CBI probe will continue, new blacklisting policy soon: Manohar Parrikar on Embraer deal

Brazilian aircraft manufacturer Embraer cannot escape Indian laws just because it has struck a settlement with American authorities over corruption in sale of planes to India and three other countries, Defence Minister Manohar Parrikar said on Tuesday.

He said a new blacklisting policy will be finalised next month.

"The CBI investigation into the USD 208 million deal will go by Indian laws on corruption, kickbacks, whatever it is, subject to evidence," he told reporters.

The minister stated that the American laws were different from Indian laws.

"In American law, criminal processes can be compounded (settlement through payment of fines). However, in India, criminal law is not compounded unless the acts are of very minor nature," he said.

On being asked whether the three planes supplied by Embraer to the IAF for Airborne Early Warning and Control System (AEW&CS) will be grounded, the Defence Minister said there was no question of grounding the planes.

"I can assure you that national requirement is a priority. In fact, I am coming out with a proposal or guidelines for blacklisting. The next Defence Acquisition Council (DAC) will finalise it," he said.

"It cannot be a knee jerk reaction. Proper decision making is required," he added.

The move comes months after the Defence Ministry laid down norms for engaging agents in defence deals. Sources said the new norms will be a mixture of heavy fines, graded blacklisting and other penalties.

The Brazilian aircraft manufacturer has come under the scanner of the US Justice Department after the former agreed to pay kickbacks for a range of defence deals with many countries.

Embraer has agreed to pay over USD 205 million to resolve charges of corruption and making bribe payments to officials in foreign nations, including USD 5.76 million allegedly being paid to an agent in India, in connection with the sale of three military aircraft for Indian Air Force.

Under the settlement, apart from the USD 107 million penalty to the US Justice Department as part of a deferred prosecution agreement, Embraer must also pay more than USD 98 million in disgorgement and interest to the Securities and Exchange Commission (SEC).

According to the company's admissions, Embraer executives and employees paid bribes to government officials and falsified books and records in connection with aircraft sales to foreign governments and state-owned entities in multiple countries.

Parrikar said the Embraer deal was being discussed and efforts were being taken to fine-tune it.

"The basic concept is that a criminal activity should be punished with a ban. But to what extent the ban should be, will be decided as per the national security. Giving exemption will also be based on national security," he said.

"If I have a platform where a company has been banned, I cannot stop operating the platform, because the company which is now blacklisted had supplied me the platform. Whose loss is it?" he asked.

The Embraer deal was signed in 2008 between Embraer and the DRDO for three aircraft equipped with indigenous radars for AEW&C (airborne early warning and control systems).