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Scam Or No Scam? India’s Rafale Deal Exposed New Fraud

The 2016 Rafale deal has been circumscribed with controversies for a long and in the queue, we have now the latest chicanery report. The controversy seems to be building up around a French media report which alleged the Agence Française Anticorruption (AFA), France’s anti-corruption agency, of finding some suspicious payment records. These suspicious payments were made to a company by a middleman arrested in 2019 by the Enforcement Directorate (ED) of India. He was put behind the bars in connection with the VVIP chopper scam.

Dassault Aviation, the manufacturer of the Rafale aircraft, has been alleged for paying as much as one million Euros to Defsys Solutions for 50 models. These 50 models were actually to be given as “gifts”, a category that is treated seriously by the defence companies in France. The company was now left in the centre stage to explain the money transferred.

The sum of one million euros was paid in a wide span of 15 years- from the Manmohan Singh led UPA government to the present. Rafale deal has been at the top of the questionable contract list for a long time.

According to the report, Dassault and Thales paid enormous amounts for Gupta’s maintenance in the company after hiring him exactly at the time when India announced a desire to purchase 126 fighter jets, that is, at the beginning of the 2000s.

The ED’s casefile contains shreds of evidence claiming the several millions of aids given to Gupta by the two French firms over the 15-year period leading to the confirmation of the contract by the Indian government.

The report also adds that the biggest problem was the payment was made to some offshore companies secretly and not into the Indian registered consultancy firm of the Guptas. This has given birth to some questionable activities taking place during the deal.

The Rafale aircraft models which were technically “gifted” by Dassault Aviation have been displayed on bases of the Indian Air Force (IAF) and at various commands. One giant aircraft model has also found space at the Air Headquarters. It is special because it is the only one manufactured in France. The rest of the models were made within Indian boundaries only.

According to a report by mediapart.fr, during a scheduled audit it has been discovered that Dassault Aviation had given its consent to transfer nearly one million euros once the 2016 Rafale fighter jet deal was signed. The middleman to whom the payment was made has been accused of money laundering in another defence deal in India.

In the clarifications issued, the company claims that the money received had been used to make payments for manufacturing 50 large replica models of the concerned item (Rafale jets). However, no proof about the actual construction or assembly of these models were given to the inspectors.

But, against all this, the AFA has made a decision to not refer the matter to prosecutors. Moreover, it is said that Rafale’s explanation of the process to the anti-corruption watchdog of France has settled the query.

What is the latest upheaval in the matter?

The Agence Française Anticorruption or AFA is to France what the Comptroller and Auditor General or CAG is to India. In other words, both positions function in a similar capacity. AFA was set up in 2017. The primary purpose/ aim behind these new positions was the keep a check on large companies and make sure that they implement the country’s anti-corruption procedures. These procedures are listed out under Sapin 2, the anti-corruption law of France. Apart from all the similarities, there is one broad difference between the two parties, the CAG of India does not have the capacity to audits private firms, unlike the AFA.

And here was where this new controversy caught fire. The above-mentioned report by AFA auditors found out a suspicious item of expenditure while combing through Dassault’s 2017 accounts. The item amounting to 508,925 euros was mentioned as an expenditure under the heading ‘gifts to clients’ in the company accounts.

It came into distrust because the amount mentioned seemed to be unnatural and disproportionate when compared to all the other entries noted under the same head.

Moreover, the amount of money in conversation was undoubtedly magnum and seems to be too huge for a gift. Although the French law does not put an upper limit on the number of corporate gifts, the sum here seemed a little too much for gifting a watch or an expensive meal. Thus, the legal precedents claimed something fishy.

Furthermore, the company which was on the receiving end of this amount in doubt was Defsys Solutions, owned and managed by the family of Mr Sushen Gupta. Mr Gupta’s already existing corrupt records acted as fuel to the already burning fire. He was also arrested by India’s ED. It has been reported that the three generations of the Gupta family have been acting as middlemen in the aeronautical and defence industries. Reports claimed that Mr Gupta acted as a catalyst or an agent for Dassault Aviation and that he notoriously worked on the Rafale contract and obtained Ministry of Defence’s confidential documents.

What did Defsys Solutions do?

Besides Dassault Aviation, Defsys Solution has done business with many other defence-related companies. Thus, it is not a banned company yet.

Coming out as a historic practice is the placing of the 25 models, given by Dassault Aviation to India (according to French industry sources), on prominent display locations.

A fully armed Rafale scale model was displayed outside the house of the IAF chief in 2019. This new piece of showcase replaced the previous model of the Su 30 MKI.

The procurement process of the concerned aircraft was done under the broad guiding umbrella of the Make in India initiative launched by the current NDA government headed by the Prime Minister (PM) Narendra Modi.

A contract has obligated Defsys to carry out and ensure the maintenance of Rafale simulators, manufactured by Sogitec Industries, at the Ambala base as well as the Hasimara base. The latter will be the location for the placement of the second squadron of the Rafale. Sogitec Industries is a subsidiary of Dassault Aviation.

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