Blacklisted Israel Military Industries moves Delhi High Court

The Delhi High Court has issued notice to the defence ministry and the Ordnance Factory Board (OFB) on a plea by the Israel Military Industries (IMI), Israel's state-run defence equipment supplier, seeking to set aside OFB's decision cancelling its contract to set up a plant to manufacture an advanced propellent for artillery ammunition at Nalanda in Bihar.

Justice Vipin Sanghi has sought a reply by July 26, the next date of hearing.

IMI had signed a contract to build bi-modular charge system (BMCS) plant for manufacturing an advanced propellant-charge used for firing artillery ammunition after emerging as the lowest bidder. However, the contract was in trouble after the defence ministry blacklisted IMI and five other defence equipment suppliers on charges of being involved in paying illegal gratification to Sudipta Ghosh, former director general of OFB.

The charges against IMI involves payment of bribe to Ghosh for securing release of 20 percent advance payment of the contractual amount. In its petition, IMI has rejected the allegation and also denied any links with Pradeep Rana, the man who allegedly gave the bribe to Ghosh for securing the 20 percent advance payment.

"It is pertinent to state that the contract was awarded in 2009 and there was nothing put against the petitioner (IMI) to establish any contemporaneous link with said Pradeep Rana or TSL, the purported employer of Rana," the petition said. IMI has also said that it had “merely” explored the possibility of engaging TSL Technologies for technical services in 2004 and 2005, and that TSL was not involved in the present programme as they had made Larsen and Toubro the local partner.

During the hearing, senior advocate Harish Salve, appearing for IMI with advocate Ajay Bhargava, told the court that it was arbitrary on the part of Indian government to cancel the contract without giving the company adequate opportunity to defend itself.

Defending the government's action, Additional Solicitor General A.S. Chandhiok questioned the territorial jurisdiction of Delhi High Court to hear the matter, saying that the OFB with its headquarters in Kolkata issued the order terminating the company's contract, so the matter should be heard in the same city.

IMI has also challenged the imposition of a 10-year ban on the company by the OFB. The decision, IMI alleged, was in "violation of principles of natural justice" as it was not provided with any of the documents including the FIR and chargesheet relied upon by the defence ministry while cancelling the contract.

On March 5 2012, the defence ministry barred four foreign firms - IMI, Singapore Technologies, Germany's Rheinmetall Air Defence and Corporation Defence Russia - and two Indian firms - New Delhi-based T.S. Kishan and Company Private Limited and Ludhiana-based R.K. Machine Tools Limited from business dealings with the Ordnance Factory Board for 10 years.

The firms were recommended for blacklisting by the CBI on the basis of evidence collected against them. "These firms were issued notice to show cause as to why action against them should not be taken consequent to the filing of the chargesheet in the case related to illegal gratification against former Director General of Ordnance Factories Shri Sudipto Ghosh and others.

The decision to debar was taken today after taking into consideration their replies," the defence ministry press statement had said.