Rafale verdict gives BJP the opportunity to convert a narrow judicial review into a clean chit

The Supreme Court on Friday dismissed all petitions seeking an investigation into the deal to acquire 36 Rafale fighter jets, immediately prompting Bharatiya Janata Party president Amit Shah to claim that the government had received a clean chit. However, even as the order finds the Supreme Court insisting that it will not look at whether the government’s decision to buy the Rafale jets was correct, it still attempts to rule out mala fide intent and charges of favouritism. To compound things, much of the court’s decision making is based on information submitted in a sealed cover, making it impossible for the public to assess how the court arrived at its conclusions.

“It is neither appropriate nor within the experience of this Court to step into this arena of what is technically feasible or not,” the bench headed by Chief Justice Ranjan Gogoi said in the order. “We do not find any substantial material on record to show that this is a case of commercial favouritism to any part.”

Soon after the judgment, Shah came out all guns blazing against the Congress, saying it was a clean chit and demanding an apology from Congress president Rahul Gandhi for lying to the nation. He also indirectly referred to the petitioners, who included former BJP ministers Yashwant Sinha and Arun Shourie, as the “B team” of the Congress party.

Amit Shah was able to claim that the judgement is a clean chit because the order has lent itself to such an interpretation by the ruling party. The court has been careful to avoid rigorous scrutiny of what is fundamentally an executive decision involving aspects of national security. But while this was said in no uncertain terms, certain comments made by the could could be perceived as a stamp of approval for the process of procuring the fighter jets.

Judicial review

The genesis of the Rafale controversy goes back to September 2016, when the Narendra Modi government signed a fresh agreement with France for 36 upgraded Rafale jets. This agreement superseded an earlier deal envisaged by the United Progressive Alliance government to buy 126 jets from Dassault Aviation.

In September 2018, following comments from former French president Francois Hollande that the French may not have had an option other than making Anil Ambani’s Reliance Defence the offset partner of Dassault if the country wanted the deal with India, a public interest litigation was filed by lawyer ML Sharma demanding a probe into the agreement. Sinha, Shourie and lawyer Prashant Bhushan later joined the issue with their own petition, questioning the price escalation in the new deal and the selection of Reliance as the offset partner.

The Supreme Court was confronted with a crucial question: Should courts scrutinise what is a function of the executive, especially given that it involves national security and defence matters?

As the court points out in its order, it was reluctant to convert the matter into a comprehensive scrutiny of the agreement. In Friday’s judgement, Chief Justice Ranjan Gogoi captures this dilemma succinctly by quoting past judgements that made it clear that courts do not have the competency to judge matters of national security. While pointing out that in matters of assessing tenders the court primarily looks at favouritism and mala fide, he said:

“We also cannot lose sight of the tender in issue. The tender is not for construction of roads, bridges, etc. It is a defence tender for procurement of aircrafts. The parameter of scrutiny would give far more leeway to the Government, keeping in mind the nature of the procurement itself.

It is our considered opinion/view that the extent of permissible judicial review in matters of contracts, procurement, etc. would vary with the subject matter of the contract and there cannot be any uniform standard or depth of judicial review which could be understood as an across the board principle to apply to all cases of award of work or procurement of goods/material. The scrutiny of the challenges before us, therefore, will have to be made keeping in mind the confines of national security, the subject of the procurement being crucial to the nation’s sovereignty.”

With these restrictions were set out, the Supreme Court during the hearing asked the government to submit information relating to the deal in a sealed cover. This included, again after some initial reluctance, the pricing aspect of the deal. The court said it was doing so to convince its own conscience. Officials of the Air Force were also summouned to answer questions from the bench.

However, while the court made it clear that the scrutiny was a truncated exercise due to the national security element, it has made some significant comments about the contents of the agreement, which has what has led to the BJP’s claims that this is a clean chit to the Union government.

Decision-making process

There were two important questions raised by the petitioners with regard to the process that led to the new agreement in 2016 to acquire 36 fighter jets instead of 126 under the earlier negotiations. First was the circumvention of Defence Procurement Procedure and the cost escalation that came with the negotiated deal. Second was the selection of Reliance as the offset partner. The second is a crucial part as it falls within the ambit of establishing favouritism.

On the renegotiated agreement, the petitioners pointed out that France had not provided a sovereign guarantee – a promise by the government to discharge Dassault’s liability in case of a default – for the deal. While the court mentioned this contention, it has not provided a satisfactory answer as to why it thought it was not a major problem. The court said:

“We are satisfied that there is no occasion to really doubt the process, and even if minor deviations have occurred, that would not result in either setting aside the contract or requiring a detailed scrutiny by the Court.

We cannot sit in judgment over the wisdom of deciding to go in for purchase of 36 aircrafts in place of 126. We cannot possibly compel the Government to go in for purchase of 126 aircraft. 

This is despite the fact that even before the withdrawal of RFP, an announcement came to be made in April 2015 about the decision to go in only for 36 aircrafts. Our country cannot afford to be unprepared/underprepared in a situation where our adversaries are stated to have acquired not only 4th Generation, but even 5th Generation Aircrafts, of which, we have none. It will not be correct for the Court to sit as an appellate authority to scrutinize
each aspect of the process of acquisition.” 

The court ends up questioning the charges even as it repeats that it was taking the questions seriously and had asked for information to convince its conscience. The judgement said that while the deal was concluded in September 2016, “nothing was called into question then”. The court added:

“It is only taking advantage of the statement by the ex­ President of France, Francois Hollande that these set of petitions have been filed, not only qua the aspect which formed the statement, that is, the issue of IOPs but also with respect to the entire decision ­making process and pricing. 

We do not consider it necessary to dwell further into this issue or to seek clause ­by ­clause compliances.”

Pricing of deal

As far as the escalation of costs go, the Supreme Court has basically said that it is satisfied with the claims of the government and does not see reason to comment on it further. The question that arises is why the court took the effort to go through the details if it was eventually going to uphold the prerogative of the government in price negotiations. “It is certainly not the job of this Court to carry out a comparison of the pricing details in matters like the present,” the court said.

The pricing aspect is crucial because the government has consistently refused to share the actual prices of the fighter jet in public, claiming that this would be in violation of the agreement. It has also claimed that revealing strategic technological components of the fighter jet to justify the cost would end up compromising the interests of the armed forces.

Offset partners

Another major contention of the petitioners was that Anil Ambani’s Reliance Aerostructure was favoured as an offset partner for the deal, violating procedures. Offset clauses are conditions placed on suppliers that force them to spend a portion of their contract cost in a certain way. In this case, Dassault has to ensure that 50% of the Rs 59,000 crore that India will be paying it for the Rafale aircraft ends up being invested in the Indian defence system. However, Reliance Aerostructure was formed just days before the agreement and had no experience in aircraft production.

The government had defended the selection of Reliance Aerostructure, stating that it was Dassault’s prerogative to select its offset partner and the government had nothing to do with it. It had also dismissed claims that Reliance Aerostructure was preferred over the publically-owned Hindustan Aeronautics Limited, which was supposed to help build 108 fighter jets in the previous deal for 126 aircraft.

Further, the petitioners alleged a sleight of hand in an amendment made by the government to the procurement procedures, whereby Dassault was allowed to reveal its offset partner only at the time of implementing the offset obligations rather than at the time of the agreement. This, it was argued, was essentially done to claim ignorance about Dassault’s choice of offset partner.

In dealing with these contentions,the Supreme Court points to press releases that show that Reliance Industries and Dassault had an arrangement way back in 2012 itself under the proposed deal to acquire 126 Rafale jets.

The court calls Reliance Industries a “parent company”. However Reliance Industries belongs to Mukesh Ambani and is different from Anil Ambani’s Reliance Aerostructure. It is not clear why this connection was recognised. The court said:

“It is no doubt true 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. There has been a categorical denial, from every side, of the interview given by the former French President seeking to suggest that it is the Indian Government which had given no option to the French Government in the matter.”

On the question of HAL, the court said it was not for the court to “step into this arena of what is technically feasible or not”. It is based on such reasoning that the court said that there was no substantial record to show favourtism.

“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.”

Court and Rafale

To sum up, the court had started deciding on this case with a sort of a self-restriction. It wanted to rule out mala fide intentions and favouritism, but was confined by the question of national security, where it has said the government has a greater leeway compared to other kind of contracts.

While the court has steadfastly kept to the restrictions on judicial review of such a matter that it has established, the comments and reasoning seem to stop halfway. Adding to the problem is that fact that much of the information was submitted to the court in sealed cover and it is now impossible for the public to assess whether the court has come to the right conclusion.

This half-hearted court process means the BJP is now able to convert what was essentially a narrow judicial review into a clean chit from the court and draw political mileage from the order. This brings us back to the fundamental question of whether the Supreme Court is the right forum to settle questions on matters like the Rafale deal, which are substantially political in nature.