The ministry of defence (MoD) headed by AK Antony has sought expert opinion on whether legal provisions can be invoked against Rolls Royce to 'penalise' the global engineering firm for hiring middlemen to bag contracts in India.
The ministry has already ordered a CBI inquiry into the matter on the recommendation of Hindustan Aeronautics Limited (HAL).
The British firm last week wrote a letter to HAL claiming that it has paid only 1.8 million pounds (Rs 18 crore) as commission to its agent, Aashmore Private Limited, and was willing to return that amount to the government, according to a senior official.
"A probe by CBI will take time and the company is involved in many key defence projects. So, we are looking for the ways to 'penalise' the company for violating procurement rules in India, which disallow hiring middlemen or commission agents. We have written to the ministry of law and justice for an opinion to initiate legal proceedings against the firm," a senior defence ministry official told dna.
Rolls Royce is involved in several key projects of Indian Air Force and Navy and more than 1,600 military aircraft of India run on Rolls Royce engine.
Though Antony is firm on taking strong action against the British firm, the IAF apprehends that any delay in signing the maintenance contract with Rolls Royce would hit India's defence preparedness to a large extent.
Last week, the MoD put on hold all future maintenance contracts with Rolls Royce till the CBI probe is completed.
According to a senior official, IAF was slated to sign crucial contracts with Rolls Royce for maintenance and overhaul of the six types of aircraft engines in the AJT Hawk, Jaguar, Avro, Kiran MkII and Sea Harrier military aircraft and Sea King helicopters.
"The company cannot get away by paying back a small amount for adopting illegal means to do business in India. There should be stricter punishment for it and blacklisting of it could be one of the options. A strong message has to be sent across the world that there is no space for lobbyists or agents to do business in India, especially with the ministry of defence," another MoD officer added.
Rolls Royce in December 2013, in an official communication to HAL has claimed to have paid commissions to Aashmore Private Limited for bagging key military deals and the amount ranged between 10 and 11.3 per cent. According to an estimated figure, HAL and Aashmore Private Limited have transacted business worth over Rs 5,000 crore between 2007-2011.