Debt waiver suggests Rafale deal was dodgy, says French press. Here are the latest revelations

In new developments, reputed French daily Le Monde made a startling disclosure: in 2015, the French government had waived the debt and taxes of beleaguered Indian businessman Anil Ambani.

A few months before this exemption, the BJP government had agreed to purchase 36 French Rafale jets for Rs 59,000 crore, with Ambani as offsets contractor/partner to Dassault, claims the report published Saturday.

One of the journalists who broke the news of the favourable tax settlement between the French state and Ambani’s Reliance FLAG Atlantic France has disclosed that senior officials suggested “political interference might have happened” in the case.

The French Embassy in Delhi, however, ruled out any political interference in the settlement with Ambani. Alexandre Ziegler, France’s ambassador to India, said a global settlement was reached between French authorities and Reliance FLAG in a tax dispute.

French authorities, according to Julien Bouissou, had waived taxes worth €143,7 million for Ambani’s France-based telecom company just a few months after PM Modi announced the final Rafale deal; petitioners approaching India’s top court have argued that it is not a better deal than the original 126-aircraft agreement, nor in the best interests of national security.

What Le Monde has unearthed

Over a series of tweets, Bouissou alleges that Ambani’s firm was investigated by French tax authorities and found liable to pay €60 million in taxes for the 2007 to 2010 period; of this, Reliance offered to pay €7.6 million as a settlement. After the French tax authorities refused and carried out another audit for 2010-2012, they taxed Ambani further with an additional €91 million.

However, this changed in April 2015, when Modi finalised the overpriced deal. By then, the total amount Reliance owed to the French state in taxes was at least €151 million; however, it was mysteriously erased while the French were negotiating the Rafale contract with India.

The longstanding tax dispute was somehow resolved between February and October that year, Le Monde said.

Reliance confirms but denies bias

This was later confirmed by Reliance Communications, which nonetheless denied “any favouritism or gain from settlement”, further claiming that the tax demands from the French state were “unsustainable and illegal”. This despite the fact that Reliance FLAG used “transfer price” to re-route profits to a tax haven via the parent firm.

Headquartered in Mumbai, Reliance Group clarified late Saturday it had mutually agreed with the French authorities to pay Rs 560 million ($8 million) as tax for the period between 2008 and 2012 instead of the initial demand of Rs 11 billion.

It said that during that period, Ambani’s French subsidiary had an operating loss of €2.7 million ($3 million).

Government responds

The Defence Ministry of India rubbished the revelations of Le Monde; it called the linking of tax exemptions given to Reliance’s French subsidiary and the $8.7 billion fighter jet deal “totally inaccurate, tendentious, and a mischievous attempt to disinform” and conjectural at best.

“Neither the period of the tax concession nor the subject matter of the concession relate even remotely to the Rafale procurement concluded during the tenure of the present government,” the ministry said in a statement.

Meanwhile, Le Monde‘s possible links to Sam Pitroda, the high-profile technocrat and advisor to the Gandhi family (he co-owns the French newspaper), has come under scrutiny with the timing of the report coinciding with the national elections.

The nation demands an explanation, from Rahul Gandhi

Congress spokesperson Randeep Surjewala shared the “sensational & explosive” report by Le Monde on Sunday.

The Opposition has for months accused PM Narendra Modi of corruption on the level of criminal misconduct in choosing Reliance Defence as a domestic partner in the deal to buy 36 Rafale planes from France’s Dassault Aviation.

With the latest revelation, critics and the court have more ammunition to prosecute, as the apex court bench is likely to hear a request for an inquiry into the Rafale deal and review its earlier verdict on the basis of leaked documents, sometime this month.

Congress has turned the defence deal into a major issue in India’s 39-day national election and made it its cause to get to the bottom of the controversy, which received a new lease of life with The Hindu publishing a set of classified documents now referred to as the Rafale Papers.

Also read: The Hindu’s investigative reports on the Rafale, in detail

A few days before Le Monde‘s expose and The Hindu‘s vindication, while interacting with reporters in Amethi after filing his nomination papers on April 10, Congress President Rahul Gandhi referred to the Rafale deal, claiming the apex court has made it “clear” that PM Modi had “committed a theft”.

Senior advocate Mukul Rohatgi, appearing for Lekhi, said Rahul had remarked in public “the Supreme Court in its judgment said ‘Chowkidar Narendra Modi chor hai‘ (Watchman Narendra Modi is a thief)”.

What happens next

This has solicited widespread criticism from the Centre, with demands for an apology for defaming the PM; MP Meenakshi Lekhi has sought contempt action against Rahul for attributing his personal observations to the apex court that were not in the original Rafale judgment.

In response to Lekhi’s petition, the Supreme Court on Monday observed that Rahul’s comment was “incorrectly attributed” to the apex court and directed the Congress president to give his explanation by April 22.

“We also make it clear that this court had no occasion to make such [an] observation in as much as it was deciding legal admissibility of certain documents, which were objected [to] by the attorney general,” said a bench headed by Chief Justice Ranjan Gogoi.

Why this matters

When the petitioners first exposed the discrepancies in the various iterations of the deal last August, they had billed it as a scam larger than UPA-era Bofors. For a while, it was all anyone talked about, although the Supreme Court’s clean bill of health undercut its transformation into a major poll issue earlier this year.

However, the apex court, in a fresh judgment, decided on April 9 that it will go ahead with the hearing of the review petitions in the light of the leaked documents cited by petitioners. On April 10, it made these documents admissible as evidence and dismissed the government’s preliminary objections claiming “privilege” over them.

The Rafale fighter is a twin-engine Medium Multi Role Combat Aircraft that French aerospace company Dassault Aviation manufactures. Under India’s defence procurement rules, any company selling equipment must invest at least 30% of the contract in India as part of an “offset” clause to help build a domestic manufacturing base and reduce the country’s dependence on imports.

Dassault has said it picked Reliance Defence as a partner on its own, but confusion about how Ambani’s company was picked persists. According to The Wire, this newly minted company was given 51% of the equity and Dassault 49%. Ambani’s firm was also assigned 70% of the offset benefits—that is, orders worth Rs 21,000 crore out of a total offset liability of Rs 30,000 crore.

Prarthana Mitra is a Staff Writer at Qrius

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