Major blow to Congress as CBI registers FIR over Pilatus aircraft deal

The FIR comes even as opposition was planning to corner govt over Rafale deal

CBI headquarters in Bengaluru | AP Representational image | AP

At a time when the opposition Congress is smarting from the defeat in the Lok Sabha polls, fresh trouble is at its doorstep with the CBI registering an FIR in connection with the Pilatus aircraft deal during the UPA regime, naming unknown officials of Indian Air Force, ministry of defence and alleged arms dealer Sanjay Bhandari. Bhandari allegedly has close links with Robert Vadra, brother-in-law of Congress president Rahul Gandhi. The Enforcement Directorate has already questioned Vadra in connection with purchase of certain properties in London where his alleged links to Bhandari are under investigation.

The CBI's FIR has also come at the beginning of the Parliament session where the opposition, led by the Congress, was preparing to take on the BJP government on the Rafale deal among others. However,the opposition's charge seems to have been blunted even before it was raised with the CBI registering a formal complaint in the matter.

The case has been registered against unknown public servants of Indian Air Force and defence ministry, Switzerland-based M/S Pilatus Aircraft Ltd, Sanjay Bhandari and Bimal Sareen, both directors of Offset India Solutions Private Limited based in New Delhi, Dubai-based M/S Offset India Solutions FZC, Deepak Agarwal, Himanshu Verma and other unknown persons under various sections of the IPC and Prevention of Corruption Act. CBI DSP Surendra Kumar Rohilla has been entrusted with the investigations.

The CBI registered a regular case after the preliminary investigation into the matter revealed that Pilatus Aircraft Ltd had entered into a criminal conspiracy with Bhandari and Sareen and ''in the furtherance of the criminal conspiracy, dishonestly and fraudulently signed a Service Provider Agreement with Bhandari during June 2010, in violation of the Defence Procurement Procedure of 2008, to obtain the contract for supply of 75 basic trainer aircraft to Indian Air Force”.

On November 11, 2016, the CBI had launched a preliminary inquiry into the alleged irregularities in the trainer jet deal.

According to the FIR, ''Pilatus Aircraft Ltd made a payment of Swiss Frank CHF 1000000 in account of Offset India Solutions Pvt Ltd in its bank account in two tranches during October and November 2010 and also transferred huge funds, amounting to Rs 350 crore, during 2011-2015 in the bank accounts of Dubai-based company namely Offset India Solutions FZC belonging to Bhandari to obtain the contract for 75 basic trainer aircraft”. The CBI has also alleged that Pilatus Aircraft Ltd dishonestly and fraudulently signed a pre-contract integrity pact on November 12, 2010, with ministry of defence, deliberately concealing the facts about signing of the service provider agreement with Bhandari. The agency further alleged that Pilatus Aircraft had also concealed facts about the payment made to Offset India Solutions.

The CBI will investigate whether the alleged commission amount was paid in order to influence the public servants of IAF and MoD associated with the process of procurement. A number of other companies allegedly linked to Bhandari were also allegedly made payments from June 2012 to March 2015 amounting to Rs 25.5 crore in lieu of cash provided by Bhandari from various companies of Deepak Agarwal, said the CBI's FIR. The CBI said there is a strong suspicion that the huge cash amounts exchanged hands as part of commission amounts paid by Pilatus to Bhandari to obtain the contract from IAF and MoD.

The CBI probe into the acts of omission and commission on part of public servants could reach the doorstep of key Air Force and MoD officials. It may be recalled that the deal has been under question from the beginning. On May 16, 2011, when MoD announced the Pilatus Aircraft as the lowest bidder in the commercial bid for its 75 basic trainer programme, rival Korea Aerospace Industries had strongly objected to the selection process. Korea Aerospace alleged that selection of Pilatus was based on an incomplete bid with multiple deviations, and demanded that it should be disqualified. In fact, South Korean firm wrote a series of letters to the then defence minister A.K. Antony, alleging irregularities in the selection process, but MoD went ahead with the Pilatus contract. Of the three vendors shortlisted for the contract—Hawker Beechcraft of the US, Korea Aerospace Industries Ltd, and Pilatus Aircraft Ltd—the contract negotiation committee (CNC) of MoD found the Swiss firm’s bid to be the lowest (L1).

It is notable that MoD purchased the Pilatus trainer jet despite strong opposition to the foreign purchase by the state-owned Hindustan Aeronautics Limited. HAL wanted a contract for the HTT-40 basic trainer that it was developing.

Moreover, top defence ministry officials had written a detailed note to former defence minister late Manohar Parrikar in 2015, highlighting the issue of over-priced deal. Finance wing of the MoD had claimed that the Swiss firm had asked for additional money, over and above the contracted price Rs. 3,870 crore. Besides, it made the PC-7 Mark II trainer far more expensive than was assessed while awarding the contract in 2012.

The comptroller and auditor general, in its recent report tabled in Parliament in February, had claimed that Pilatus Aircraft got the deal despite failing to commit to transfer of technology for maintenance, and was allowed to tweak its offer at a later stage for an advantage over competitors. Auditors also pointed out that while Korea Aerospace Industries, which was shortlisted, quoted $120.6 million as the total cost of transfer of technology for maintenance, the offer made by Pilatus did not include the complete cost.

However, despite alleged irregularities in its original deal, in January 2016, the Defence Acquisition Council (DAC)—the highest body on military purchases—went on to approve the procurement of an additional 38 PC-7 Mk-II trainers from the Pilatus. But, this contract is yet to be signed.