Govt puts overhaul contracts, repair with Rolls-Royce on hold

The Defence Ministry on Monday put on hold all “repair and overhaul” contracts with Rolls- Royce till the CBI probes several commercial deals between the UK-giant and Hindustan Aeronautics Limited (HAL) in which the engine manufacturer has employed the service of a middleman.

Akin to an annual maintenance contract, the repair and overhaul contract may impact maintenance of Avro, Jaguar, Hawk, Kiran and Embraer fleet of the Indian Air Force, which is already struggling with a depleting fleet strength.

The decision comes in the wake of Defence Minister A K Antony ordering a CBI enquiry into commercial contracts worth approximately Rs 5,000 crore inked by HAL and Rolls- Royce between 2007 and 2011. Antony gave the order to the CBI a week ago.

The contracts were related to supply on Marine Gas Turbines and not linked to the public sector aviation major's defence business, HAL sources told Deccan Herald. Asked for a comment, a Rolls- Royce spokesperson said, “We will cooperate fully with the regulatory authorities and have repeatedly made clear that we will not tolerate misconduct of any sort.”

In a letter that HAL received on December 27, 2013, Rolls Royce reportedly admitted appointing a commercial adviser in India for providing sales and logistical support, local business expertise and strategic advise. The contract with the company expired in January, 2013. HAL sources identified the firm as “Ashmore Private Limited.”

The engine manufacturer said it paid certain percentage of the purchase order for HAL to the “adviser” for which it had not made relevant declaration. Sources said Rolls -Royce made the disclosure on its own under the “integrity protocol.”

After receiving the letter, the vigilance officer of the HAL made his own enquiry and found merit in points mentioned in the letter. The HAL board subsequently discussed the matter and referred it to the Defence Ministry.

India would also seek information from Britain where the Serious Fraud Office is investigating bribery charges against Rolls -Royce in cases related to China and Indonesia.