Defence firm SMPP may face suspension over corruption charges

SMPP Limited, whose CEO was arrested by the Central Bureau of Investigation (CBI) in an alleged bribery case on Wednesday along with two others, faces possible suspension or a ban on government business dealings by the defence ministry under the government’s rules for procuring weapons and systems, officials aware of the matter said on Thursday.

SMPP CEO Ashish Kansal, state-owned Munitions India Limited executive director Anil Kumar and his brother B Harshavardhan were held in an alleged bribery case linked to a ₹500-crore ammunition deal.

The department of defence production is expected to decide what action to take against SMPP, the officials added, asking not to be named. It manufactures ammunition, loitering munitions, bullet-proof jackets and helmets.

The Defence Procurement Manual 2025 lays down the grounds for such action. Corrupt practices and the use of unfair means are among the top grounds for punitive action.

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Rules states that the competent authority may impose financial penalties and/or suspend or ban business dealings with an entity on grounds including a firm resorting to corrupt practices, unfair means and illegal activities during any stage to secure a contract, even in cases where PCIP (pre-contract integrity pact) is not mandated.

Violation of the PCIP is also a key ground for initiating action.

The manual states that the competent authority may suspend business dealings with an entity pending a full inquiry into allegations or facts relating to any ground for punitive action. The government may suspend business dealings with an entity when it refers any complaint against it to the CBI or any investigating agency or when it receives intimation regarding the initiation of a criminal investigation or inquiry against any entity.

The manual details the outcome of suspending business dealings with a firm.

“An order of suspension of business dealings with an entity shall result in immediate ineligibility of the entity from participating in future bids. No RFP (request for proposal) will be issued to such an entity. An order suspending business dealings with an entity may extend to its allied firms.

The period of suspension ordinarily does not exceed one year. In exceptional cases and those involving national security, the government may order a longer ban.

The entity whose business dealings are suspended or banned may participate in future RFPs for spares, upgrades and maintenance of the equipment/weapon systems it supplied earlier, if that equipment is a proprietary item and no alternative sources of supply are available, the manual adds.

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Munitions India Limited was one of the seven defence companies carved out of the erstwhile Ordnance Factory Board (OFB) five years ago. The state-owned firm faces a clean-up and an accountability push following the corruption allegations. The board’s corporatisation was aimed at boosting its efficiency and competitiveness in a long-awaited reform in the country’s defence manufacturing sector.