Judicial Review of Defence Procurement Agreement

The Rafale Aircraft Controversy

(Perception of individuals cannot be the basis of a fishing and roving enquiry)

Scope of Judicial Review:

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.

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. 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 have been informed that joint exercises have taken place, and that there is a financial advantage to our nation. It cannot be lost sight of, that these are contracts of defence procurement which should be subject to a different degree and depth of judicial review. Broadly, the processes have been followed. The need for the aircrafts is not in doubt. The quality of the aircraft is not in question. It is also a fact that the long negotiations for procurement of 126 MMRCAs have not produced any result, and merely conjecturing that the initial RFP could have resulted in a contract is of no use. The hard fact is that not only was the contract not coming forth but the negotiations had come practically to an end, resulting in a recall of the RFP.
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.

Price of aircraft:

The pricing details are stated to be covered by Article 10 of the IGA between the Government of India and the Government of France, on purchase of Rafale Aircrafts, which provides that protection of classified information
and material exchanged under the IGA would be governed by the provisions of the Security Agreement signed between both the Governments on 25th January, 2008. Despite this reluctance, thematerial has still been placed before the Court to satisfy itsconscience.
We have examined closely the price details and comparison of the prices of the basic aircraft along with escalation costs as under the original RFP as well as under the IGA. We have also gone through the explanatory note on the
costing, item wise. Suffice it to say that as per the price details, the official respondents claim there is a commercial advantage in the purchase of 36 Rafale aircrafts. The official respondents have claimed that there are certain better terms in IGA qua the maintenance and weapon package.
It is certainly not the job of this Court to carry out a comparison of the pricing details in matters like the present.
We say no more as the material has to be kept in a confidential domain.

Offset (to Reliance)

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 basis of materials available

before us, this appears contrary to the clause in DPP 2013 dealing with IOPs which has been extracted above. Thus, the commercial arrangement, in our view, itself does not assign any role to the Indian Government, at this stage, with respect to the engagement of the IOP. Such matter is seemingly left to the commercial decision of Dassault.
That is the reason why it has been stated that the role of the Indian Government would start only when the vendor/OEM submits a formal proposal, in the prescribed manner, indicating details of IOPs and products for offset discharge. As far as the role of HAL, insofar as the procurement of 36 aircrafts is concerned, there is no specific role
envisaged. In fact, the suggestion of the Government seems to be that there were some contractual problems and Dassault was circumspect about HAL carrying out the contractual obligation, which is also stated to be responsible for the non­-conclusion of the earlier contract.
Once again, it is neither appropriate nor within the experience of this Court to step into this arena of what is technically feasible or not. The point remains that DPP 2013 envisages that the vendor/OEM will choose its own IOPs. 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.

Conclusion of Supreme Court:

In view of our findings on all the three aspects, and having heard the matter in detail, we find no reason for any intervention by this Court on the sensitive issue of purchase of 36 defence aircrafts by the Indian Government. Perception of individuals cannot be the basis of a fishing and roving enquiry by this Court, especially in such matters. We, thus, dismiss all the writ petitions, leaving it to the parties to bear their own costs. We, however, make it clear that our views as above are primarily from the standpoint of the exercise of the jurisdiction under Article 32 of the Constitution of India which has been invoked in the present group of cases.
[Source: Manohar Lal Sharma v. Narendra Damodardas Modi decided by SC on 14 Dec. 2019]
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