Airbus got Rs 1,000-crore undue benefits in Air India deal: ED

According to the ED, the terms and conditions approved by the then Cabinet Committee on Security to purchase aircraft were deleted and a new condition was added in the purchase agreement with Airbus

The Enforcement Directorate’s (ED) money laundering probe into an Air India deal with Airbus to supply 43 passenger planes has revealed fraudulent benefit of Rs 1,000 crore to the European aviation firm.

According to the enforcement agency, the terms and conditions approved by the then Cabinet Committee on Security to purchase aircraft were deleted and a new condition was added in the purchase agreement with Airbus. The ED has submitted its probe report along with the evidence to the special court of Prevention of Money Laundering Act (PMLA).

The government had approved the purchase of 43 Airbus aircraft in 2006 and the price of each aircraft was fixed on the condition that Airbus will establish a training and MRO (maintenance, repair and operation) centre worth $175 millon (equivalent to Rs 1,000 crore). However, that purchase order — fixed by the government subject to certain terms and conditions — was fraudulently deleted. The order was signed by a representative of Airbus, then Chairman and Managing Director (CMD) of Air India under civil aviation minister Praful Patel.

Patel was asked to appear before the ED on Thursday.

“A careful perusal of the purchase order has revealed that ‘not only conditions of establishing the training centre was deleted, another new condition was added in the purchase agreement in Article 16, which provides for training by Airbus at their existing facility in Blagnac, France; or Hamburg, Germany; or Miami, the US; or Beijing, China, depending on availability, said the ED submission in court. 

Business Standard has reviewed the probe report in the case.

The new article of training provides various conditions including that living and travel expenses for buyer’s training shall be borne by the buyer. And, in the circumstances training is to be provided by the location other seller’s training centre, the buyer shall reimburse all the expenses relating to instructors of Airbus.

In addition to this, the cost of training material and equipment was to be met by the buyer. In other words, “Article 16 of the agreement is contrary to approval of the Cabinet Committee that training centre was to be established in India”, the ED noted.

Further scrutiny of terms and conditions of the purchase agreement has showed that two important conditions did not make it to the final purchase agreement signed between the CMD of Indian Airlines — which was later merged into Air India — and representative of Airbus. In fact, the letter attached with the said agreement demanded only cooperation in establishing a pilot training centre, dedicated spare centre as well as the MRO facility which proves additional expenditure by Indian Airlines in creating these facilities as the letter does not provide for any additional investment by Airbus except for cooperation.

The probe agency has examined the then secretary of civil aviation and other officials of Air India where they stated that no plausible explanation has come forth for deleting the condition. The tour programme of the secretary showed that he visited France in order to negotiate setting up of the MRO and the training centre.

“These substantial changes without the approval of Cabinet have resulted in financial implication of over Rs 1,000 crore (including additional cost of training on the buyer) to Indian airlines,” the ED said. 

When contacted, Praful Patel chose not to comment on the matter.

A source close to the former aviation minister said that “once a decision is taken by the Cabinet, the communication and implementation of that is to be done by the bureaucracy and the airline concerned. The role of a minister is limited to the approval and that time no one had brought these issues up.

Airbus connection with Deepak Talwar

During the course of investigation, the ED had sought explanation from then deputy CMD of Airbus Manet Paes and shared the purchase agreement with him. The probe agency said it is pertinent to note that Paes later joined the company (Track India) controlled by corporate lobbyist Deepak Talwar as a director.

The ED in the finding also highlighted the role and connection of Talwar in the matter. According to the ED, the deletion of the condition was followed by a payment of Rs 142 crore by Airbus and its associates to Deepak Talwar in the bank account of the company beneficially owned by him in Singapore and Delhi.

Explaining the transaction, the ED said Airbus had paid the kickback of Rs 50 crore ($6 million, between August 29 and September 24, 2012) in the bank account of Auctus Capital in Singapore.

Auctus Capital is run by Aditya Talwar, son of Deepak Talwar. Besides, Advantage India, an NGO controlled and beneficially owned by Deepak Talwar, had also received a payment of Rs 92 crore from Airbus and a subsidiary of Airbus which was later withdrawn in cash in India by Talwar. 

The probe agency had come across acquisition of shares of Auctus Capital, soon after this deal happened with new conditions. According to it, Airbus had acquired 49 per cent of shares ( 1,107,841 shares) of Auctus Capital on August 29, 2012, and the remaining 51 per cent were held by Asiapac Alternative Investment (incorporated on April 2009), a company owned by Aditya Talwar by way of 100 per cent shareholding.

The probe agency in the finding also alleged that Airbus — that had got deleted its obligation to establish training centre — had meanwhile started negotiating with one of the companies namely Skylark Warehousing Solutions, owned by Deepak Talwar for establishing the MRO centre.

The ED is in possession of the email correspondence of the draft agreement between the two, seized by the Income-Tax department, probing the tax evasion.

The draft agreement suggests a total investment of Rs 350 crore of which shares of Airbus was proposed Rs 80 crore and the balance was to be invested by Talwar.

The ED highlighted this draft agreement raised an issue whether the cost of training and MRO was a correct estimate, the credit of which allowed to Airbus.

The ED also said its officials had had come across several emails exchanged between Airbus and its subsidiary, European Aeronautic Defence and Space Company, and Deepak and Aditya Talwar, including employees of the companies controlled by them.