Arrest of Ex-Service Chief Heralds Major Indian Crackdown on Dodgy Defense Deals

New Delhi (Sputnik) — As India's demonetization drive to eliminate black money stutters, the Government has opened another front to crackdown on corruption.

In what could be a signal to those who have taken the corrupt route to win Indian defense tenders in the past, India's Central Bureau of Investigation (CBI) has arrested former Indian Air Force Chief SP Tyagi and two others over alleged corrupt practices in the $ 753 mn AgustaWestland VVIP chopper deal.

"They were arrested on the allegations of accepting illegal gratification for exercising influence through corrupt or illegal means," said the CBI, India's premier investigating agency for probing corruption in high places.

CBI sources revealed that the arrested people had shown undue favor to the Italian firm AgustaWestland Ltd and helped it win a contract through illegal means.

India had signed a deal to purchase 12 luxury helicopters from AgustaWestland. The contract was annulled after an initial probe revealed changes in technical parameters to accommodate the AgustaWestland chopper in the tender. Earlier this month, a special Indian court had issued non-bailable warrants (NBW) against a British national and alleged middleman Christian Michel James in this case.

The Modi government began investigating all deals entered by his predecessor and last month, registered a money laundering case in connection with another aircraft deal. It was alleged a Brazilian company has paid $ 5.76 mn in bribe to defense consultant Vipin Khanna to bag the deal for the sale of three aircraft to the Defense Research and Development Organization, said CBI.

In addition, a case under the provisions of Foreign Exchange Management Act (FEMA) for alleged commission in award of contract for upgunning 130 mm field guns to 155 mm to Soltam Ltd of Israel has been registered by Directorate of Enforcement. The case is under investigation," Subhash Bhamre, India's Minister of State for Defense, said in Parliament on Friday.

Sources say that Indian government has also ordered inquiry into a deal for Swiss made basic trainer aircraft Pilatus.

India's Ministry of Defense documents reveal that it has already debarred six firms from further business dealings for a period of ten years. Apart from this, the Indian government has also suspended business dealings with 13 firms. The government has recently issued guidelines for penalties in business dealings with entities.

As per a report published by the Stockholm International Peace Research Institute (SIPRI) in February this year, India's share in international arms imports during 2011-2015 was 14 per cent.

Since 2014, Indian government has signed 135 contracts with a total value of approximately $ 29 billion for capital procurement of defense equipment such as aircraft, helicopters, rifles, rockets, missiles, radars, UAVs, frigates, ammunition and simulators.