The Rafale fighter jets deal involved a payment to the tune of one million euros (Rs 8.62 crore) to an Indian middleman, which aircraft maker Dassault has failed to explain to the French anti-corruption authorities, Mediapart reported on Sunday, April 5.
The Rafale jets constitute India's first major acquisition of fighter planes in more than two decades.
In the first report of a three-part investigation, Mediapart reported that in mid-October 2018, French anti-corruption agency, Agence Française Anticorruption, spotted the payment and demanded an explanation from the Rafale manufacturer Dassault.
Soon after the deal was done on September 23, 2016, Dassault had decided to pay the amount to Defsys Solutions, one of its sub-contractors in India.
Dassault said that money was utilised to pay for the making of 50 large replica models of Rafale jets. The French company was, however, not able to furnish any evidence for the same. In spite of the irregularity, the anti-corruption agency did not inform the prosecutors.
Defsys Solutions, on the other hand, is owned by Sushen Gupta, who was arrested in March 2019 by the Enforcement Directorate in a money laundering case relating to the AgustaWestland scam. Gupta was later released on bail.
In 2017, the AFA was tasked to check whether large companies have implemented the anti-corruption procedures mentioned in the French law. In October 2018, the anti corruption agency decided to audit Dassault after several reports flagged possibilities of corruption in the Rafale deal.
During the audit, the AFA spotted an item of expenditure in Dassault's 2017 accounts, worth 508,925 euros (Rs 4.39 crore) and entered under the heading "gifts to clients".
An audit report referred to the expenditure as "seemed disproportionate in relation to all the other entries".
On being questioned, Dassault informed AFA that a "proforma invoice" dated March 30, 2017, that was supplied by Defsys Solutions.
The audit report said that the invoice related to 50% of the total order of that amounted to over one million euros, and was meant for manufacture of the 50 models of Rafale. However, as AFA asked Dassault why it had ordered an Indian company to make models of its own aircraft, at 20,000 euros a plane, and the reason behind "gift to client", the aviation company failed to provide an explanation.
The company also could not produce images of the models were ever made.
The AFA inspectors thus suspected it to be a bogus purchase designed to hide financial transactions, according to Mediapart.
The Rafale jets deal came four years after the Narendra Modi government signed a deal with France. All the 36 jets are to be delivered by 2022.
The deal had become a major political issue during the Lok Sabha election campaign in 2019.
The opposition had accused PM Modi of corruption and alleged that he was a "middleman" for industrialist Anil Ambani in the Rafale deal.