Defence company may face ban over arrest of CEO for bribery

Defence firm SMPP Limited could face a suspension or a ban on government business dealings under the Centre’s rules for procuring weapons and systems following the arrest of its CEO and two others by the Central Bureau of Investigation (CBI) in an alleged bribery case, officials familiar with the matter said on Thursday.

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

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

SMPP did not respond to a query from HT on the developments. There was no official response from the defence ministry either.

The allegations include Kumar disclosing sensitive information concerning defence production, procurement and other important activities of MIL. CBI officials said they recovered ₹1.73 crore in cash during a raid on Kumar’s premises in Pune. The investigating agency also seized ₹50 lakh in cash, along with incriminating documents, during searches in Mysuru and Bengaluru in Karnataka and Delhi.

Rules state that the competent authority may impose financial penalties and/or suspend or ban business dealings with an entity if the firm resorts to corrupt practices, unfair means, or illegal activities at any stage to secure a contract, even when a 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,” according to the manual.

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.

MIL 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.