Six defence firms, including four from abroad, named in a Central Bureau of Investigation (CBI) chargesheet in a graft case involving a former Ordnance Factory Board (OFB) chief, were on March 5 banned from doing business in India for the next 10 years.
Singapore Technologies (STK), Israeli Military Industries (IMI), Germany's Rheinmetall Air Defence and Corporation Defence Russia, as also two Indian firms, were debarred from dealing with the OFB, defence production department and the defence ministry. The Indian firms facing action are New Delhi-based T.S. Kisan and Company and Ludhiana-based R.K. Machine Tools. The former manufactures explosive shells for the 155mm Bofors guns through a tie-up with OFB. The latter is a supplier of components to the OFB such as 120mm shells and 155mm ammunition and flares for the artillery guns.
"The defence ministry today decided to debar six firms from from further business dealings with the Ordnance Factory Board, Department of Defence Production, MoD, for a period of 10 years," defence ministry spokesperson Sitanshu Kar said in an official statement in New Delhi. The action is a consequence of the CBI chargesheet against former OFB director general Sudipto Ghosh, and the probe agency's recommendation for blacklisting the six firms. The CBI had filed the chargesheet against Ghosh and several others involved in the graft case in June 2010. "The firms were recommended for blacklisting by the CBI on the basis of evidence collected against them," Kar said.
"These firms were issued notice to show cause as to why action against them should not be taken consequent to the filing of the charge sheet in the case related to illegal gratification against Ghosh and others. The decision to debar them was taken today after taking into consideration their replies," Kar added.
The government had in June 2009 decided to put on hold all defence dealings with these companies that were named by the CBI in the graft case against Ghosh and recommended to the defence ministry that they be blacklisted. However, some of the firms appeled and the Delhi High Court quashed the order, noting that principles of natural justice were not followed by providing the companies an opportunity to be heard. The government then issued show cause notices to the firms. After receiving their replies to the notice, the decision to ban them was taken.
As Bofors and Denel, two producers of artillery guns, were already banned in India, there were apprehensions in 2009 that halting defence business dealings with some of the firms, particularly STK and IMI, would impact the Indian Army's artillery modernisation programme. At that time, the STK was ahead for the army's over USD1 billion order for 155mm ultr- light howitzers for mountain deployment. Since then, India had decided to buy 145 of the M777 guns from BAE Systems through the foreign military sales route from the US. The IMI had, in April 2009, won a USD300 million contract for building a chain of ordnance factories in Nalanda, Bihar, to manufacture ammunition for Bofors 155mm guns. The decision to debar IMI has resulted in the project being adversely affected.