In a first such case involving a major defence deal,the government has invoked the stringent integrity clause of the defence procurement procedure and confiscated a bank guarantee of Rs 224 crore from Israeli firm IMI after it was blacklisted for 10 years following a CBI probe into corruption charges.
Sources said that the Defence Ministry invoked the strict clause in the Rs 1,200-crore deal to set up an ordnance factory in Nalanda to produce artillery ammunition that was inked with IMI in 2009. Under the provisions of the clause,not only has the contract been cancelled but the entire bank guarantee that had been given by the firm,amounting to Rs 224 crore,has also been encashed by the Ordnance Factory Board (OFB).
Officials said that the money was confiscated days before the firm was formally banned for 10 years in March after it had been named in a CBI probe in connection with corruption charges against former OFB chairperson Sudipto Ghosh.
The cancellation of the Nalanda factory contract that sought to indigenously produce Bi Modular Charge Systems (BMCS) needed for artillery ammunition has come as a big blow for the Army that has been relying on erratic imports for supplies.
With the factory suffering two major setbacks first in 2005 when the original technology partner Denel was blacklisted and the second with the banning of IMI the Defence Ministry has decided to go alone this time and sanctioned a tie-up between OFB and the Defence Research and Development Organisation (DRDO) to develop the technology indigenously.
Officials said that the pilot batch of BMCS modules has been assembled at the Nalanda factory in association with the DRDO and will shortly be offered to the Army for field trials. The plant for bulk production will be set up by OFB through indigenous resources at half the cost, an official said.
The Defence Ministry on Monday also cleared a Rs 15,764 crore modernisation and capacity augmentation for OFB during a meeting with key stakeholders that was chaired by Defence Minister A K Antony. The investment will be carried out over the next five years. Key projects will be augmentation in capacity to build T 90 tanks and increasing the capabilities to manufacture large calibre weapons.