British engine manufacturer Rolls-Royce has become embroiled in a controversy after media reports emerged on Sunday, alleging the company to have used a commission agent in a deal with Indian government-owned Hindustan Aeronautics Limited (HAL).
The charges appear to be related to a contract for gas turbines, which HAL was handling for India’s Gas Authority of India Limited (GAIL).
According to media reports, the charges surfaced on the basis of an anonymous letter, apparently sent to HAL some four months previously, which the HAL board is reported to have forwarded to the Ministry of Defense for further consideration.
The defense ministry has ordered an investigation into the charges by the Central Bureau of Investigation (CBI).
Some reports said that Rolls-Royce has admitted to the ministry that it engaged an Indian consultant or commercial adviser for the purpose of facilitating the contract, who was allegedly then paid a percentage of the value of the contract.
These reports have also suggested the commercial adviser to be part of a British consultancy firm.
While middlemen, commission agents or go-betweens are banned from the defense procurement process in India, the exact legal position is not entirely clear in this case.
This is because, although HAL, which comes under the defense ministry, was involved in the contract, the contract, itself, is not one for procurement of defense materiel for an arm or agency of the defense ministry.
Rolls-Royce has, so far, maintained silence on the issue, issuing only a terse statement: “We will cooperate fully with the regulatory authorities and have repeatedly made clear that we will not tolerate misconduct of any sort.”
The company is already under investigation by the UK’s Serious Fraud Office (SFO) for alleged bribery in pursuing orders in Indonesia and China.
Alleged arms dealer Sudhir Choudhrie, based in the UK has been reported to be involved in this bribery scandal and was recently arrested by British police along with his son, Bhanu.
If the charges against Rolls-Royce are proved correct, there could be serious consequences for the Indian Air Force (IAF).
Rolls Royce engines power the Lockheed Martin C-130J Super Hercules, Jaguar, Hawk AJT, HJT-16 Kiran trainer, HS748 Avro transport and the Embraer EMB 145 AEW&C. They also power the navy’s Sea Harriers and Sea Kings.
The IAF clarified on Monday that contracts between Rolls Royce and HAL for the maintenance, repair and overhaul for the engines powering their aircraft have been placed on hold.
While HAL is procuring Adour engines for the 56 Hawks it is currently producing under licence, there are also plans to produce an additional 20 aircraft to make up the IAF aerobatic team, Surya Kiran.
The Trent 700 Rolls Royce engine is also competing against the GE CF-6 engine to power the IAF’s Airbus A-330 MRTT (Multi Role Tanker Transport) aircraft being planned for procurement.
The Indian Navy’s plans to acquire Japanese ShinMaywa US-2i amphibious aircraft could also be affected because it is powered by four of the same Rolls Royce engines that power the C-130J.
The availability of the above aircraft currently in service and procurement plans for the additional Hawk, US-2i and C-130J aircraft could end up being adversely affected in case the charges against Rolls Royce are confirmed.
While charges of corruption have never been proved against any defense company in an Indian court of law, an assessment of likelihood of guilt made by the defense ministry usually leads to blacklisting of the company.