British aerospace and defense major Rolls-Royce Plc has filed a corruption case against top officials of its Indian unit and arms dealers for 'kickbacks’ in the purchase of Hawk 115 advanced jet trainer aircraft for the Indian Air Force and Navy. Officials said.
The CBI has booked Tim Jones, Rolls-Royce India director, arms dealers Sudhir Chowdhury and his son Banu Chowdhury, Rolls-Royce Plc and British Aerospace Systems under IPC Sections 120-B (criminal conspiracy) and 420 (cheating). and provisions of the Prevention of Corruption Act after completing a six-year preliminary inquiry registered in December 2016.
An email to Rolls-Royce seeking comment went unanswered.
A 2017 British court order also mentioned the involvement of middlemen and commission paid by the company to change the contract.
During 2003-12, these accused entered into a conspiracy with unidentified public servants who „abused their official positions” in return for „huge bribes, commissions and kickbacks” offered by Rolls-Royce to approve the purchase of aircraft.
The company paid the middlemen even though contracts, integrity agreements and related documents of the contract „prohibited such payments”, the CBI FIR alleged.
The Cabinet Committee on Defense approved the purchase of 66 Hawk 115 AJTs on 3 September 2003, under which 24 BAE Hawk 115Y AJTs with all facilities to be manufactured by HAL were sanctioned for £ 734.21 million, Rs. 5,653.44 crore equivalent (calculated at Rs. 77 per GBP) was sanctioned.
Approval was granted to purchase 42 aircraft manufactured by HAL at a cost of 308.247 million pounds equivalent to 1,944 crore rupees and to pay 7.5 million pounds to Rolls-Royce as manufacturer’s license fee.
Subsequent contracts signed with Rolls-Royce/PAE contained a fairness clause, which prohibited the involvement of any middlemen or the payment of commissions. In case of violation, the company may be debarred from any work of the Government of India for the next five years besides fine.
The contracts also include a penalty clause for using undue influence, where the supplier must give an undertaking that no commission or fee has been paid to any person in connection with the contract.
HAL delivered 42 aircraft to the Indian Air Force from August 2008 to May 2012.
In January 2008, HAL sought the Defense Ministry’s approval for license production of 57 additional Hawk aircraft, 40 for the Air Force and 17 for the Navy at a cost of Rs 9,502 crore.
An agreement was signed between HAL and BAE on August 30, 2010, which contained a clause prohibiting the use of undue influence and payment of commission. HAL delivered the aircraft between March 2013 and July 2016.
In 2012, media reports emerged of corruption at Rolls-Royce operations, resulting in an investigation by the Serious Fraud Office in London.
The company produced a truth report that revealed its corrupt payments related to transactions with countries such as Indonesia, Malaysia and India. A deferred prosecution agreement was reached between the company and the SFO.
Jan. 9, 2006, during the inspection conducted by the Income Tax Department, the fact sheet revealed that the department had seized important documents relating to the list of middlemen who were paid to secure the contract.
The statement of facts was cited in a ruling by the Crown Court Southwark, UK in 2006 that a middleman was paid £1.85 million to retrieve a list of middlemen seized by the IT department during a 2006 audit of Rolls-Royce India. To prevent the list from getting into the hands of the Defense Ministry, the deal will be terminated and lead to a CBI investigation.
The tax department has recorded the statement of Jones, who was then director of Rolls-Royce India.
Rolls-Royce Plc was allegedly involved in bribing tax officials and other officials to thwart an investigation by Indian authorities into its tax affairs and use of middlemen in the deal.
“This judgment revealed that between 2005 and 2009, the involvement of middlemen in the defense industry in India by Rolls-Royce despite restrictions imposed by the Government of India on payment of commissions/fees to middlemen.
„There are reasons to believe that substantial sums of money were paid to middlemen in public servants in India,” the FIR alleged.
A Crown Court ruling states that Rolls-Royce paid an intermediary £1m to increase the license fee from £4m to £7.5m.
The CBI also alleged that 100 million pounds were paid by Russian arms companies to a Swiss account in the name of a company called Portsmouth associated with Sudhir Chowdhury for defense contracts with Russia for the purchase of MIG aircraft.
Of this sum, Chowdhury’s family companies Pelinia Services Ltd, Cottage Consultants Ltd and Carter Consultants Inc received £39.2m, £32.8m and £23m respectively between October 2007 and October. 2008,” said the FIR.
Sudhir Choudhary and Banu Choudhary, unregistered Indian agents and middlemen who allegedly worked at Rolls-Royce and PAES in securing the contract to supply Hawk aircraft, „exerted undue influence over Indian civil servants to induce the Government of India to ratify the contract,” it alleged.
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