Why Centre is ‘Unwilling’ to Probe Blacklisted Arms Dealer’s Role in Rafale Deal

On December 9, the Defence Ministry suspended Defsys Solutions Private Limited from its list of vendors preventing it from doing business with the Indian military. The blacklisted firm, owned by infamous arms dealer Sushen Mohan Gupta, was involved in the alleged scandal relating to the purchase of AgustaWestland helicopters by the United Progressive Alliance (UPA) government.

The Narendra Modi government hopes to embarrass the Congress-led UPA with its investigation into the so-called Choppergate scam. At the same time, the government is extremely reticent about investigating the role of Defsys and Gupta, as reported by the French news portal Mediapart, in the controversial purchase of Rafale aircraft. Why such double-standards? The answer is not difficult to find.

Gupta is an agent of companies supplying equipment to India’s armed forces. He was arrested by the Enforcement Directorate (ED) in March 2019 after allegations of bribery were levelled against him in the Rs 3,600-crore AgustaWestland deal. Subsequently, he was released on bail in June of that year. 

The ED is a wing of the finance ministry overseeing the implementation of the Foreign Exchange Management Act and the Prevention of Money Laundering Act. AgustaWestland is a British-Italian helicopter design and manufacturing company owned by Finmeccanica. The choppers supplied by it were meant for use by very, very important persons, or VVIPs, in India before the deal was cancelled.

Allegations by French news portal Mediapart

Defsys was in the news in 2021 when the French news portal Mediapart published a series of articles on its links with Dassault Aviation, which manufactures the Rafale multirole fighter jets, 36 of which were purchased in a ‘fly-away’ condition by the Indian Air Force (IAF).

The reports alleged that the auditors of Dassault had found transactions worth more than €1 million (Rs 8.7 crore at current exchange rates) with Defsys. According to Mediapart, Dassault and its partners had hired Gupta nearly two decades earlier when the IAF started discussions for acquiring 126 new multirole fighter jets.

Gupta’s clout and reach were evidently known. Mediapart alleged that French suppliers of defence hardware paid millions of euros to him over the years until the deal was sealed. Part of this money was used to bribe Indian officials, it alleged. 

“The problem is that the money was not paid into the Indian-registered consultancy firm of the Guptas but was instead transferred in the form of secret commissions, some of which have questionable justifications, into offshore companies,” one of the reports published by the website alleged adding: “In a statement given to an Indian investigator, a member of the … management (of an Indian company called IDS) explained that it was an individual called ‘Pierre’ at Dassault who instructed him to pay commissions into a front company registered in Mauritius … called Interstellar.”

Mediapart also alleged that the ED had found enough evidence against Gupta and how he received large sums of money to influence decision-making in Delhi. The website claimed that he obtained highly-confidential documents from the defence ministry on the position adopted by the Indian Negotiating Team (INT) on various aspects of the Rafale deal. These documents were then passed on to French firms to help them in their negotiations with government officials in New Delhi. 

“For the French camp, Sushen Gupta’s assistance was to prove invaluable … he obtained confidential documents from the Indian defence ministry on the dispute over the purchase price. The documents included minutes of meetings of the INT, the arguments that were prepared to be presented to the French, and detailed notes on the methodology of calculating and ‘benchmarking’ costs of acquisition. Gupta even obtained an Excel sheet created by one member of the INT for calculating the purchase price (‘price benchmarking’).”

The French news website claimed that after performing complex “benchmark” calculations, Indian negotiators concluded, in a confidential report of August 2015, that “the overall purchase price for the Rafale jets, including weaponry, should be €5.06 billion. However, in January 2016, Dassault proposed to more than double the price to €10.7 billion, excluding missile equipment.”

The Mediapart report added that Gupta actively helped Dassault formulate its negotiation strategy and prepared computer spreadsheets for the French firm. It alleged: “A column on one of these (spreadsheets), created on January 20, 2016, concludes a suggested overall purchase cost of €7.87 billion. That was precisely what the French negotiating team proposed to the Indians during a negotiation meeting the following day… (Gupta) also obtained the complete contents of the revised Eurofighter offer as it had been presented by Airbus (a member of the consortium) to the Indian defence ministry in July 2014.”

Cobrapost blew the whistle

Two-and-a-half years before Mediapart published its series of articles, Aniruddha Bahal, the journalist who runs the investigative news website Cobrapost, had accessed two handwritten diaries and loose sheets with notes that had the initials of names of people in the AgustaWestland deal. These diaries and papers were reportedly maintained by Gupta. After analysing the documents, Bahal noted that Gupta was the behind-the-scenes kingpin in both the Rafale and the AgustaWestland deals.

Cobrapost revealed various transactions between entities based out of different jurisdictions. Bahal wrote:

“One may also question if the reason for not going after Gupta has to do with avoiding a connection being made to Dassault and the Rafale deal. Is this a case where the ED has been camouflaging the role of Gupta and reversing its own earlier findings with regard to him? The documents accessed by Cobrapost indicate that Gupta … may have made false statements to ED to mislead the investigation.”

To highlight Gupta’s clout in the corridors of power in Delhi, Bahal quoted a report published by the business intelligence portal Intelligence Online in April 2016: “Before the end of … spring, the Indian defence minister could resolve the final issue before signing a €7.8 billion order for 36 Dassault-built Rafale fighter aircraft. The Indian military is under intense pressure to conclude the deal by the leaders of the ruling Bharatiya Janata Party (BJP), the office of… Prime Minister Narendra Modi and National Security Advisor Ajit Doval, all of whom are amazingly keen on the French deal … the French companies on Team Rafale have been going all out to woo the ruling party.”

“Thales made sure it had the support of Dev Mohan Gupta (father of Sushen Mohan Gupta), who heads Indian Avitronics, a small defence company. (European missile supplier) MBDA, meanwhile, has relied on Deepak Gupta, the head of Ubico Private, which is already the missile manufacturer’s partner on the Mirage retrofit contract/project.” 

Five months later, in September 2016, the contract for Rafale aircraft was signed for exactly the same amount: €7.87 billion.

Given the controversy surrounding the Prime Minister’s sudden announcement in April 2015 that India would purchase 36 Rafales in a ‘fly-away’ condition through a government-to-government deal, it is hardly surprising that the ED has chosen not to probe Defsys and Gupta’s involvement further.

The writers are independent journalists who have written a recently published book ‘The Rafale Deal: Flying Lies? The Role of Prime Minister Narendra Modi in India’s Biggest Defence Scandal’.