Gurugram, New Delhi and Bengaluru: The government of India is seeking the extradition of arms dealer Sanjay Bhandari on grounds of his alleged failure to declare his foreign assets under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, and for alleged money laundering. Andrew Peretti reported from London for NewsClick that closing arguments in the extradition case were heard at the Westminster Magistrates’ Court, London, on October 4 and a final decision is expected on November 7.
The Thales Group – a French multinational conglomerate that designs, develops and manufactures electrical systems, as well as devices and equipment for the aerospace, defence, transportation and security sectors, including the Rafale aircraft – has been accused by Bhandari of not paying him the “commission” that had been agreed upon. Thales SA has denied the allegation. The French government owns 25.67% of the equity capital of Thales, while Dassault Aviation (the manufacturer of Rafale) has a 24.62% stake in the company. Thales is also one of several offset partners in the Rafale deal.
Backdrop to the Controversy
According to a January 9, 2022 article in the London, UK-based publication, The Telegraph, Bhandari alleged that “he was hired by Thales to secure a €2.4 billion contract to upgrade Mirage 2000 military jets for the Indian Air Force” that was signed in 2011. He claims he helped Thales to sell the contract for the upgrade of the Mirage jets by facilitating a meeting with a top official of India’s Ministry of Defence.
Bhandari filed a lawsuit in a commercial court near Paris alleging that while Thales had agreed to pay a consultancy fee of €20 million to him, he was paid only €9 million.
The Telegraph report said Bhandari had alleged that he was not paid his dues due to “political factors,” namely, his proximity to the Congress party and that from 2016 onward, the Bharatiya Janata Party government in New Delhi led by Prime Minister Narendra Modi “started persecuting him.” More about Bhandari’s alleged links with the Congress party will come a bit later.
The British publication wrote that “the allegations that will emerge during Mr Bhandari’s case against Thales could embarrass the French defence industry which has close ties to the government (in Paris).” It added that Bhandari has claimed in his petition that “he was told by François Dupont, then managing director of Thales India, about an elaborate covert … scheme in India and Dubai which enabled the payment of secret commissions to intermediaries… This arrangement was presented as being a standard practice within the Thales group for the payment of commercial intermediation services, taking into account the regulations in force in France.”
Complex Corporate Structure
The Telegraph report by Mark Hollingsworth claimed that a “special subsidiary called Thales Middle East and Africa” allegedly handled the “financial structures” and the executives involved included the president of Thales Air Systems, Guy Delevacque, and Dupont.
The report added: “Initially, it was agreed with India that as part of the Mirage 2000 modernisation contract, Thales would set up a technology transfer (scheme) that would benefit local Indian industry. A part of the funds received was to be earmarked for this purpose. But these funds were in fact mainly used by Thales to make indirect payments to middlemen who were lobbying foreign governments, the lawsuit claims.”
Bhandari’s petition further alleges that in order to pay the commissions to him, Thales awarded offset contracts to two companies based in Bengaluru that would retain a quarter of the price paid by Thales for services that could materialise in engineering or consulting. The remaining amount would allegedly be paid to a Dubai-based company called UHY Saxena Consulting. He claimed that the company did not, in fact, provide any services to Thales other than receiving the payment of the fees due to Bhandari and transferring the funds to the designated accounts.
Bhandari’s petition, quoted by The Telegraph, a copy of which is with the authors of this article, claims that this “fictitious economic justification constructed by Thales also involved the conduct of an audit by the UK firm Ernst & Young.” He alleged that on February 14, 2019, Pierre-Marie Budin (who succeeded Dupont in Thales) told him that the intermediary company involved in the financing package would be audited by Ernst & Young in order to “protect everyone.”
The Telegraph quoted an unnamed spokesperson for Thales denying Bhandari’s allegations. “Thales firmly denied the claims by Bhandari regarding the sums allegedly due or any other payments to him by Thales SA. Thales never signed a contract with Mr Bhandari or his companies in connection with this project. Thales complies with the law and applies a zero-tolerance policy on corruption and influence peddling. The Group’s integrity programme is regularly evaluated and amended to reflect changes in applicable legislation and best practices.”
A source close to Bhandari was also quoted in The Telegraph report claiming: “Bhandari helped Thales win the Mirage upgrade deal. But Thales—a powerful multinational—sacrificed (its) former partner on the altar of Indian domestic politics and reneged on their side of the bargain. It’s a David versus Goliath, but we know who won that fight in the end.”
The report ends with a reference to the supplier of Rafale aircraft: “This shows how French defence companies like Dassault and Thales are neck deep into corruption and their use of illegitimate business practices and offshore companies to pay their middlemen and bribe officials in other countries to secure big defence contracts.”
Bhandari reportedly fled India despite a “look-out” notice being issued against him following a search-and-seizure raid on his residence by officials of the Income Tax Department in October 2016 where “confidential” documents of the Defence Ministry were found that indicated a possible violation of the Official Secrets Act.
According to a report in The Times of India by Naomi Canton, published on September 2, 2020, Bhandari had brokered a Rs 2,895 crore contract with Swiss aircraft company Pilatus Aircraft Limited that had paid his Dubai company, Offset India Solutions FZC, and had also received “kickbacks” for a Rs 6,744 crore petroleum industry deal obtained by South Korea’s Samsung Engineering Company Limited in Gujarat.
Attempts to Extradite Bhandari: Political Angle
After Bhandari was arrested in London on July 15, 2020, he was released on bail by the Westminster Magistrates’ court on payment of £120,000 (or the equivalent of Rs 1.1 crore) and a series of stringent conditions were imposed on him. The conditions included surrendering his passport, wearing an electronic tag, not leaving his residence, a curfew between 10.00 pm and 6.00 am, not switching off his mobile phone, visiting the local police station twice a week, and not visiting any international port and not applying for, or being in possession of, any travel document.
The ToI quoted a court spokesperson saying that the charges against Bhandari related to him “knowingly” evading payment of income tax between April 2016 and September 2019. The news-report then brought in the angle of Bhandari being allegedly involved in property deals in London with Robert Vadra, husband of Congress leader Priyanka Gandhi Vadra, adding that Robert Vadra had denied any business association with Bhandari.
A source confirmed to the principal author of this article that Bhandari was well aware of the details of the Rafale deal involving the Indian government and Dassault Aviation. If correct, what the allegations levelled by Bhandari reveal are the complex “layering” of transactions by arms merchants and their dealings with so-called brokers or intermediaries.
According to several media reports, including one in the Economic Times dated January 11, 2022, and another in The Telegraph, UK, Bhandari filed a suit against Thales at the Tribunal de Commerce in Nanterre, France, wherein he repeats several allegations against Thales made by him in the UK court, namely, that
● Thales did not pay him €11 million out of €20 million that was supposed to be his fee for services as a commercial intermediary representing Thales in the Mirage modernisation deal.
● that he was told by a Thales India official about an elaborate financial covert scheme in India and Dubai which enabled the payment of secret commissions to intermediaries, and;
● that the two companies based in Bengaluru that were awarded offset contracts “would retain about 25 per cent of the price paid by Thales for services that could materialise in engineering or consulting.”
Link with Rajeev Chandrasekhar’s Firm?
Court documents suggest that one of the “two companies based in Bangalore” is Axiscades Engineering Technologies Limited, which is promoted by Jupiter Capital, which, in turn, was promoted by Rajeev Chandrasekhar, the Minister of State for Electronics and Information Technology. At the time the companies were promoted, Chandrasekhar was not a Union minister. He was a Director of Jupiter Capital between 2005 and 2020 and he became a minister in 2021. During the time the Thales deal took place, Chandrasekhar was a member of the Rajya Sabha.
Bhandari has alleged that Axiscades, “headed by Sudhakar Ganje, is indirectly owned by Mr ... Chandrasekhar, an Indian politician and member of the upper house of Parliament in India.” The allegations levelled by Bhandari are yet to be proven. His allegations have also been published in a report on a portal, Intelligence Online, on October 17.
Bhandari has alleged in the commercial court in France that Axiscades was awarded an offset contract by Thales and retained 25% of the value of the contract. Further, he has alleged that a Dubai-based consulting company, named UHY Saxena Consulting, headed by Rajeev Saxena, was supposed to pay him part of his fee but did not. “The purpose of concluding these cascade contracts was to facilitate the transit of funds from Thales to the accounts of Mr. Sanjay Bhandari,” he has alleged in the French court.
Bhandari has further claimed that using the financial structure of which Axiscades is a part, Thales has paid a portion of the €20 million due to him for his services as a commercial intermediary amounting to €9 million.
That Thales was a client of Axiscades and its predecessor companies, and that Axiscades was an offset partner for the Mirage modernisation deal, is well documented.
Rajiv Shamsher Bahadur Saxena (also known as Rajeev Saxena) of UHY Saxena Consulting and his wife Shivani Saxena were arrested in 2019 by the Directorate of Enforcement in the Ministry of Finance in connection with the case relating to purchase of 12 helicopters for very, very important persons (VVIPs) from AgustaWestland, a British-Italian company.
The question is whether Chandrasekhar was aware of the interconnections of the accused people in these transactions at the time he was still a Director of Jupiter Capital. The principal writer of this article sent the Minister detailed messages on both his official email address as well as his personal email addresses on September 30. A reminder was sent on October 17. This report will be updated as and when we receive a response from Chandrasekhar.
Will Bhandari’s Allegations Stick?
In his petition, Bhandari has alleged that Thales’ Pierre-Marie Durand told him on February 20, 2019, that funds would get routed through AvioHelitronics and Axiscades to UHY Saxena Consultancy in Dubai and then to Bhandari’s designated accounts, in the following manner: AvioHeli €6.2 million, Axiscades €3.8 million and UHY Saxena Consulting €1.2 million. These amounts were apparently never paid.
Rajeev Saxena was deported from the United Arab Emirates to India on January 19, 2019, and arrested the same day. This was exactly a month before the communication between Bhandari and Durand allegedly took place.
Will Bhandari Be Extradited?
NewsClick has already reported from London that as far as extradition trials go, the case relating to Bhandari has not elicited the fanfare of high-profile names like Vijay Mallya or Nirav Modi. Interpol’s website currently shows no red notice against Bhandari, although fugitive diamantaire Nirav Modi is listed on the site. In 2017, Interpol had refused to issue a red notice, after a case had been lodged against Bhandari under the Official Secrets Act. At that time, Interpol had stated that the rejection was due to the case appearing to be of a “political nature.”
As Peretti commented in his article published in this portal, Bhandari’s case goes beyond politics and is significant from a legal perspective that would test the provisions of the Black Money Act, 2015, enacted by Modi government to curb flows of black money and undisclosed foreign assets.
Bhandari’s lawyers have sought to put the spotlight on a report by the United Nations Human Rights Council Working Group on Arbitrary Detention, that had outlined the treatment of Christian Michel, who was extradited to India on allegations that he organised bribes in exchange for a 2007 contract for the purchase of luxury helicopters from AgustaWestland. Michel is currently behind bars in Delhi’s Tihar Jail.