Supreme Court Dismisses Rafale Deal Review Petitions, Upholds Government’s Procurement Process

The case of Manohar Lal Sharma vs. Narendra Damodardas Modi & Ors. revolved around the controversial procurement of 36 Rafale fighter jets for the Indian Air Force through an Inter-Governmental Agreement (IGA) between India and France. Several Public Interest Litigations (PILs) were filed in the Supreme Court, challenging the transparency, pricing, and selection of offset partners in the deal.

The Supreme Court, in its judgment dated 14 December 2018, dismissed all petitions, ruling that there was no ground to doubt the government’s decision-making process, the pricing of the aircraft, or the selection of the offset partner.

Background of the Case

The Rafale deal had its origins in 2001 when the Indian Air Force proposed the acquisition of 126 Medium Multi-Role Combat Aircraft (MMRCA) to modernize its fleet. The procurement process began in 2007, and by 2012, French manufacturer Dassault Aviation emerged as the lowest bidder. However, negotiations with Hindustan Aeronautics Limited (HAL) for manufacturing 108 aircraft in India could not be finalized.

In 2015, the newly elected government decided to scrap the previous deal and instead procure 36 Rafale jets in fly-away condition through an IGA with France. The agreement was signed on 23 September 2016, with Dassault Aviation supplying the aircraft and offset obligations being met by Dassault and MBDA Missile Systems.

Key Issues Raised in the Petitions

• Decision-making process: The petitioners alleged procedural irregularities in the cancellation of the earlier MMRCA deal and the approval of the new IGA.
• Pricing differences: It was contended that the price per aircraft in the 36-jet deal was significantly higher than that in the original 126-aircraft deal.
• Selection of offset partners: The petitioners claimed that the Indian government influenced Dassault Aviation to select Reliance Defence as its offset partner over HAL.

Arguments by the Petitioners

The petitioners, including lawyer Manohar Lal Sharma, former Union Ministers Yashwant Sinha and Arun Shourie, and advocate Prashant Bhushan, argued that:

• The government failed to follow due procedure in canceling the 126-aircraft deal and finalizing the IGA for 36 jets.
• The price of each Rafale jet had escalated due to an alleged change in specifications, without proper justification.
• The selection of Reliance Defence as the offset partner was not transparent and sidelined HAL, a government-owned entity.
• The government refused to disclose details of the pricing, citing national security concerns.

Arguments by the Government

The government defended the deal, stating:

• The purchase of 36 Rafale jets was necessitated by national security considerations, and the IGA ensured faster delivery.
• The pricing was better than the original MMRCA deal when considering weapons, maintenance, and training costs.
• The selection of offset partners was solely at Dassault Aviation’s discretion, as per the Defence Procurement Procedure (DPP) 2013.
• Details of the deal were shared with the Comptroller and Auditor General (CAG) and Parliament’s Public Accounts Committee (PAC), ensuring accountability.

Supreme Court’s Judgment

The Supreme Court, comprising Chief Justice Ranjan Gogoi, Justice Sanjay Kishan Kaul, and Justice K.M. Joseph, ruled in favor of the government, stating:

• There was no procedural lapse in the decision-making process.
• “We have studied the material carefully. We have also had the benefit of interacting with senior Air Force officers who answered court queries in respect of different aspects, including that of the acquisition process and pricing.”
• The court found no evidence of favoritism in the selection of offset partners. “The role of the Indian government is not envisaged at this stage with respect to the engagement of the Indian Offset Partner.”
• On the pricing issue, the court stated, “It is certainly not the job of this Court to carry out a comparison of the pricing details in matters like the present.”
• There was no commercial favoritism to Reliance Defence, as the offset policy allowed Dassault to choose its partners freely.

Key Takeaways from the Judgment

• Limited Judicial Review: The court reaffirmed that policy decisions on defense procurements should not be interfered with unless clear evidence of mala fide intent is present.
• Pricing Cannot Be Publicly Scrutinized: The court accepted the government’s argument that revealing pricing details would compromise national security.
• No Grounds for Investigations: The petitioners’ demand for an FIR and further probe was rejected due to the lack of evidence.

Final Directions

The Supreme Court dismissed all the petitions and upheld the Rafale deal, stating:

“In view of our findings on all three aspects, and having heard the matter in detail, we find no reason for any intervention by this Court on the sensitive issue of the purchase of 36 defense aircraft by the Indian government.”

Conclusion

The Supreme Court’s judgment on the Rafale deal reaffirmed the principles of judicial restraint in defense procurement matters. While the controversy surrounding the deal sparked political debates, the court found no merit in the allegations of procedural lapses, pricing manipulation, or favoritism in offset partner selection. The ruling underscored the importance of national security considerations and the need for transparency in government decision-making while respecting confidentiality in strategic defense procurements.

Petitioner Name: Manohar Lal Sharma.
Respondent Name: Narendra Damodardas Modi & Ors..
Judgment By: Justice Ranjan Gogoi, Justice Sanjay Kishan Kaul, Justice K.M. Joseph.
Place Of Incident: India.
Judgment Date: 14-12-2018.

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