MANOHAR LAL SHARMA versus NARENDRA DAMODARDAS MODI & ORS. on 14 December 2018

840 SUPREME COURT REPORTS [2018] 14 S.C.R.[2018] 14 S.C.R. 840

A

MANOHAR LAL SHARMA

v.

NARENDRA DAMODARDAS MODI & ORS.

(Writ Petition (Crl.) No. 225 of 2018)

B

DECEMBER 14, 2018

[RANJAN GOGOI, CJI, SANJAY KISHAN KAUL AND

K. M. JOSEPH, JJ.]

Constitution of India: Art 32 – Public interest litigation – Issuerelating to procurement of 36 Rafale Fighter Jets for the IndiaCAirforce by Defence Ministry from France – Petitions seekingregistration of FIR, court monitored investigation into corruptionallegations in Rafale deal and quashing of Inter GovernmentalAgreement of 2016 for purchase of Rafale Jets – Held: Interferenceon the sensitive issue of purchase of defence aircrafts by the IndianDGovernment as regards the decision making process, difference inpricing, and the choice of Indian Offset Partner-IOP not called for– In such matters, perception of individuals cannot be the basis ofa fishing and roving enquiry by this Court – Court cannot sit as anappellate authority to scrutinize each aspect of the process ofacquisition – Decision making process cannot be doubted – MinorEdeviations even if have occurred, would not result in either settingaside the contract or requiring a detailed scrutiny – Court wouldnot carry out a comparison of the pricing details – Said materialhas to be kept in a confidential domain – In Defence ProcurementProcedure 2013, the role of the Government is not envisaged, thus,Fmere press interviews or suggestions cannot form the basis forjudicial review, especially when there is a categorical denial byboth the sides – Also, no material to show that this is a case ofcommercial favouritism to any party by the Government.

Judicial review: Governmental decisions relating to defenceGprocurement of aircrafts – Permissibility of judicial review – Held:Extent of permissible judicial review in matters of contracts,procurement, etc. varies with the subject matter of the contract andthere cannot be any uniform standard – Contracts of defenceprocurement should be subject to a different degree and depth ofjudicial review – Scrutiny of the challenges will have to be madeH

keeping in mind the confines of national security, the subject of theprocurement being crucial to the nation’s sovereignty.

Dismissing the writ petitions, the Court HELD: 1.1 Adequate Military strength and capability todiscourage and withstand external aggression and to protect thesovereignty and integrity of India, undoubtedly, is a matter ofutmost concern for the Nation. The empowerment of defenceforces with adequate technology and material support is,therefore, a matter of vital importance. It would be appropriate,at the outset, to set out the parameters of judicial scrutiny ofgovernmental decisions relating to defence procurement and toindicate whether such parameters are more constricted than whatthe jurisprudence of judicial scrutiny of award of tenders andcontracts, that has emerged till date, would legitimately permit.The tender in issue is not for construction of roads, bridges,etc. It is a defence tender for procurement of aircrafts. Theparameter of scrutiny would give far more leeway to theGovernment, keeping in mind the nature of the procurementitself. [Para 5, 6, 9][847-G-H; 848-A-B, F-G]

1.2 The extent of permissible judicial review in matters ofcontracts, procurement, etc. would vary with the subject matterof the contract and there cannot be any uniform standard or depthof judicial review which could be understood as an across theboard principle to apply to all cases of award of work orprocurement of goods/material. The scrutiny of the challenges,thus, will have to be made keeping in mind the confines of nationalsecurity, the subject of the procurement being crucial to thenation’s sovereignty. [Para 11][849-G-H; 850-A]

Jagdish Mandal v. State of Orissa and Ors. (2007) 14SCC 517 ; Maa Binda Express Carrier & Anr. v. North-East Frontier Railway & Ors. (2014) 3 SCC 760 : [2013]12 SCR 529 ; Tata Cellular v. Union of India (1994) 6SCC 651 : [1994] 2 Suppl. SCR 122 ; Siemens PublicCommunication Networks Pvt. Ltd. & Anr. v. Unionof India & Ors. (2008) 16 SCC 215 : [2008] 15 SCR585 ; Reliance Airport Developers (P) Ltd. v. AirportsAuthority of India & Ors. (2006) 10 SCC 1 : [2006] 8Suppl. SCR 398 – referred to.

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A2. There is no occasion to really doubt the process, andeven if minor deviations have occurred, that would not result ineither setting aside the contract or requiring a detailed scrutinyby the Court. Joint exercises have taken place, and that there isa financial advantage to the nation. It cannot be lost sight of, thatthese are contracts of defence procurement which should beBsubject to a different degree and depth of judicial review. Broadly,the processes have been followed. The need for the aircrafts isnot in doubt. The quality of the aircraft is not in question. It isalso a fact that the long negotiations for procurement of 126MMRCAs have not produced any result, and merely conjecturingCthat 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 forthbut the negotiations had come practically to an end, resulting in arecall of the RFP. The Court cannot sit in judgment over thewisdom of deciding to go in for purchase of 36 aircrafts in place of

126. The Government cannot be compelled to go in for purchaseDof 126 aircraft. This is despite the fact that even before thewithdrawal of RFP, an announcement came to be made in April2015 about the decision to go in only for 36 aircrafts. The countrycannot afford to be unprepared/underprepared in a situation wherethe adversaries are stated to have acquired not only 4[th]EGeneration, but even 5[th] Generation Aircrafts, of which, thereare none. It will not be correct for the Court to sit as an appellateauthority to scrutinize each aspect of the process of acquisition.[Para 22][854-B-F]

2.2 The process was concluded for 36 Rafale fighter jetFaircrafts on 23[rd] September, 2016. Nothing was called intoquestion, then. It is only taking advantage of the statement bythe ex-President of France, that these set of petitions have beenfiled, not only qua the aspect which formed the statement, that is,the issue of IOPs but also with respect to the entire decision- making process and pricing. [Para 23][854-G-H]G

3.1 The material placed before this Court shows that theGovernment did not disclose pricing details, other than the basicprice of the aircraft, even to the Parliament, on the ground thatsensitivity of pricing details could affect national security, apart H

from breaching the agreement between the two countries. Thepricing details have, however, been shared with the Comptrollerand Auditor General and the report of the CAG has been examinedby the Public Accounts Committee only a redacted portion of thereport was placed before the Parliament, and is in public domain.The Chief of the Air Staff is stated to have communicated hisreservation regarding the disclosure of the pricing details,including regarding the weaponry which could adversely affectnational security. The pricing details are stated to be covered byArticle 10 of the IGA between the Government of India and theGovernment of France, on purchase of Rafale Aircrafts, whichprovides that protection of classified information and materialexchanged under the IGA would be governed by the provisionsof the Security Agreement signed between both the Governmentson 25[th] January, 2008. Despite this reluctance, the material hasstill been placed before the Court to satisfy its conscience.[Para 25][855-C-F]

3.2 The price details and comparison of the prices of thebasic aircraft along with escalation costs as under the originalRFP as well as under the IGA and the explanatory note on thecosting, item wise have been examined. As per the price details,the official respondents claim there is a commercial advantage inthe purchase of 36 Rafale aircrafts. The official respondents haveclaimed that there are certain better terms in IGA qua themaintenance and weapon package. It is certainly not the job ofthis Court to carry out a comparison of the pricing details inmatters like the present. Nothing more is said as thematerial has to be kept in a confidential domain. [Para 26][855-G-H; 856-A]

4.1 The company, Reliance, has come into being in therecent past, but the press release suggests that there was possiblyan arrangement between the parent company and Dassaultstarting from the year 2012. As to what transpired between thetwo corporates would be a matter best left to them, being mattersof their commercial interests, as perceived by them. There hasbeen a categorical denial, from every side, of the interview givenby the former French President seeking to suggest that it is theIndian Government which had given no option to the French ABC

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AGovernment in the matter. On the basis of materials availablethis appears contrary to the clause in DPP 2013 dealing with IOPs.Thus, the commercial arrangement, itself does not assign anyrole to the Indian Government, at this stage, with respect to theengagement of the IOP. Such matter is seemingly left to thecommercial decision of Dassault. That is the reason why it hasBbeen stated that the role of the Indian Government would startonly when the vendor/OEM submits a formal proposal, in theprescribed manner, indicating details of IOPs and products foroffset discharge. As far as the role of HAL, insofar as theprocurement of 36 aircrafts is concerned, there is no specificCrole envisaged. In fact, the suggestion of the Government seemsto be that there were some contractual problems and Dassaultwas circumspect about HAL carrying out the contractualobligation, which is also stated to be responsible for the non-conclusion of the earlier contract. [Para 32][858-A-E]

D4.2 It is neither appropriate nor within the experience ofthis Court to step into this arena of what is technically feasible ornot. The point remains that DPP 2013 envisages that the vendor/OEM will choose its own IOPs. In this process, the role of theGovernment is not envisaged and, thus, mere press interviewsor suggestions cannot form the basis for judicial review by thisECourt, especially when there is categorical denial of thestatements made in the Press, by both the sides. There is nosubstantial material on record to show that this is a case ofcommercial favouritism to any party by the Indian Government,as the option to choose the IOP does not rest with the Indian FGovernment. [Para 33][858-F-G]

5. There is no reason for any intervention by this Court onthe sensitive issue of purchase of 36 defence aircrafts by theIndian Government. Perception of individuals cannot be the basisof a fishing and roving enquiry by this Court, especially in suchGmatters. It is made clear that the views are primarily from thestandpoint of the exercise of the jurisdiction under Article 32 ofthe Constitution which has been invoked in the instant group ofcases. [Para 34][858-H; 859-A-B]

CIVIL/CRIMINAL ORIGINAL JURISDICTION : Writ Petition(Criminal) No. 225 of 2018.

C

Under Article 32 of the Constitution of India With W.P. (C) No. 1205 of 2018, W.P. (Crl.) Nos. 297, 298 of 2018

K. K. Venugopal, AG, Tushar Mehta, SG, Sanjay R. Hegde, Sr.Adv., Ms. Suman, Ms. Raj Rani Dhanda, Vineet Dhanda, N. A. Usmani,Gopi Chand for Dr. J. P. Dhanda, Dheeraj Kumar Singh, Mrinal Kumar,Nihal Ahmad, Alok Shukla, R. Balasubramanian, Ms. ShraddhaDeshmukh, A.K. Sharma, Advs. for the appearing parties.

D

Manohar Lal Sharma, Petitioner-in-person.

E

Prashant Bhushan, Petitioner-in-person.

Arun Shourie, Petitioner-in-person.

The Judgment of the Court was delivered by RANJAN GOGOI, CJI

F

1. The issues arising in this group of writ petitions, filed as PublicInterest Litigations, relate to procurement of 36 Rafale Fighter Jets forthe Indian Airforce. The procurement in question, which has been soughtto be challenged, has its origins in the post-Kargil experience that saw arenewed attempt to advance the strategic needs of the armed forces ofthe country.

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2. As far back as in the month of June of the year 2001, an in-principle approval was granted for procurement of 126 fighter-jets toaugment the strength of the Indian Airforce. Simultaneously, a moretransparent Defence Procurement Procedure (“DPP”) was formulatedfor the first time in the year 2002. A robust ‘offset clause’ was included H

Ain the DPP in the year 2005 so as to promote Indigenisation and to thateffect Services Qualitative Requirements (“SQRs”) were prepared inJune 2006. On 29[th] June 2007 the Defence Acquisition Council (“DAC”)granted the “Acceptance of Necessity” for the procurement of 126Medium Multi Role Combat Aircrafts (for short “MMRCA”) including18 direct fly-away aircrafts (equivalent to a single squadron) to beBprocured from the Original Equipment Manufacturer (“OEM”) with theremaining 108 aircrafts to be manufactured by Hindustan AeronauticsLimited (for short “HAL”) under licence, to be delivered over a periodof 11 years from the date of signing. The bidding process commencedin August 2007. Six (06) vendors submitted proposals in April, 2008.CThe proposals were followed by technical and field evaluations; a StaffEvaluation Report and a Technical Oversight Committee Report. Allthese were completed in the year 2011. The commercial bids wereopened in November, 2011 and M/s Dassault Aviation (hereinafterreferred to as “Dassault”) was placed as the L-I sometime in January

2012. Negotiations commenced thereafter and continued but withoutDany final result. In the meantime, there was a change of politicaldispensation at the centre sometime in the middle of the year 2014.

3. According to the official respondents negotiation continued. Aprocess of withdrawal of the Request for Proposal in relation to the 126MMRCA was initiated in March 2015. On 10[th] April, 2015 an Indo-EFrench joint statement, for acquisition of 36 Rafale Jets in fly-awaycondition through an Inter-Governmental Agreement (hereinafterreferred to as “IGA”), was issued and the same was duly approved bythe DAC. The Request for Proposal for the 126 MMRCA was finallywithdrawn in June 2015. Negotiations were carried out and the processFwas completed after Inter-Ministerial Consultations with the approvalof the Cabinet Committee on Security (for short “CCS”). The contractalong with Aircraft Package Supply Protocol; Weapons Package SupplyProtocol; Technical Arrangements and Offset contracts was signed inrespect of 36 Rafale Jets on 23[rd] September, 2016. The aircrafts werescheduled to be delivered in phased manner commencing from OctoberG2019.

4. Things remained quiet until sometime in the month of September,2018 when certain newspapers reported a statement claimed to havebeen made by the former President of France, Francois Hollande, to theeffect that the French Government were left with no choice in the matterHof selection of Indian Offset Partners and the Reliance Group was the

name suggested by the Government of India. This seems to havetriggered of the writ petitions under consideration.

The first writ petition i.e. Writ Petition (Criminal) No.225 of 2018has been filed by one Shri Manohar Lal Sharma, a practicing lawyer ofthis Court. What is sought for in the said writ petition is registration ofan FIR under relevant provisions of the Indian Penal Code, 1860 and aCourt Monitored Investigation. The further relief of quashing the Inter-Governmental Agreement of 2016 for purchase of 36 Rafale Jets hasalso been prayed for.

Writ Petition (Civil) No.1205 of 2018 has been filed by one ShriVineet Dhanda claiming to be a public spirited Indian. The petitionerstates that he was inspired to file the writ petition being agitated over thematter on the basis of the newspaper articles/reports.

The third writ petition bearing Writ Petition (Criminal) No.297 of2018 has been filed by one Shri Sanjay Singh, a Member of Parliamentalleging illegality and non-transparency in the procurement process. Thesaid writ petition seeks investigation into the reasons for “cancellation ofearlier deal” and seeks a scrutiny of the Court into the alteration ofpricing and, above all, how a ‘novice’ company i.e. Reliance Defencecame to replace the HAL as the Offset partner. Cancellation of Inter-Governmental Agreement and registration of an FIR has also been prayedfor.

The fourth and the last writ petition bearing Writ Petition (Criminal)No.298 of 2018 has been filed by Shri Yashwant Sinha, Shri Arun Shourieand Shri Prashant Bhushan claiming to be public spirited Indians. Theyare aggrieved by non-registration of FIR by the CBI pursuant to acomplaint made by them on 4[th] October, 2018 which complaint, accordingto the petitioners, disclose a prima facie evidence of commission of acognizable offence under the provisions of the Prevention of CorruptionAct, 1988. The prayer, inter alia, made is for direction for registrationof an FIR and investigation of the same and submitting periodic statusreports to the Court.

5. Adequate Military strength and capability to discourage andwithstand external aggression and to protect the sovereignty and integrityof India, undoubtedly, is a matter of utmost concern for the Nation. Theempowerment of defence forces with adequate technology and materialsupport is, therefore, a matter of vital importance.

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A6. Keeping in view the above, it would be appropriate, at the outset,to set out the parameters of judicial scrutiny of governmental decisionsrelating to defence procurement and to indicate whether such parametersare more constricted than what the jurisprudence of judicial scrutiny ofaward of tenders and contracts, that has emerged till date, wouldlegitimately permit.B

7. Parameters of judicial review of administrative decisions withregard to award of tenders and contracts has really developed from theincreased participation of the State in commercial and economic activity.In Jagdish Mandal vs. State of Orissa and Ors.1 this Court, consciousof the limitations in commercial transactions, confined its scrutiny to theCdecision making process and on the parameters of unreasonablenessand mala fides. In fact, the Court held that it was not to exercise thepower of judicial review even if a procedural error is committed to theprejudice of the tenderer since private interests cannot be protectedwhile exercising such judicial review. The award of contract, beingDessentially a commercial transaction, has to be determined on the basisof considerations that are relevant to such commercial decisions, andthis implies that terms subject to which tenders are invited are not opento judicial scrutiny unless it is found that the same have been tailor-madeto benefit any particular tenderer or a class of tenderers. [See MaaBinda Express Carrier & Anr. Vs. North-East Frontier Railway &EOrs.2]

8. Various Judicial pronouncements commencing from TataCellular vs. Union of India3, all emphasise the aspect that scrutinyshould be limited to the Wednesbury Principle of Reasonableness andabsence of mala fides or favouritism.F

9. We also cannot lose sight of the tender in issue. The tender isnot for construction of roads, bridges, etc. It is a defence tender forprocurement of aircrafts. The parameter of scrutiny would give farmore leeway to the Government, keeping in mind the nature of theprocurement itself. This aspect was even emphasized inSiemens PublicGCommunication Networks Pvt. Ltd. & Anr. Vs. Union of India &Ors.4. The triple ground on which such judicial scrutiny is permissiblehas been consistently held to be “illegality”, “irrationality” and “proceduralimpropriety”.

1(2007) 14 SCC 517

2(2014) 3 SCC 760H3(1994) 6 SCC 6514(2008) 16 SCC 215

10. In Reliance Airport Developers (P) Ltd. vs. AirportsAuthority of India & Ors.5 the policy of privatization of strategic nationalassets qua two airports came under scrutiny. A reference was made inthe said case to the commentary by Grahame Aldous and John Alder intheir book ‘Applications for Judicial Review, Law and Practice’:

“There is a general presumption against ousting the jurisdiction ofthe courts, so that statutory provisions which purport to excludejudicial review are construed restrictively. There are, however,certain areas of governmental activity, national security being theparadigm, which the courts regard themselves as incompetent toinvestigate, beyond an initial decision as to whether theGovernment’s claim is bona fide. In this kind of non-justiciablearea judicial review is not entirely excluded, but very limited. Ithas also been said that powers conferred by the royal prerogativeare inherently unreviewable but since the speeches of the Houseof Lords in Council of Civil Service Unions Vs. Minister for theCivil Service [1985 AC 374: (1984) 3 WLR 1174 (HL): (1984) 3All ER 935] this is doubtful. Lords Diplock, Scaman and Roskili(sic.)[6] appeared to agree that there is no general distinction betweenpowers, based upon whether their source is statutory orprerogative but that judicial review can be limited by the subject-matter of a particular power, in that case national security. Many-prerogative powers are in fact concerned with sensitive, nonjusticiable areas, for example, foreign affairs, but some arereviewable in principle, including where national security is notinvolved. Another non-justiciable power is the Attorney General’sprerogative to decide whether to institute legal proceedings onbehalf of the public interest.”

[emphasis supplied]

11. It is our considered opinion/view that the extent of permissiblejudicial review in matters of contracts, procurement, etc. would varywith the subject matter of the contract and there cannot be any uniformstandard or depth of judicial review which could be understood as anacross the board principle to apply to all cases of award of work orprocurement of goods/material. The scrutiny of the challenges beforeus, therefore, will have to be made keeping in mind the confines of national 5(2006) 10 SCC 1

6To be read as ‘Roskill’

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Asecurity, the subject of the procurement being crucial to the nation’ssovereignty.

12. Adopting such an approach, on 10[th] October, 2018 when thefirst two writ petitions were initially listed before the Court, the Courthad specifically observed in its order that it is proceeding in the matterBby requiring the Government of India to apprise the Court of the detailsof the steps taken in the decision-making process notwithstanding thefact that the averments in the writ petitions were inadequate and deficient.The Court had also indicated that it was so proceeding in the matter inorder to satisfy itself of the correctness of the decision-making process.It was also made clear that the issue of pricing or matters relating toCtechnical suitability of the equipment would not be gone into by the Court.The requisite information was required to be placed before the Court bythe Government of India in sealed cover. Before the next date of hearingfixed i.e. 31[st] October, 2018, the other two writ petitions came to befiled.

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13. On 31[st] October, 2018, the Court in its order had recorded thatin none of the writ petitions the suitability of the fighter jets and its utilityto the Indian Airforce had been called into question. Rather what wasdoubted by the petitioners is the bona fides of the decision-making processand the price/cost of the equipment at which it was proposed to beEacquired.

14. Pursuant to the order dated 10[th] October 2018, a note in sealedcover delineating the steps in the decision-making process was submittedto the Court and by order dated 31[st] October 2018 this Court had directedthat such of the information which has been laid before the Court, whichFcan legitimately be brought into the public domain, be also made availableto the petitioners or their counsels. Details with regard to the inductionof the Indian Offset Partner (IOP), if any, was also required to bedisclosed. The Court also directed that the details with regard to pricing;the advantages thereof, if any, should also be submitted to the Court in asealed cover.G

15. It is in the backdrop of the above facts and the somewhatconstricted power of judicial review that, we have held, would be availablein the present matter that we now proceed to scrutinise the controversyraised in the writ petitions which raise three broad areas of concern,namely, (i) the decision-making process; (ii) difference in pricing; andH(iii) the choice of IOP.

Decision Making Process

16. The details of the steps in the decision-making process leadingto the award of the 36 Rafale fighter aircrafts’ order have been set outin response to the order dated 10[th] October, 2018. The Governmentstates that the DPP 2002 has been succeeded by periodical reviews in2005, 2006, 2008, 2011, 2013 and 2016. The preamble to DPP has beenreferred to capture its essence, which emphasises that –

“Defence acquisition is not a standard open market commercialform of procurement and has certain unique features such assupplier constraints, technological complexity, foreign suppliers,high cost, foreign exchange implications and geo-politicalramifications. As a result, decision making pertaining to defenceprocurement remains unique and complex.”

It also states that –

“Defence procurement involves long gestation periods and delayin procurement will impact the preparedness of our forces. Theneeds of the armed forces being a non-negotiable and anuncompromising aspect, flexibility in the procurement process isrequired, which has also been provisioned for.”

It is DPP 2013 which is stated to have been followed in the procurementin question.

It is no doubt true that paragraph 77 of the DPP 2013 reads asfollows:

“77. This procedure would be in supersession of DefenceProcurement Procedure 2011 and will come into effect from 01June 2013. There are, however, cases which would be undervarious stages of processing in accordance with provision of earlierversions of DPP at the time of commencement of DPP-2013.The processing of these cases done so far under the earlierprocedure will be deemed to be valid. Only those cases in which-RFP is issued after 01 June, 2013, will be processed as per DPP2013.”

In other words when it is stated that only those cases in whichRFP is issued after 1[st] June 2013 will be processed as per DPP 2013, inthis case where the RFP was issued much prior to 1[st] April 2013 and itwas withdrawn, as already noted, in June 2015, a question may arise as A

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Ato how it could be claimed that DPP 2013 was followed. We, however,also notice clause 75 of DPP 2013 which reads as follows:

“75. Any deviation from the prescribed procedure will be put upto DAC through DPB for approval.”

17. Also, we notice that the official respondents have soughtBsupport from paragraph 71 of the DPP 2013.Para 71 of DPP 2013, inrespect of the IGA has been referred to, which postulates possibilities ofprocurement from friendly foreign countries, necessitated due to geo-strategic advantages that are likely to accrue to the country. Suchprocurement would not classically follow the Standard ProcurementCProcedure or the Standard Contract Document, but would be based onmutually agreed provisions by the Governments of both the countriesbased on an IGA, after clearance from the Competent Financial Authority(hereinafter referred to as “CFA”). Of the total procurement of aboutRs.7.45 lakh crores since 2002 under DPP, different kinds of IGAs,including Foreign Military Sales and Standard Clauses of Contract accountDfor nearly 40%. With the object of promoting indigenization, a robustoffset clause is said to have been included since 2005. As per the DefenceOffset Guidelines of 2013, the vendor/Original Equipment Manufacturer(hereinafter referred to as “OEM”) is free to select its IOPs forimplementing the offset obligation.

E18. As far as the endeavour to procure 126 fighter aircrafts isconcerned, it has been stated that the contract negotiations could not beconcluded, inter alia, on account of unresolved issues between the OEMand HAL. These have been set out as under:

“i) Man-Hours that would be required to produce the aircraft inFIndia: HAL required 2.7 times higher Man-Hours compared tothe French side for the manufacture of Rafale aircraft in India.

ii) Dassault Aviation as the seller was required to undertakenecessary contractual obligation for 126 aircraft (18 direct fly-away and 108 aircraft manufactured in India) as per RFPGrequirements. Issues related to contractual obligation andresponsibility for 108 aircraft manufactured in India could not beresolved.”

19. The aforesaid issues are stated to have been unresolved formore than three years. Such delay is said to have impacted the cost ofH

acquisition, as the offer was with ‘in-built escalation’ and was influencedby Euro-Rupee exchange rate variations. The stalemate resulted in theprocess of RFP withdrawal being initiated in March 2015. In thisinterregnum period, adversaries of the country, qua defence issues,inducted modern aircrafts and upgraded their older versions. This includedinduction of even 5[th] Generation Stealth Fighter Aircrafts of almost 20squadrons, effectively reducing the combat potential of our defenceforces. In such a situation, government-to-government negotiationsresulted in conclusion of the IGA for the supply of 36 Rafale Aircrafts,as part of a separate process. The requisite steps are stated to havebeen followed, as per DPP 2013. An INT[7] was constituted to negotiatethe terms and conditions, which commenced in May 2015 and continuedtill April 2016. In this period of time, a total of 74 meetings were held,including 48 internal INT meetings and 26 external INT meetings withthe French side. It is the case of the official respondents that theINTcompleted its negotiations and arrived at better terms relating to price,delivery and maintenance, as compared to the MMRCA offer of Dassault.This was further processed for inter-ministerial consultations and theapproval of the CCS was also obtained, finally, resulting in signing of theagreement. This was in conformity with the process, as per para 72 ofDPP 2013.

20. The petitioners, on the other hand, seek to question the veryfulfilment of the prerequisites for entering into an IGA. The Governmentof France, giving only a ‘Letter of Comfort’ and not a ‘SovereignGuarantee’ has been questioned.

21. It is a say of the petitioners that para 71 envisages threeeventualities, where the question of entering into an IGA would arise,which have not arisen in the present case:

(a) Proven technology and capabilities belonging to a friendlyforeign country is identified by our Armed Forces while participating injoint international exercises; (b) Large value weapon system/platform in service in a friendlyforeign country is available for transfer or sale normally at a much lessercost; or

(c) Requirement of procuring a specific state-of-the-art equipment/platform where the Government of the OEM’s country might have 7Indian Negotiating Team AB

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Aimposed restriction on its sale and thus the equipment cannot be evaluatedon ‘No Cost No Commitment’ basis.

22. We have studied the material carefully. We have also had thebenefit of interacting with senior Air Force Officers who answered Courtqueries in respect of different aspects, including that of the acquisitionBprocess and pricing. We are satisfied that there is no occasion to reallydoubt the process, and even if minor deviations have occurred, that wouldnot result in either setting aside the contract or requiring a detailed scrutinyby the Court. We have been informed that joint exercises have takenplace, and that there is a financial advantage to our nation. It cannot belost sight of, that these are contracts of defence procurement whichCshould be subject to a different degree and depth of judicial review.Broadly, the processes have been followed. The need for the aircraftsis not in doubt. The quality of the aircraft is not in question. It is also afact that the long negotiations for procurement of 126 MMRCAs havenot produced any result, and merely conjecturing that the initial RFPDcould have resulted in a contract is of no use. The hard fact is that notonly was the contract not coming forth but the negotiations had comepractically to an end, resulting in a recall of the RFP. We cannot sit injudgment over the wisdom of deciding to go in for purchase of 36 aircraftsin place of 126. We cannot possibly compel the Government to go in forpurchase of 126 aircraft. This is despite the fact that even before theEwithdrawal of RFP, an announcement came to be made in April 2015about the decision to go in only for 36 aircrafts. Our country cannotafford to be unprepared/underprepared in a situation where ouradversaries are stated to have acquired not only 4[th] Generation, but even5[th] Generation Aircrafts, of which, we have none. It will not be correct Ffor the Court to sit as an appellate authority to scrutinize each aspect ofthe process of acquisition.

23. We may also note that the process was concluded for 36Rafale fighter jet aircrafts on 23[rd] September, 2016. Nothing was calledinto question, then. It is only taking advantage of the statement by theGex-President of France, Francois Hollande that these set of petitionshave been filed, not only qua the aspect which formed the statement,that is, the issue of IOPs but also with respect to the entire decision-making process and pricing. We do not consider it necessary to dwellfurther into this issue or to seek clause-by-clause compliances.

Pricing

24. The challenge to the pricing of the aircrafts, by the petitioners,is sought to be made on the ground that there are huge escalations incosts, as per the material in public domain, as found in magazines andnewspapers. We did initially express our disinclination to even go intothe issue of pricing. However, by a subsequent order, to satisfy theconscience of the Court, it was directed that details regarding the costsof the aircrafts should also be placed in sealed covers before the Court.

25. The material placed before us shows that the Governmenthas not disclosed pricing details, other than the basic price of the aircraft,even to the Parliament, on the ground that sensitivity of pricing detailscould affect national security, apart from breaching the agreementbetween the two countries. The pricing details have, however, beenshared with the Comptroller and Auditor General (hereinafter referredto as “CAG”), and the report of the CAG has been examined by thePublic Accounts Committee (hereafter referred to as “PAC”). Only aredacted portion of the report was placed before the Parliament, and isin public domain. The Chief of the Air Staff is stated to havecommunicated his reservation regarding the disclosure of the pricingdetails, including regarding the weaponry which could adversely affectnational security. The pricing details are stated to be covered by Article10 of the IGA between the Government of India and the Government ofFrance, on purchase of Rafale Aircrafts, which provides that protectionof classified information and material exchanged under the IGA wouldbe governed by the provisions of the Security Agreement signed betweenboth the Governments on 25[th] January, 2008. Despite this reluctance,the material has still been placed before the Court to satisfy itsconscience.

26. We have examined closely the price details and comparisonof the prices of the basic aircraft along with escalation costs as underthe original RFP as well as under the IGA. We have also gone throughthe explanatory note on the costing, item wise.

Suffice it to say that as per the price details, the official respondentsclaim there is a commercial advantage in the purchase of 36 Rafaleaircrafts. The official respondents have claimed that there are certainbetter terms in IGA qua the maintenance and weapon package.It is A

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Acertainly not the job of this Court to carry out a comparison of the pricingdetails in matters like the present. We say no more as the material has tobe kept in a confidential domain.

Offsets

27. The issue of IOP is what has triggered this litigation. TheBoffset contract is stated to have been governed by the Defence OffsetGuidelines of DPP 2013. Two of the said contracts were signed withDassault and M/s MBDA Missile Systems Limited on 23[rd] September,2016, the same day on which the IGA was signed between theGovernment of India and the Government of France. These are theCFrench industrial suppliers of the Aircraft package and Weapon Packagerespectively. There are stated to be no offset obligations in the firstthree years, but the offset obligations are to commence from October2019 onwards.

28. The complaint of the petitioners is that the offset guidelinesDcontemplate that the vendor will disclose details about the Indian Offsetpartner however, in order to help the business group in India in question,an amendment was carried out in paragraph 8 of the Offset Guidelinesthat too with retrospective effect. By virtue of the said amendment it iscontended that cloak of secrecy is cast about the Offset partner and thevendor is enabled to give the details at a much later point of time. It isEcontended, however, that other provisions of the Offset Guidelines remainunamended, and, therefore, Government cannot pretend ignorance aboutthe Indian Offset partner as has been done in the affidavit filed. It iscomplained that favouring the Indian business group has resulted inoffence being committed under the Prevention of Corruption Act.F29. As per clause 8 of DPP 2013, dealing with the processing ofoffset proposals, it has been stated in clause 8.2 as under:

“8. Processing of Offset Proposals

8.2 The TOEC[8] will scrutinize the technical offset proposals(excluding proposals for Technology Acquisition by DRDO asGper para 8.3) to ensure conformity with the offset guidelines. Forthis purpose, the vendor may be advised to undertake changes tobring his offset proposals in conformity with the offset guidelines.The TOEC will be expected to submit its report within 4-8 weeksof its constitution.”

H8Technical Offset Evaluation Committee

30. It has been categorically stated that the vendor/OEM is yet tosubmit a formal proposal, in the prescribed manner, indicating the detailsof IOPs and products for offset discharge. A press release in the formof a ‘Clarification on Offset Policy’, posted on 22[nd] September, 2018has also been placed before us. Inter alia, it states that the Governmentreiterates that it has no role to play in the selection of the IOP. As perthe Defence Offset Guidelines, the OEM is free to select any Indiancompany as its IOP. A joint venture is stated to have come into beingbetween Reliance Defence and Dassault in February 2017, which isstated to be a ‘purely commercial arrangement’ between the two privatecompanies. Media reports of February 2012 are stated to suggest thatDassault, within two weeks of being declared the lowest bidder forprocurement of 126 aircrafts by the previous Government, had enteredinto a pact for partnership with Reliance Industries (Another businessgroup) in the Defence sector. Dassault has also issued a press releasestating that it has signed partnership agreements with several companiesand is negotiating with over hundred other companies. As per theguidelines, the vendor is to provide details of the IOPs, either at the timeof seeking offset credit or one year prior to discharge of offset obligation,which would be due from 2020 onwards. The aforesaid press release isin conformity with the clause dealing with IOPs which reads as under:

“4.Indian Offset Partner

4.3 The OEM/vendor/Tier-I sub-vendor will be free to select theIndian offset partner for implementing the offset obligation providedthe IOP has not been barred from doing business by the Ministryof Defence.”

31. Despite the aforesaid illustration, the petitioners kept onemphasising that the French Government has no say in the matter, asper media reports. It is also stated that there was no reason for Dassaultto have engaged the services of Reliance Aerostructure Ltd., through ajoint venture, when the company itself had come into being only on 24[th]April, 2015. The allegation, thus, is that the Indian Government gave abenefit to Reliance Aerostructure Ltd., by compelling Dassault to enterinto a contract with them, and that too at the cost of the public enterprise,HAL.

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858 SUPREME COURT REPORTS [2018] 14 S.C.R.

A32. It is no doubt true that the company, Reliance AerostructureLtd., has come into being in the recent past, but the press release suggeststhat there was possibly an arrangement between the parent Reliancecompany and Dassault starting from the year 2012. As to what transpiredbetween the two corporates would be a matter best left to them, beingmatters of their commercial interests, as perceived by them. There hasBbeen a categorical denial, from every side, of the interview given by theformer French President seeking to suggest that it is the IndianGovernment which had given no option to the French Government in thematter. On the basis of materials available before us, this appears contraryto the clause in DPP 2013 dealing with IOPs which has been extractedCabove. Thus, the commercial arrangement, in our view, itself does notassign any role to the Indian Government, at this stage, with respect tothe engagement of the IOP. Such matter is seeminglyleft to thecommercial decision of Dassault. That is the reason why it has beenstated that the role of the Indian Government would start only when thevendor/OEM submits a formal proposal, in the prescribed manner,Dindicating details of IOPs and products for offset discharge. As far asthe role of HAL, insofar as the procurement of 36 aircrafts is concerned,there is no specific role envisaged. In fact, the suggestion of theGovernment seems to be that there were some contractual problemsand Dassault was circumspect about HAL carrying out the contractualEobligation, which is also stated to be responsible for the non-conclusionof the earlier contract.

33. Once again, it is neither appropriate nor within the experienceof 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 willFchoose its own IOPs. In this process, the role of the Government is notenvisaged and, thus, mere press interviews or suggestions cannot formthe basis for judicial review by this Court, especially when there iscategorical 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 acase of commercial favouritism to any party by the Indian Government,Gas the option to choose the IOP does not rest with the Indian Government.

Conclusion:

34. In view of our findings on all the three aspects, and havingheard the matter in detail, we find no reason for any intervention by thisHCourt on the sensitive issue of purchase of 36 defence aircrafts by the MANOHAR LAL SHARMA v. NARENDRA DAMODARDASMODI & ORS. [RANJAN GOGOI, CJI]

Indian Government. Perception of individuals cannot be the basis of afishing and roving enquiry by this Court, especially in such matters. We,thus, dismiss all the writ petitions, leaving it to the parties to bear theirown costs. We, however, make it clear that our views as above areprimarily from the standpoint of the exercise of the jurisdiction underArticle 32 of the Constitution of India which has been invoked in thepresent group of cases.

Nidhi Jain

Petitions dismissed.

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