No case of "commercial favouritism" in Reliance as offset partner for Rafale: SC

The Centre had no role in the choice of Anil Ambani-led Reliance Aerostructure as an Indian Offset Partner in the Rafale fighter jet deal and there is no substantial material to show that it was a case of "commercial favouritism", the Supreme Court said Friday.

Mere press interviews or suggestions cannot form the basis for judicial review, especially when there is categorical denial of the statements made in the Press, by both the governments involved, India and France, it said.

A bench of Chief Justice Ranjan Gogoi and Justices S K Kaul and K M Joseph said the Defence Procurement Procedure (DPP)-2013 envisages that the Original Equipment Manufacturer (OEM) will chose its own Indian Offset Partner (IOPs).

"In this process, the role of the Government is not envisaged and, thus, mere press interviews or suggestions cannot form the basis for judicial review by this Court, especially when there is categorical denial of the statements made in the Press, by both the sides.

"We do not find any substantial material on record to show that this is a case of commercial favouritism to any party by the Indian Government, as the option to choose the IOP does not rest with the Indian Government," the bench said.

The court noted that two contracts were signed with Dassault and MBDA Missile Systems Limited on September 23, 2016, the same day on which the Inter-Governmental Agreement (IGA) was signed between the Government of India and the Government of France in the Rafale fighter jet deal, estimated to be Rs 58,000 crore.

Dassault and MBDA Missile Systems Limited are the French industrial suppliers of the Aircraft package and Weapon Package respectively.

The court said there are stated to be no offset obligations in the first three years, but are to commence from October 2019.

The bench said that it is no doubt that the company, Reliance Aerostructure Ltd, has come into being in the recent past, but the press release suggests that there was possibly an arrangement between the parent Reliance company and Dassault starting from the year 2012.

"As to what transpired between the two corporates would be a matter best left to them, being matters of their commercial interests, as perceived by them," the bench said.

It noted that there has been a categorical denial, from every side, of the interview given by the former French President Francois Hollande seeking to suggest that it is the Indian government which had given no option to the French government in the matter.

"In this process, (DPP-2013) the role of the Government is not envisaged and, thus, mere press interviews or suggestions cannot form the basis for judicial review by this Court, especially when there is categorical denial of the statements made in the Press, by both the sides," the bench said.

It added that on the basis of materials available before the court, the suggestions of former French president appears contrary to the clause in DPP-2013 dealing with IOPs.

"Thus, the commercial arrangement, in our view, itself does not assign any role to the Indian Government, at this stage, with respect to the engagement of the IOP. Such matter is seemingly left to the commercial decision of Dassault," it said.

The bench said that is the reason why it has been stated that the role of the Indian government would start only when the vendor/OEM submits a formal proposal, in the prescribed manner, indicating details of IOPs and products for offset discharge.

With regard to Hindustan Aeronautics Limited (HAL), the bench said that insofar as the procurement of 36 aircrafts is concerned, there is no specific role envisaged.

It also noted the submission of Centre that there were some contractual problems and Dassault was circumspect about HAL carrying out the contractual obligation, which is also stated to be the reason responsible for the non-conclusion of the earlier contract of 2007.

The bench said that "it is neither appropriate nor within the experience of this Court to step into this arena of what is technically feasible or not".

The court said that the issue of IOP is what has triggered this litigation and the offset contract is stated to have been governed by the Defence Offset Guidelines of DPP 2013.

In relief to the Modi government, the Supreme Court dismissed the pleas challenging the deal between India and France for procurement of 36 Rafale jets saying there was no occasion to "really doubt the decision making process" warranting setting aside of the contract. The deal is estimated to be Rs 58,000 crore, or about USD 8 billion.

Petitioners including advocates M L Sharma, Vineet Dhanda, AAP leader Sanjay Singh, former Union ministers Yashwant Sinha, Arun Shourie and advocate Prashant Bhushan in there separate petitions have alleged, among other things, that Centre has favoured a business group and for that purpose a clause of the Offset Guidelines have been amended.

They alleged that the Indian Government gave a benefit to Reliance Aerostructure Ltd., by compelling Dassault to enter into a contract with them, and that too at the cost of the public enterprise, HAL.

The bench noted that Centre has stated that it has no role to play in the selection of the IOP and as per the Defence Offset Guidelines, the OEM is free to select any Indian company as its IOP.

It said that a joint venture is stated to have come into being between Reliance Defence and Dassault in February 2017, which is stated to be a purely commercial arrangement between the two private companies.