CBI books Rolls Royce, BAE Systems for alleged corruption in Hawk aircraft deal

The Central Bureau of Investigation has registered a case against arms dealer Sudhir Choudhrie and British defence firms Rolls Royce Plc and British Aerospace Systems in connection with alleged irregularities in the purchase of 24 Hawk 115 advance jet trainer aircrafts for the Indian air force and navy between 2003 and 2012, people familiar with the development said.

Kickbacks were allegedly paid to middlemen although agreements, an integrity pact, and associated documents and orders related to the deal prohibited such payments, they added, requesting anonymity.

Rolls-Royce Plc office in London issued a statement saying the firm is assisting Indian authorities. HT reached out to British Aerospace Systems but there was no comment till evening.

Choudhrie, a British citizen, is a known arms dealer. He earlier faced probes by CBI and the Enforcement Directorate in defence deals, including alleged bribery in securing a contract for an upgrade of artillery guns for an Israel-based defence firm in 2004 and in the Barak missile scandal of 2006-07.

Both cases were closed due to lack of evidence.

Rolls-Royce was investigated in 2018-19 in a separate case related to dubious payments in the form of commissions in return for contracts from three state-run Indian companies. It allegedly made payments to a Singapore based middleman between 2007 and 2011 in bank accounts in Singapore and Hong Kong.

The latest case, registered on May 23 based on a preliminary enquiry, names Rolls Royce India’s director Tim Jones, Choudhrie’s son Bhanu Choudhrie and unidentified public servants.

“Enquiry revealed that unknown officers of ministry of defence, during the period 2003 to 2012, entered into a criminal conspiracy with Tim Jones, director of Rolls Royce India Pvt Ltd, Sudhir Choudhrie, Bhanu Choudhrie, M/s Rolls Royce Plc, British Aerospace Systems UK, and other unknown public servants and private persons with the object to cheat the government of India in the matter of procurement of Hawk aircraft from Rolls Royce Plc, UK, and its associate group companies, including Rolls Royce Turbomeca Limited, and in pursuance of the criminal conspiracy, the unknown public servants abused their official position and approved and procured a total number of 24 Hawk 115 advance jet trainer (AJT) aircrafts for British Pounds 734.21 million (around ₹7,400 crore according to Monday’s exchange rate),” CBI’s first information report said. HT has seen a copy.

“Rolls-Royce Plc is continuing to assist the Indian authorities. The allegations being investigated by CBI were disclosed in the Deferred Prosecution Agreement agreed with the UK’s Serious Fraud office in 2017. Rolls-Royce today is a fundamentally different business. We will not tolerate business misconduct of any sort and are committed to maintaining high ethical standards. India remains an important market for Rolls-Royce and we have a valued ecosystem of skilled people and partners in the country,” the company said in its statement.

The Cabinet Committee on Security (CCS) had approved the procurement of 66 Hawk 115 AJTs on September 3, 2003, under which 24 BAE Hawk 115Y AJTs in flyaway condition with all the accoutrement along with material for 42 aircraft to be manufactured by HAL were cleared for British Pounds 734.21 million, equivalent to ₹5653.44 crore (calculated at ₹77 per British Pound), was sanctioned.

Procurement of 42 aircraft, to be licence manufactured by HAL at an additional cost of 308.247 million British Pounds, equivalent to ₹1944 crore, and a payment of 7.5 million British Pounds to Rolls Royce as a Manufacturer’s licence fee was also cleared.

Subsequent contracts signed with Rolls Royce/BAE had an integrity clause that barred the engagement of any middlemen or payment of a commission. In case of violation, the company could have been debarred for any Government of India work for the next five years besides penalty.

HAL delivered 42 aircraft to the Indian Air Force between August 2008 and May 2012.

Hawk aircraft is used as a trainer as well as for aerobatics and ground attack operations.

The FIR says the accused persons permitted “licence manufacturing of 42 additional aircraft by HAL against materials supplied by the said manufacturer (Rolls-Royce) for an additional amount of $308.247 million (around ₹2,545 crore at today’s rates) and $7.5 million (around ₹62 crore) towards manufacturer’s licence fee, in lieu of huge bribes, commissions and kickbacks paid by manufacturer and its officers to intermediaries, despite the fact that agreements, integrity pact and associated documents/orders pertaining to the said deal prohibited payments to intermediaries and middlemen.”

The preliminary enquiry revealed that the income-tax department recovered documents related to the deal during a survey at Rolls-Royce’s office in 2006-07. But the accused persons allegedly caused the disappearance of these vital documents, CBI said.

In 2012, media reports alleging corruption in Rolls Royce operations surfaced, resulting in an investigation by the British Serious Fraud Office based in London. Rolls-Royce allegedly paid 1.85 million pounds (around ₹19 crore) to an intermediary, CBI said.

According to CBI, 100 million British pounds were deposited by Russian arm companies into a Swiss bank account in the name of Portsmouth, a company associated with Choudhrie with regard to defence deals with Russia for purchase of MIG fighter aircraft.

“Out of this amount, the companies in the name of Choudhrie’s family, namely Belinea Services Ltd, Cottage Consultants Ltd and Carter Consultants Inc. received GBP 39.2 million, GBP 32.8 million and GBP 23 million respectively between October 2007 and October 2008,” the FIR alleged, without elaborating on the link between this and the Hawk jet aircraft deal.