’s assertion that the present matter was beyond the scope of judicial review-
“The AG has said that matters of national security are best left to experts. Defence procurement is part of national security. It was way back in 2002 that this stated policy (Defence Procurement Procedure) was put out in public. It is not as if the policy is to be read as a statute, But barring unforeseen circumstances, the government has to adhere to it....The process starts on June 29, 2007 for 126 aircrafts- for 7 squadrons of 18 jets each. today, it has been reduced to 2 squadrons. This is like going through the entire ordeal of matching horoscopes for an arranged marriage and then ditching it and marrying someone different altogether. If this Gross deviation from set procedure does not fall within the administrative law window, by passable logic, it should invoke the judicial conscience of this court....there is No evidence that the procedure was complied with and the concerned persons were consulted with regard to the change”
“The deal between France and India is not an intergovernmental agreement but that between a private firm and India. An intergovernmental agreement is Like the one in case of the 1962 indo-china war when we had no equipment. Even during the Kargil war, snowshoes and all were procured, But here, there was no glaring emergency to change the nature of contract without some ratification from the authorities”
He pressed on the requirement for an Independent agency to inquire into the criminality.
When he pointed out the approach of the court in seeking the response of the government on the present string of petitions and “being careful to not issue notice”, Chief Justice Ranjan Gogoi expressed his unhappiness at the indication.