Investigative_JPC_Bofors_2008.pdf - JOINT COMMITTEE TO ENQUIRE INTO BOFORS CONTRACT(E fG:F-ITH LOK SABJ-lA P,\u00b7ese11ted to Lok Sc1bl1c1 Lcticl Oil t,e

Investigative_JPC_Bofors_2008.pdf - JOINT COMMITTEE TO...

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Unformatted text preview: JOINT COMMITTEE TO ENQUIRE INTO BOFORS CONTRACT (E fG:F-ITH LOK SABJ-lA) P,·ese11ted to Lok Sc1bl1c1 Lcticl Oil t!,e T<tblc oj' 0 11 {Clj)i (L • 26-4-88 s·ab!,a • LOK SABHA SECRETARIAT NE\V DELHI April, 1988/Vaisa!c!za, 1910 (S..tll,a) • Oil 26-4-88 CONTENTS- Con1position of tl1e Co111mittee I. Introduction • • II. Constitution of tl1e Co111rnittee III. P rocedure of I 11ql1iry . • 1 • 4 • • • (v) • • • • • • • 24 • I V. Procedure for tl1e Acquisition of Wea11011s and Systems by Army Headqt1arters . . . . . A. Procedt1re for assess1nent of req11ire1nents v. . • • • B. Procedure actually followed and the sequence of events through wl1ich tl1e proposal for the procurement of I55 1nm Howitzer gun sy~tem was processed . . 38 c. 45 Observations/ Conclusio11s of the Committee • T ecl1nic al Eval11ation of t110 155 1nn1 Gt1 n Systen1 A. Field Trials • • • B. General Staff E val uatio11 c. • • • General Staff Q ualit:1tive Reql1 ircmcnls • 48 • 48 • 51 'i1 • • • • 53 E- Technical Evaluatio11 & Negotiat in -g Con1n1ittee • 54 F. Shortlisting of t,vo gl1n systems by Army Hqrs. • 61 D- CCPA Pa,per • • ~ ()-+ G. Selectio11 of B ofors Gur1. VI. Financial a.nd Con1n1ercial EvaI11ati<)n • A. Constit11tio11. of Ne2.otiatin~ Co111tnittec ~ • ~ B. Eval1Lation of offers • C. Fir1ar1cial/ Con11nercia l considerations in selection of • the orTer of A B Bofors . D. Ol)scrvatio11s/ Conc lusi0 11 c; of tl1c Co111n1iltec • • 77 77 77 , C· () / 99 (ii) Pa1Ze ~ VII .. Payn,ents 111ade by Bofors • • • 106 • • • 106 • • • 107 • A. Age11ts i ,, defcr1ce deals • • B. Prol1ibition on employ1nent of agents C. Steps taken by Ministry of Defence to ascertain details of pay-offs . . . . • . • 109 D. Report of the Swedish National Audit Bureau • 112 • 117 F . Discussions by Ministry of Defence with officials of AB Bofors (Sept. 87) • • • • • • 119 G. Evidence of officials of AB Bofors before the JPC (Sept. 87) • • • • • • • • 120 • E. Preliininary investigation by the Chief District Prosecutor • • • • • • H. Report of tl1e Investigating Agc11cies • 131 • I . Comments of the Ministry· of Defence on the RepoTt of the Investigating Agencies . . . . . J. Further evidence of AB Bofors before tl1e JPC (April, 87) . . . . . K. Evidence of Sl1ri·W . N. Chad ha. . . . • 145 • • • • 155 • • 166 L. Observations/Conclusions of the Committee VIII. Legal Position IX. Conclt1sions 144 • • • • • • • • 179 • • • • • • • • 189 .. .. ..\PPENDICES I Report of the Swedish Natiot1al Audit Bureau • • IT. Motion 1uoved b1 t11e Defe11ce Minister in Lok Sab11a on 193 1 29 Julv. 1987 . 197 IIJ. Substitute n1otion moved by Shri So111nath CI1atterjee, MP 198 IV. Substitute motion moved by Shri Dinesh Goswami, MP . 200 V. Substitute 1notion moved by Shri C. Madha\r R eddy, MP 201 a . . . . . . VI. Substitute 1notion 1noved by Shri K.P. Unnikrisl1nan, MP VII. Substitute motion moved by Shri Indrajit Gupta, MP 203 • 205 vnr. Substitute motion moved by SI1ri C. Janga Reddy, MP . 207 1X. An1endme11t of the original motion moved bytl1e Minister of Defc-nce . . • • . . • • X. Unoffirial translation of the Statement issued on 28 Jan11ary, 1988, by the Chief District Prosec11tor, Sweden . . X I. Certificate of the Public Accountant retained by AB Bofors to examine their accou11ti11g records Post-Script • • • 209 211 . . . . 212 • • • • ')- l )~ PA.RT II 1\1inutes of the Sittint!S ... of the Con,rn ittee* * Not printed. One cyclostyled copy Jaid on the T ab!~ of tl1e House and 5 copies placed it1 Parliament Library. (iii) JOINT C0l\11v1IITEE TO ENQUIRE IN'fO BOFOilS CONTRACT COlv.fPOS/TION Sl1ri B. S11a11kara11u11d-C/1air11.1a1z . MEMBERS • Loi, S'ab!1a 2. Shri 'I'. Basl1cer* 3. Sl1ri111alj D. K.. Bl1a11dari 4. SJ1ri Dileep Si11gl1 Bl1uria 5. SI1ri Narcsl1 Chandra ChatL1rvcdi 6. SJ1ri V. N. Gadgil 7. Shri Ga11ga Ra111** 8. Dr. S. Jagathrakshakan 9. Shri Jaga11 Nath Kausl1al 10. Shri P. K0Ia11da1velu J 1. SI1ri A sL1t()S}1 . la.\v 12. Shri Y. S. Mal1aja.11 J3. SL1ri M. V. Chandrasek11ara Murthy 14. Prof. Narai11 C11and Parasl1ar 15. Sl1ri Ebra11in1 Sulai111an Sait 16. Prof. Nir111ala Kuroari SI1aktawat 17. l)rof. Saif-u<l-Di11 Soz 18. Sl1ri Tariq A11war 19. Shri P. K. TI1ungon** 20. S11ri Ran1 SingJ1 Yadav - -·- - - ·-- -···--··- ·- - * Elected \-Y.e.f. 4-12-1987 vice Dr. K. G. l\divodi died. . . .. *-* Elected \.V.e.f. l G-3-1988 vice Shri ~'1ahabir Prasad & Shrimati Suroati Oraon resigned. ~ (v) .. . (vi) Rajya Sablza 21. Shri Aladi Aruna alias V. Arunachalam 22. Shri Darbara Singh 23. Shri H. [email protected] 24. Shrimati [email protected] 25. Shri B. V. Abdulla Koya 26. Shri Thomas Kuthiravatton1 27. Shri Ghulam Rasool Matto @ 28. Shri Mirza Irshadbaig 29. Sl1rimati Jayanthi Natrajan 30. Shri Tl1angabaal u SECRETARIAT 1. Sl1ri K. C. Ra.stogi-Joir1t S'ecret,zry 2. Sl1ri G. S. Bl1a.si11-Chie/ Lcgislati1'e Co111111ittee Officer • . @ Ceased to be members of.the Committee consequent on tl1eir retiren1enc fron1 Rajya Sabl1a w.e.f. 2-4-1988. .. t '· . ' . ~ ., I . . .iNTRODUCTION .. ' .. . .. . Tl1e Joint Committee to enquire into Bofors Contract \vas a1)pointed by Parliament in terms of the motion adopted by the Lok Sabl1a on 6 August, 1987 and concurred in by Rajya Sabha on 12 August, 1987. , 1.2 Tl1e Joint Committee consisted of 30 members, 20 from Lok Sabha . . and 10 from Rajya Sabha. The members of the Committee were elected by the respective Houses according to t11e principle of proportional repre'3entation. 1.3 An esteemed colleague Dr. K. G. Adiyodi, M.P. passed away on 22 October, 1987. T11e Committee place on record their dee1, appreciation of his valuable contribution. Shri T. Basheer, M.P.- was elected to serve on the Comn1ittee wit11 effect from 4 Dece1nber, 1987 vice Dr. K. G. . Adiyodi, M.P. 1.4 Later, two other Members, Shri Mahabir Prasad, M.P. and Shrin1ati Sumat.i Oraon, M.P.,··w ere indttcted in t11e Union Co:urrcil of .Ministers and in their places Sarvasl1ri Ganga Ram, M.P. and P. K. Thung~n, M.P. were 16 March., 1988. The elected to serve on the Committee with effect from . Committee owe . a word of tl1anks to. the1n for their useful contribution to . the deliberations of the Committee. " ~ ~ . 1.5 Three otl1er Members of tl1e Committee, viz. ,. Sarvashri H. Hanu111anthappa, Ghulam Rasool Matto and Shrimati K.ailashpati, wl10 were Me1nbers of Rajya Sabha retired from Rajya Sabl1a on 2 April, 1988 on the expiration of tl1eir term of office and, therefore, ceased to be mernbers of the Committee since the11. Tl1e Committee place on record t heir appreciation of tb.e valuable contribution made by eacl1 one of them to the delibe~ations of the ,, Committee. . 1.6 . A technical pr_e sentation of tl1e Gun syste1n was made for the benefit • of the Comtnittee by the Chief of the Army Staff in·tI1e Ministry of Defence on 5 October, 1987. Later, the Committee were taken to a forward area in the Western Sector on 6 October, 1987 wl1ere tl1ey witnessed field demonstration of the 155 mm l1owitzer gun. Anotl1er demonstration was at·ranged in the Eastern Sictor on. · 21 N?ve1nber, 1987. T11ese visits and . tl1e technical presentations that preceded them were of immense educative value to the Committee and were indeed indispensable for a proper . . appreciation of tl1e 155 111m howitzer gun. ·'· • .. ,l • 4 2 1. 7 The Committee held 50 sittings in all. Of these, 30 sittings were devoted to recording the evidence of various official and non-official witnesses. 7 sittings were exclusively devoted to study of the classified documents furnished by the Ministry of Defence. The Com:nittee held in-house deliberations at 13 sittings. Tl1e Attorn'.!y-General for India addressed the Committee on tl1e legal aspects of the deal. 1.8 I 1.9 The total duration of the sittings of the Committee was 140.25 hours approximately. A verbatim record of the proceedings · was kept. This runs into 2190 pages. The minutes of the sittings of the Committee form Part-II of this Report. 1.10 The Committee recorded the evidence of the following offic-ial and non-official wit11esses : - Official witnesses Army Headq11arters (i) General K. Sun.darji, Chief of the Army Staff. (it) Lt. Gen. Mayadas, Director-General, N.C.C. (iii) Lt. Gen. E. G. Kerr, Director-General, Artillery. (iv) Maj. Ge11. T. P. Singh, Director-Ge11eral , Weapo11s Equipment, Army Headquarters. ( v) Subedar. Shivaji Jadhav (Surveyor) . and • Mi11istry of Defe,zce (vi) Shri S. K. Bhat11agar, Secretary, Ministry of Defence. (vii) Shri N. N. Vohra, Additio11al Secretary, Ministry of Defence. ( viii) Shri T. K. Banerji, Joint Secretary, Ministry of Defence. (ix) Shri A. K. Ghosh, Additional Fina11cial ..t\.dviser, Ministry of Defence. Non-official witnesses (i) Shri Per Ove Morberg, President, A. B. Bofors, Sweden. (ii) Shri Lars Gothlin, Chief Jurist and Senior Vice-Preside11t, A. B. Bofors, Sweden . (iii) Lt. Ge11. H. Kaul, Deputy Chief of Army Staff (Retired). (iv) Shri M. C. Sarin, Former Secretary (Defence Production). 3 (v) Shri R. Ganapati, Former Sec.retary (Expenditure), Ministr y of Finance. (vi) Shri W. N. Chadha, M/s. Anatronic General Corporation, Vasant Vihar, New Delhi. 1.11 The Committee would like to express their thanks to the officers of the Ministry of Defence and Army Headquarters for furnishing information and making available various classified documents asked for by the Committee. 1.12 The i11vestigating agencies of the Government of India have rendered all possible assistance to the Committee in ascertaining the details of the payments made by Bofors, the persons to whom the payments were made and the purpose thereof. The Committee record their thanks to the Director, CBI, D irector, Enforceme11t and the Director, Revenue Intelligence. 1.13 The Committee would also like to place on record their appreciation of the assistance rendered to them by the Attorney-General for India and thank him for his valuable advice 011 the legal aspects of the matter under inqmry. 1.14 Secretarial assistance was provided by the Lok Sabl1a Secretariat. A special cell consisting of three Legislative Committee Officers and a Chief Legislative Committee Officer headed by a Joint Secretary was created exclusively to deal with the Committee work. The officers worked 11ngrudgingly for long hours. The Committee place on record their deep appreciation of the work done by these officers and their supporting staft~ !.15 The Committee considered and finalised the report at their sittings 1.1 6 On behalf of the Committee, I present this Report to the Parliame11t. held on 21 and 22 April, 1988. NEW Dam; 22 April, 1988 2 Vaisakha, 1910 (Saka) B. SHANKARANAND Chairma.,.z, Joint Committee to enquire into Bofors Co11tract. • ' . II CONSTITUTION OF THE COMMlT'IEE ,.. 2.1 On 17 April, 1987, some lead i11g jle\.vspa pers of ,the cou11try gave prominen t covera,ge to a Swedish Radio Broadcast made the previous day that.bribys J1ad 'been paid to senior lndia11 politicians a11d.key D efe11ce figures to win the Col1tract awarded by the Govern.ment of I11dia to M/s. Bofors of Sweden 0 11 24 March, 1986, for tl1e purchase of FH 77B 155mm To,ved H owitzers:- The• fallowing nevvs item appeared in the H in9-t1stan Times, New Delµi .of 17 Apr~l, 1987 : • • I • · '~SWEDISH FIRM BRIBED 'KEY' INDIAN LEADERS'' ·STOCKHOL-M , April 16 (Reuter)- Swedish State radio said today that tl1e arms firm Bofors won Sweden's biggest export order by lndia11 politicia11s and key Defence figures paying bribes to senior . through secret Swiss bank accounts. . ' Bofors declin~d to con1n1ent 011 the radio a1Iegatio11s · that it was planning to pay a total of l 00 million kroners ($ 16 million) to men1bers of Prime Minister Rajiv Ga11dhi's Congress-I Party in an undercover operation code-named Lotus. Tl1e radio quoted senior company sources as saying four instalments totalling 32 million kroners ($ 5 million) were paid during the last two months of 1986 into secret accounts at the Swiss bank corporation. The accounts were traced to senior :figures responsible for placi11g India's n1ilitary orders, tl1e radio added. Bofors is already at tl1e centre of a political storm in Sweden after acknowledging smuggling millions of dollars worth of arms to blacklisted count ries in tl1e Middle East. Police are also investigating reports of illegal exports to Irar1. The firm last year overcame strong inter11atio11al competition to win an order worth 8 l.} billion for a complete field artillery system to be delivered to tl1e I11dian Army over tl1e 11ext four years . • Other leading contenders i11cluded British , Austrian and West Germa11 firms, witl1 Fra11ce as the final ru11ner-t1p, Bofors said in • · February last year. It said it won the order tl1rougl1 credit finance provided on good terms by the Swedish Gover11me11t." 4 - ) 2.2 Comme11ti11g llpon tl1e allegations contained in the news-item, the Governn1ent of I11dia issued the following statement on 17 April, 1987 : ''Governtne11t categorically de11y the allegations contained i11 the News storjes based on the reports broadcast by tl1e. S\vedish radio and television in connectio11 with an arms order placed on the Swedish firm Bofors. The news item is false, baseless and mischievio11s. During the negotiations tl1e Governn1ent had made it clear tl1at tl1e con1pany should not pay any money to a11y person in connectio11 with tl1e contract. Government's policy is not to per1nit a11y cla11destine or irregular payments in contracts. Any breach of t]1is policy by any 011e will be most severely dealt with. TJ1e report is orte}more link in the cl1ain of denigration and destabilisatio11 of our J)olitical system. Goven1ment a11d the p~oplc are deter1ni11ecl to defeat this si11ister desjgn with all their mig11t." Tl1e Swedis11 Radio repeated tl1e allegatio11 on 17 April, 1987 2.3 claiming tl1at it l1acl documentary proof of the pay-offs in four instaln1ents to Indian accou11ts in Sv,1iss Banks and it had checked with Skandinaviska E11skilds Ban.ken, tJ1e bankers for Bofors. On the otl1er l1and, Bofors ,de11ied paying any l<ickbacks to Indian politicians or officials for the deal juvolving the sL1pply of 155 mm Towed howitzers. The company 1ssue~ the followi11g stateme11t 011 17 April, 1987 : · ·'AB Bofors l1as not paid, or conspired to pay, any bribes i11 connection witl1 tl1is order. All allegations to the co11trary are hereby categorically denied.'' 2.4 On 20 April, 1987, tl1e Mu1ister of Defc11ce (S11ri K.C. Pa11t) made a suo:,11oto _.,tatement on tl1e subject i11 Lok Sabha. He stated inter cilia :''In May 1985, the Defence Secretary, as Chairn1an of the Price Negotiating Committee int'lividuaily advis\,d the ]~1.ders of each of tl1e four co111peting firms that the policy of tl1e present Governn1ent. did 11ot approve of the appointment of Indian agents acti11g l~or foreig11 suppliers. H·e specially asked them to reduce their offers by the am.ol111t of st1ch commissions, if any bad been provjded for. TJ1e-y \~ere u11a1nbiguously advised that the deci~ ::.ion of tl1e Government of India ,vould be based entirely on the 1nerits of eacl1 offer. Defence Sectetary . further stated that Governn1ent of l 11dia ,vould disqualify a firm in case it came to tl1e notice of tl1e Government of I11dia t]1at an agent had been appointed by a foreign firn.1. On the eve of finalising the contract, in respo11se to a reiteration of Govcrn111.e11t's policy and a dema11d t·or confinnatio11, M/s.. Bofors replied, vide their letter of the 10th Murcl1, 1986, that they did 11ot employ a11y Representative/Agent in India 6 for tl1e project. . However, for administrative services, e.g., l1otel booki11gs, transportation> t'orwarding of letters, telexes etc., tl1ey tlse tJ1e services of a local firm. ''Besides the formally recorded deliberations of the Price Negotiati11g ,Comf11ittee, the Govern1nent of India's policy i11 this regard ,vas conveyed to the concerned Goven1tnents whenever an appropriate opportu11ity .presented itself, either t11rough their Ambassadors in India or during the visits of senior functionaries of sucJ1 Governments to New Delhj. In tJ1e case of Bofors, opportunities arose during the visit of Mr. Carl JoJ1a11 Aberg, Permanent Unde1· Secretary of State Foreign Trade of tlie S\vedish Govern1nent, as ,vell as dtu·ing .person;:11 cons11ltatio11s between ot1r Prirne Mi11ister a11d the late Mr. Olof Paln1e. The aforesaid JJositio11 has been confirmed by Mr. Aberg in a state111e11t 111ade l1y l11n1 on J7 April. 1987 regardi11g the Bofors contract with lnciia. His stateme11t is. as follows :- 'Indian Prime Mi11istcr Rajiv Ga11dJ1i l1i111self duri11g J1i$ talks in 1985 with Olof Palme said. that 011e of t]1e pre-conditio11s tl1at Bofors sI1ould satisfy i11 co11nectio11 witl1 tl1e Howitzer contr,tct was tl1at tb.e compa11y should l1ave 110 m1ddle1nen. The deal should be draw11 directly between Bofors a11d tl1e I11dian Defence Mi11istry. TJ1e Co1npt111y infor1ned the Swedisl1 Gover11me11t representative i11 autun111 1985 tl1a.t there \vou]d be 110 middlemen involved a11d that tl1ey 1,-vould deal directly witl1 Indian Defence Ministry. TJ1is was conveyed l)y 01of Pal111e i11 his personal conversation with Rajiv Gandl1i :in January, 1986.' It wot1ld tht1s be seen that tl1ere was 110 doubt whatsoever, in Bofors Qr it1 the Swed1sl1 Gover11me11t, about the Governme11t of India's policy tl1at 110 co1n1nissions or agency fees shot1ld be J)aid ju respect of ·contracts sec11re(i fro111 J11dia . . By indt1cting tl1e Bofors FH 77B Towed Hc)1,-vitzcr tJ1e Gover11- n1ent of India have acl1jevcd the folJo,vi11g :. (i) Acquired tl1e weapo11 syste111 whicl1, i11 tl1e technical opi1lio11 Army Headquarters. was tl1e most preferred. or· (ii) Acquired it- at a value cI1eaper tl1a11 tl1at otTe.red. by its closest competitor. ' • (iii) Obtai11ed considerable price reductio11 fron1 the origi11al bid whjch w~s based on June 1984 base prices pli1s escalation and! converted it i11to a fixed price co11tract at tl1e reduced level. 'Y 7 The Defence Minister further stated that ''if a11y evidence is produced involving violatiorts of tl1e 1a\v, the matter will be tl1oroughly i11vestigatcd 2.5 and the guilty, wl1oever tl1ey may be pt1nisl1cd." A similar stateme11t was made by the Minister of State for Defence 2.6 in Rajya Sabl1a 011 21 April, 1987. 2.7 The matter was tl1oroughly discussed i11 the Lok Sabha <)Tl 20 Apri 1. 1987 and in the Rajya Sabha on 21 April. 1987. During the discussions tl:tc members raised issttes relati11g not 011ly to tl1e alleged kickbacks paid by Bofors for win11i11g tl1e contract but also ;:1bout the quality and s11itability· of the gu11 selected for proct1re111ent. _.o ? ) [ . i11 the d~bate.,; i11 tl1c Lok S:ibl1a tl1e P rime Minister nte rvcn111g observed : .... ,,..,..... .... • .... !,, ••• tI1e issue was raised by tl1e Svvedisl1 Pri111e Minister, who said tl1at they were i11terested tl1at l11dia l)t1y tl1cir guns. l saicI tl1at (J) the guns n1ust be technically accei1table and superior to all the other weapons. (2) tl1e cost must be less tha11 tl1e competitors and (3) if you wa11t a11y involven1e11t at n1y level. yot1 must guarantee me. That means 1 must get a fir111 a11svver fro111 tl1e Prin1e Minister of S\vcden that 110 n1iddlcmer1 are i11volved. \Ve have bee11 taking this up ............ '! ''It l1as bee11 take11 up at tl1e official level vvl1e11ever dealings l1ave bee11 taki11g place. It has been take11 up by ju11ior Mi11isters wl1erever they l1ave been involved. tl1at this should 11ot take place. But wl1en l was sought to be involved 111 a particular process and it is not 011ly Prin1e Mi11ister Olof Pal1ne \Vho l1as said tbis, Mrs. Tl1atcl1er, President Mitterra11d, all Heads of State do raise tl1c qLLestion of deals t11c1l tl1eir Govern1nent a.re doi11g \Vitl1 our Gover11me11t and I n1,tke it clear 011 every occasion tl1at this is one of tl1e conditio11s tl1at there 1nust be-that there can be- 110 midd.leme11 or agents i11volved in such dealings and l got • co11firmation f ron1 Prime Minister ...
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