The Mysterious Rafale Deal, Modi & Reliance & Anil Ambani
The French news portal Mediapart has disclosed that Paris magistrates have requested the Indian government’s assistance in their investigation into payments made by Dassault Aviation during the 2015-16 Rafale fighter jets deal. The magistrates are particularly interested in examining the case files of two Indian investigations that shed light on Dassault’s alleged secret payments to business intermediary Sushen Gupta.
As Mediapart has previously revealed, detailed evidence that Dassault secretly paid several million euros to Indian-based business intermediary Sushen Gupta in its attempts to secure the deal signed in 2016,” according to the report, written by Yann Phillipin.
The response from the Indian government is currently unknown, as requests of this nature are typically channelled through the external affairs ministry and handled by relevant departments such as the Department of Personnel and Training (DOPT) and the Ministry of Finance. These departments oversee the Central Bureau of Investigation and Enforcement Directorate, respectively.
Sushen Gupta is currently under investigation by the Enforcement Directorate (ED) in relation to the VVIP chopper scam. Mediapart’s reports in 2021 exposed Gupta’s extensive business connections with Dassault and Thales over a 15-year period, alleging that Gupta received secret commissions of several million euros through offshore accounts and shell companies. These payments were made using inflated invoices for software consulting.
Anil Ambani’s Reliance Group
However, this is not all; there is yet another aspect – that of the Rafale puzzle – focusing on the tax reduction obtained by Anil Ambani’s Reliance Group in 2015.
How Ambani wrote to French economics minister (and now president) Emmanuel Macron and finance minister Michel Sapin, requesting their personal intervention to reduce a €151 million tax bill.
Eventually, Ambani was asked to pay a significantly reduced amount of €6.6 million, which closely matched his suggested settlement proposal.
The Mysterious Rafale Deal
During a visit to France in 2015, Ambani accompanied Prime Minister Modi, who decided to cancel a previous co-production deal for 126 Rafales with Hindustan Aeronautics Ltd and instead opt for the outright purchase of 36 aircraft from Dassault.
Mediapart found evidence of Ambani’s letter in confidential documents gathered by France’s tax administration. Its sources said some of these have been added to evidence collected in the French judicial investigation into the corruption allegations surrounding the 2016 sale of 36 Rafale fighter jets to India.
The Modi Government & Ambani Connection
Former French president François Hollande confirmed in a 2018 interview that Ambani was brought into the deal as Rafale’s partner at the insistence of the Modi government.
However, both Dassault Aviation and Reliance have denied this claim, and the Indian government stated that it had no influence on Dassault’s commercial decision. While the Indian Supreme Court declined to order a probe, the deal remains the subject of an ongoing criminal investigation in France.
The article further highlights that the Indian Air Force’s Rafale jets will be participating in the Bastille Day military parade on July 14, where Prime Minister Modi is a guest of honour. However, this decision has faced criticism in France, with some citing concerns about human rights issues in India under Modi’s leadership.
The Role Of The Current French President
The report brings attention to the involvement of Emmanuel Macron, who was not directly responsible for public finances at the time but played a role in granting Reliance Flag Atlantic France a €144 million tax reduction.
The report questions Macron’s involvement, as he did not have authority over the public finances directorate. French daily Le Monde initially reported the tax reduction, which cited an unnamed Reliance employee stating that the tax issue was resolved through a phone call to Macron’s administration during a meeting at his office.
Anil Ambani’s Role in the Rafale Controversy
The tax reduction obtained by Reliance Group was initially reported by French daily Le Monde. The report highlights that while Michel Sapin, the finance minister at the time, had direct control over the tax department, Emmanuel Macron’s involvement raises questions as he had no authority over the public finances directorate, the Direction Générale des Finances Publiques (DGFIP).
According to an unnamed Reliance employee quoted by Le Monde, Anil Ambani and the employee met Macron at his office, where the tax issue was resolved in a phone call to his administration. Macron and his office have not directly addressed questions regarding this matter, and his former advisors at the economy ministry have no recollection of a meeting between Macron and Ambani.
Reliance Flag Atlantic France, which operated an underwater telecommunications cable between France and the US, drew the attention of the French tax inspection directorate due to alleged tax evasion and avoidance practices. The report reveals that Reliance artificially transferred profits from its French subsidiary to its telecommunications company registered in Bermuda, which was previously on the European Union’s blacklist of non-cooperative tax havens.
French tax authorities thoroughly examined the internal operations of Reliance Flag Atlantic France and determined that the company owed €151 million in taxes and penalties for the period between 2008 and 2012. This significant amount was primarily due to the company’s taxing strategy. However, experts suggest that the tax authorities used this high amount as leverage to push Reliance into providing documents and reaching an amicable settlement.
By the end of 2014, Reliance submitted the necessary documents and proposed paying €6.2 million in early 2015. However, French authorities deemed this amount too low. Nevertheless, Anil Ambani had a “trump card” to play.
In March 2015, Reliance secretly became designated as Dassault’s new principal Indian local partner, undoing the previous appointment of the Indian government-owned HAL. In April 2015, during Modi’s visit to France accompanied by Anil Ambani, the French authorities likely aimed to avoid upsetting Ambani, who had been appointed as Dassault’s principal partner by the Modi government, as confirmed by former French President François Hollande. The Indian government, Reliance, and Dassault denied Hollande’s version of events.
Anil Ambani’s letter, dated April 14, 2015, was addressed to Prime Minister Modi. Ambani expressed satisfaction with the bilateral exchanges led by Modi during his visit to France. He also claimed to be in an “extreme and unreasonable situation” regarding the tax amount and requested a fair and transparent review to quash the proposed tax demands.
Following Ambani’s letter, the central directorate of the tax inspection services requested a copy of the Reliance case file from its regional office. The documents were sent on the same day. The head of Reliance France then wrote to Sapin, Macron, Ambani, and India’s ambassador, informing them that an agreement had been reached with the French Tax Authorities. Reliance stated that they did not require further assistance and withdrew the request mentioned in Ambani’s letter.
The Last Bit, By October 2022, Reliance’s tax issue was formally settled through a signed agreement with tax services. Although a source claimed that Ambani’s letter had no impact on the final settlement, experts noted that the lack of penalties imposed on the debt, resulting in a gain of approximately 1 million euros, suggested favourable treatment.
What’s more, experts found it odd that Reliance was considered to have acted in “good faith” despite using aggressive tax optimization structures in a tax haven. The resolution of this tax matter adds to the ongoing controversies surrounding the Rafale deal.
