Questions abound as CBI seeks to chargesheet former CAG Shashi Kant Sharma

When Shashi Kant Sharma was appointed CAG in 2013, BJP had noted that he would be handling an audit into his own role in the AgustaWestland chopper deal - a classic case of conflict of interest

The Central Bureau of Investigation (CBI) has sought the government’s permission to chargesheet Shashi Kant Sharma, former Comptroller and Auditor General (CAG) of India and former defence secretary. The permission has been sought in relation to Sharma’s role in India’s procurement of AgustaWestland helicopters during the tenure of the United Progressive Alliance government in which middlemen were allegedly involved. Sharma gets drawn into the controversy because he served in the Ministry of Defence in various capacities from 2003 to 2013 until he left as defence secretary upon being appointed CAG.
 
Sharma made some interesting observations when he retired as CAG in 2017. In an exit interview, Sharma told news agency Press Trust of India (PTI) that CAG had audit jurisdiction over any person or authority with any relation to government revenues and expenditure. "We plan to audit certain issues related to the fiscal impact of demonetisation, largely its impact on tax revenues," he said.

 
He added that the audit report would cover the linkage of demonetisation with the public exchequer, expenditure on the printing of notes, the Reserve Bank’s dividend to the Consolidated Fund of India, and the huge amount of data generated by banks and the income-tax department in the wake of demonetisation.
 

Now, three years after he demitted office, there is still no sign of the report, and in off-the-record briefings to reporters, ‘sources’ in the CAG have said that dealings of the Reserve Bank of India (RBI) and banking and money supply issues were not covered by the CAG. This has led to an avalanche of criticism of the government, with around 80 former bureaucrats asking the government to clarify on the fate of the CAG report on demonetisation.

 
In the interview, Sharma had also said: "Our mandate covers GST (goods and services tax), just like the earlier taxation regimes. We have already started work on restructuring our revenue audit arrangements to meet this likely challenge when GST is introduced.”
 
Little wonder then that the establishment was a bit rattled. And now, this.
 
Will the government give its permission for a CBI chargesheet against Sharma? And what is the case?
 
The background
 
The story is now well known, and decades old. It spans three continents — Europe, the UAE and India. It involves CEOs, senior bureaucrats, Air Force officers in India, and middlemen. And there is a sense of weariness with the investigation, because it does not seem to be ending in India, though the two top executives alleged to have paid bribes have been acquitted in Italy.

 
AgustaWestland, a subsidiary of Italy’s Finmeccanica, was alleged to have paid bribes to procure the order for supply of 12 helicopters to the Government of India in order to replace the Soviet-built Mi8, which had to be phased out by 2014. Among those to whom the bribes are alleged to have been paid are former Chief of Air Staff, Air Marshal S P Tyagi, a clutch of (now retired) Indian Air Force (IAF) officials, and some bureaucrats and political figures. Then Joint Secretary in the Ministry of Defence, Shashi Kant Sharma, is alleged to be one of them.
 

Negotiations for the helicopters began in 2000. Because specifications were so precise, only Eurocopter qualified, causing a single-vendor situation. In November-December 2003, Brajesh Mishra, then principal secretary to the prime minister, said this was to be avoided at all costs. The specs were lowered to make the deal more competitive. This left just two big players in the field: Finmeccanica's AgustaWestland (the AW-1O1), an Anglo-Italian aircraft; and the American firm Sikorsky's S 92 Superhawk.
 
In 2010, after the field trials had been concluded, AgustaWestland was found to be the better aircraft, and the contract for a 560 million-euro ($638 million) deal was signed, Sikorsky put in a complaint that it hadn't got a debriefing on certain ‘concessions' given to each side during the technical bid stage, and that it felt the trials had been unfair. It followed this up with a legal notice to the Ministry of Defence.

 
The government opened an investigation. Simultaneously, a whistleblower at Finmeccanica in Italy alleged that the company paid bribes to secure the India contract. An Italian appeals court sentenced former Finmeccanica chief executive Giuseppe Orsi to four-and-a-half years in prison for corruption and falsifying invoices, overturning a previous lower court ruling that held Orsi guilty only of false invoicing, especially in the case of an order related to the Indian government.
 
Italian Public prosecutor Eugenio Fusco accused Orsi and former AgustaWestland head Bruno Spagnolini of paying ‘tens of millions of euros to Indian officials’, including a ‘former air force head through intermediaries and falsifying invoices’ to win the contract.

 
Orsi and Spagnolini contested the order in the Italian Supreme Court. There, they secured an acquittal in 2019. One chapter of the controversy, for them, was closed.
 
But in the highly competitive world of defence contract procurement, Orsi and Spagnolini were obviously under pressure, and they were not acting alone. The Italian public prosecutor produced documents they found at the residence of one Guido Ralph Haschke, a middleman who contacted another ‘facilitator’, Christian Michel. Michel, allegedly a defence middleman, is believed to have had contacts in the Indian government. At present, he is in jail in New Delhi. Among the documents that were recovered was a note with headings "AF", which according to prosecutors stood for air force, "BUR" (bureaucrats), "POL" (politicians) and "Fam" (family members of the former Indian air force chief of staff). While the Italian investigation is dead after the acquittal, India is not giving up. It is on the basis of the testimony of Michel, presumably, that the CBI has built its case against Shashi Kant Sharma.

 
The record
 
Sharma seems to have had an unblemished service record until the AgustaWestland episode. After being defence secretary, and having had to deal with the controversies surrounding then Chief of Army Staff Gen V K Singh and his retirement age, Sharma was seen to have been both discreet and moderate in handling complicated situations. He was appointed CAG in 2013, succeeding Vinod Rai, who had created a huge controversy by his investigation and conclusion that the system adopted by the outgoing United Progressive Alliance (UPA) government for allocation of 2G spectrum and coal block allocation represented a huge swindle of public money. Sharma inherited a controversial legacy, and the Bharatiya Janata Party (BJP) noted that as CAG he would be handling an audit into his own role in the AgustaWestland chopper deal — a classic case of conflict of interest.

 
Those who know Sharma discount this completely. A 1976-batch IAS officer of the Bihar cadre, he has held a variety of positions – he was posted at Banka in Bihar, Dhanbad and Bokaro (now in Jharkhand). He was district magistrate of Bhagalpur in 1982-1985 and served as district magistrate of Patna in 1990, before being appointed labour commissioner in Bihar, a position in which he served between 1990 and 1992 before moving to Delhi to run the department of youth affairs and sports in the Ministry of Urban Affairs and Employment. A short stint in the Ministry of Finance followed. And he later joined the Ministry of Defence in 2003 and stayed there to become defence secretary.

 
The defence secretary is both “very sharp" and “cool headed", said a leader who has had dealings with him. Former Home Secretary G K Pillai says Sharma is a straightforward officer with “highest integrity".
 
But the reports he had initiated are yet to see the light of day.
 
The question is: Will the government now give its assent to chargesheet him?