New Rafale Affidavit: Key Issues Modi Government Continues to Duck

The latest affidavit of the Modi government in the ongoing Rafale review petition filed by Prashant Bhushan, Yashwant Sinha and Arun Shourie is another attempt by it to and skirt the issues raised. The aim is to ensure the controversial deal is upheld and the prime minister exonerated without an independent investigation.

There are multiple flaws in the affidavit, which seems to be another deliberate attempt to mislead the court.

The petitioners pointed out that the PMO’s interference in the Rafale negotiation process weakened India’s position and that many of the clauses in contention were changed in favor of France and Dassault.

Also Read: PMO Monitoring of Rafale Deal Can’t be Called ‘Parallel Negotiations’: Centre to SC

Their claim is that the government did not disclose key details to the Supreme Court in its earlier submissions, which led the court to issue a flawed order dismissing the initial petition. Hence, to clear the air, the petitioners have requested that the court ask the government to submit, with suitable redactions to protect national security, the following documents:

1. Work share agreement between Hindustan Aeronautics Ltd (HAL) and  Dassault, referred to by T. Suvarna Raju, former chairman of HAL, in an interview;
2. Final report of the Indian negotiating team (INT) dated July 21, 2016;
3. Record of minutes of meetings of the Defence Acquisition Council dated 13.05.2015, 11.01.2016 and 14.07.2016;
4. Record of consultation with Ministry of Finance & Ministry of Law& Justice, subsequent to the finalistaion of the INT report;
5. The minutes of meetings of the Cabinet Committee on Security dated 24.08.2016 where the decision was taken to increase the price by almost 2.5 billion euros from the benchmark price, and where sovereign guarantee and bank guarantees were dispensed with and the seat of arbitration was changed;
6. The minutes of meetings before signing of the contract on September 23, 2016 where provisions for the use of  anescrow accountwas dropped and the ‘Letter of Comfort’ from France accepted, standard provisions relating to ‘use of undue influence’, ‘Agents / Agency Commission’ and ‘Access to Book of Accounts’ were inter alia dropped, disregarding objections of domain experts in INT, MoD and MoL&J;
7. The record on the basis of which the CCS took the aforementioned decisions.

The government’s affidavit quoted the concluding paragraph of the December 14, 2018  judgment to note:

Perception of individuals cannot be the basis of a fishing and roving enquiry by this Court, especially in such matters”, and highlighted it to suggest that “the attempt by the petitioners to call for production of the documents and in the process try and attempt to get a roving or fishing enquiry ordered is nothing but a complete misuse and abuse of the legal process. It is submitted that such an application ought to be dismissed with exemplary costs.

The government goes on to say that “access to all files, notings, letters etc. related to said procurement including the full pricing details has been made available to the CAG,” which found nothing amiss.

The government argument here is another attempt to create a smokescreen to hide the facts, because the court has already accepted the review petition in which the petitioners elaborated on the problems with the initial judgment. Many legal luminaries have also pointed out the flaws and errors in the judgment.

How the CAG report was a failed attempt to whitewash the procedural violations done by the PM has also been widely discussed. The report did not mention a word on the process which led to the reduction of the number of aircraft from 126 to 36, and did not touch the topic of selection of offset partner, which is one of the main contentions in the petition. Curiously, though the CAG noted that the foregone bank guarantee cost should have meant a lower price, it did not factor this into its own final calculation.

Problem with PMO’s role

The government’s latest affidavit says “that the prayer for production of documents is misleading and misconceived keeping in view the government’s reply on the review petition”. But if the government has nothing to hide and if the deal is clean and all the processes were followed in accordance with DPP 2013 and no corruption or favoritism was involved, why should the government shy away from submitting the mentioned documents in court?

None of the documents relate to any technical details of the aircraft, weaponry or associated systems but only to the process followed. Hence the government cannot hide behind its usual argument of “it will compromise national security.”

“It is further submitted that monitoring of the progress by PMO of this government to government process cannot be construed as interference or parallel negotiations,” the affidavit says. This seems to be another attempt by the government to absolve Modi of his culpability in compromising India’s interests. For example, a note marked “Secret” (Note 18, F.No.Air HQ/S/96380/3/ASR PC-XXVI written by Ministry of Defence (Air –I) ) accessed and published by The Wire on November 18, 2018, pointed out the involvement and role of the national security advisor Ajit Doval in the INT negotiations in Paris on January 12 and 13, 2016.

Para 6 of the note reads: “After receipt of above legal advice, discussions have taken place during the meetings of INT on these issues, in the meetings in MoD and also in the meeting of NSA and Member Secretary, INT, with the French side in Paris”.

Also Read: The National Security Advisor Had No Locus Standi to Negotiate the Rafale Contract

Para 7 says: “As per the advice of MoL&J, the French side was requested to incorporate a clause on ‘Joint and Several Responsibility’ in respect of Article 3.1. Article 4.3 was amended in the meeting of NSA and Member Secretary, INT with the French side in Paris on 12 &. 13 January 2016 and was further amended after discussions in MoD.”

Para 8 says: “In the meeting in Paris, the arbitration in accordance with UNCITRAL Arbitration Rules in Geneva was also agreed.”

Para 9 reads: “…Hon’ble RM with reference to the issue of Bank Guarantees has recorded that considering the French insistence on our accepting the ‘Letter of Comfort’ in lieu of bank / government guarantee, the views of MEA and NSA on the subject, the special dispensation given to Russia (Corporate guarantee backed by Letter of Comfort) USA (Procurement through FMS without Government guarantee) and the need to secure and safeguard our interests against any advance given to M/s DA, needs to be placed before the CCS for its consideration. The alternatives suggested by the Def Secretary could be considered while formulating our recommendations at that stage. Air Acquisition Wing in their Note dated 18.08.2016 in the main file has proposed that Bank Guarantees may be insistedfrom French side as required under our procedure and Indian side may bear the Bank Guarantee charges. In the eventuality, that the Letter of Comfort in this regard only gets approved by competent authority (CCS) there would be a need to ensure proper reference of this Letter of Comfort in the IGA.”

The NSA is the most powerful bureaucrat in the country because he acts as an advisor to the prime minister on security related issues. The current NSA, Ajit Doval, is also said to have links to the RSS – the parent organisation of the ruling party BJP – and is known to be close to Modi. Hence, his interference in a defence procurement price negotiation can’t be swept under the carpet.

Rather, it is enough of a reason to believe that if the NSA participated in the negotiation and agreed to many clauses which were favorable to France, as the record indicates, he did so on the insistence of Modi.

Further, The Hindu reported in detail that the INT complained to the MoD that the interference of the PMO was weakening its position – and thus India’s interests.

Not much comfort at all

The “Letter of Comfort” by France addressed to Prime Minister Modi, dated  September 8, 2016, accessed by The Wire, notes, “A few days ago, you informed the president of the French republic of the advancement of the decisions on the Indian side.”

This confirms the personal involvement of Modi in the deal without any doubt.

The “Letter of Comfort” says, “Furthermore, assuming that the Dassault Aviation or MBDA France meet difficulties in the execution (of) their respective supply protocols and would have to reimburse all or part of the intermediary payments to the Government of the Republic of India, the government of the French republic will (take) appropriate measures so as to make sure that the said payments or reimbursements will be made at the earliest.”

This letter is vague and doesn’t give the comfort its name promises. It is not clear whether the French government will reimburse the advance payment made by India in case of the failures of the vendors or what measures it will take to compel the vendors to pay India back. Here, we have to remember, any arbitration will be according to UNCITRAL rules and take place in Geneva, which will take years to rule the case.

Speaking to The Wire, Sudhansu Mohanty, former financial advisor (defence services) in the Ministry of Defence from October 2015 to May 2016 and former Controller General of Defence Accounts (CGDA): “The money spent is from the CFI (Consolidated Fund of India) and it is public money. How can the government say they cannot disclose the price?”

Also Read: Why Were So Many Concessions Granted During the Rafale Negotiations?

It was during Mohanty’s time at the MoD that the current Rafale deal was being negotiated.

In a detailed e-mail to this writer, Mohanty explained his observations on the affidavit filed by the government and its handling of the case:

“I’ve gone through the government’s reply. My response is, as follows:

Failing all attempts to hide behind the Official Secrets Act, 1923, this is a vain and valiant attempt on the part of the government to refuse to part with facts/documents/official records, and summarily skirt the issue. There are multiple issues.

• As per procedural fidelity, it’s flawed to its soul. On the issue of AON, categorization and the no. of MMRCAs to be procured, they have no answers, and, as you say, the Union does not substantively contest this. All that followed were flaws compounded one after another, almost like a flaw-multiplier! One of the many gems that kept repeating in the reply is a select phrase from the Supreme Court judgment of December 14, 2018: fishing and roving expedition. N. Ram’s exposés with documentary proof can’t ever be considered unsubstantiated, and far from a fishing and roving expedition; no sane and rational person will deem it so. So are other terms repeated many times over: misuse and abuse; scandalous and false and baseless; internal file notings procured unauthorisedly and illegally.
• The DPP 2013 assigns the entire responsibility of negotiation right off the RFP to finalization of prices/contract to the CNC. No one other than the CNC (INT is a misnomer, thrust on the MoD – and conferred this genteel acronym because of the NSA’s participation) is to be a part of this negotiating team. (Please see my piece in The Wire) As much as the government is reluctant to part with this document (as also other important and material documents) sought by the petitioners, in the name of national security, sovereignty and sovereign government, it would suggest they are likely incriminating and militate against them and their line of argument thus far. I didn’t see any allusion to the term secret and secrecy in their reply. Perhaps after the SC’s dismissal of their last plea, the term has lost its resonance, and they have quickly jettisoned it now. The DPP is a sacred document and always followed to a Tee.
• The CAG Report on Rafale is the audit equivalent of the “sealed cover” submitted to the Supreme Court. It is economical on sundry deviations/violations/infirmities, flawed in many places, and with selective attention in many others; overall, to put in pithily, it has given short shrift to the procedural rigour the CAG is known for. Most glaring is the fact that the CAG has reproduced the government’s information on sovereign guarantee, ToT etc and accepted them without demur! How much of reliance must one place on such a report even though done by a constitutional authority (notwithstanding its exalted status) and pat one’s back as a ringing approbation of its acts of commission?
• The uniform thrust in the reply is that the media reports are scandalous, false, and baseless. Except that when it comes to adducing logic to their line of argument and quoting the then Raksha Mantri’s note – “It appears that PMO and French President’s office are monitoring the progress of the issues which are an outcome of the Summit meeting” – it isn’t anymore inauthentic, but credible!
• The clause on Indian Offset Partners in DPP 2013 was modified post PM Modi’s March 2015 Paris announcement in August 2015. This grants the leeway to the OEM – not to give details of the IOPs, which wasn’t envisaged in the original DPP 2013. Why was it done?
• The fact mentioned in page 11-12 of the reply about Shri Rajeev Verma, JS&AM signing the note for the cabinet, is naïve and disingenuous. His views on price negotiation are already in the public domain, which was overruled by competent authorities. As a government servant, he was duty-bound to sign the note; anything else would have been an act of insubordination on his part.”