The covert payment was discovered by France's anti-corruption agency. Rafale deal: Dassault paid 1 million euros to Indian middleman as ‘gift’, claims report

On Sunday, Mediapart, a French investigative news publication, reported what it claimed to be a "scandal" associated with the sale of 36 Rafale fighter jets from France's Dassault to India.

The deal for 36 Rafale fighter jets, first announced by Prime Minister Narendra Modi in 2015, had led to questions by the opposition about alleged irregularities and non-adherence to procedure. Mediapart on Sunday published the first of a three-part series on the Rafale deal. Mediapart reported, "alongside this controversial deal [for 36 Rafale fighters], Dassault also agreed to pay one million euros to a middleman who is now under investigation in India in connection with another defence deal."

The covert payment was discovered by Agence Française Anticorruption (AFA), France's anti-corruption agency, in an audit of Dassault.

Mediapart reported that during AFA's audit of Dassault's accounts for 2017, inspectors found "an item of expenditure costing 508,925 euros under the heading 'gifts to clients'".

Mediapart reported "legal precedents suggest that giving a gift or an expensive meal costing several hundred euros can be enough to constitute corruption".

Mediapart revealed Dassault gave AFA an invoice dated March 30, 2017, for an Indian company Defsys Solutions". "This invoice, which related to 50% of the total order (1,017,850 euros) was for the manufacture of 50 models of the Rafale C, with a price per unit of 20,357 euros," Mediapart reported. Such an aircraft model would be about the size of a small car.

The AFA, reportedly, posed questions to Dassault related to the order including why such an order was given to an Indian company at such a price, why the expenditure was recorded as "gift to client" and whether any models of the aircraft were ever made.

Mediapart reported, "Dassault group was unable to provide the AFA with a single document showing that these models existed and were delivered and not even a photograph." This raised suspicions that the purchase was "bogus" and intended to cover up "hidden financial transactions".

Mediapart reported AFA did not flag the matter to French prosecutors.

Defsys Profile

Mediapart reported Defsys does not specialise in making aircraft models. Defsys is one of the sub-contractors of Dassault in the Rafale deal in India. According to its website, Defsys specialises in designing and manufacturing “Integrated Electronic Systems, Electro-Optical Payloads, Thermal Imagers, Flight and Firing Simulators, Weapon Replicas, Electro-Mechanical systems, On-board electronic sub-systems, Automated Test Equipment (ATEs), RF & Microwave Sub-assemblies, Radar & Seeker Simulators, RF Test and Measurement systems.”

Defsys is owned by Sushen Gupta. Gupta was arrested in March 2019 over allegations he was a middleman in the AgustaWestland deal. Reports in 2019 said the Enforcement Directorate had claimed Gupta had possessed classified papers of the ministry of defence, HAL and the Indian Air Force.

Congress Latches On

Not surprisingly, the opposition Congress has latched on to the latest revelations. Allegations of corruption in the Rafale deal had figured extensively in the Congress's campaign in the 2019 Lok Sabha polls.

Dinesh Gundu Rao, the Congress in-charge for Puducherry and Tamil Nadu, tweeted on Monday "The #Rafale deal is the biggest scandal in India’s Defence procurement history. New facts have emerged in #France which show that middleman were involved & were paid off. The way @narendramodi made it happen, the help a bankrupt #Ambani got clearly showed there was corruption."

Congress MP Manickam Tagore tweeted that the media may not report on the latest allegations. Tagore tweeted, "Important test will be for Media in India ,,let’s see in 48 hours how many of them reports . Fair media dead in India or still alive will be proved. I can challenge few channels won’t report because Modi sahib will be angry on them . Pl update if u see or read Flag of India #RafaleScam."