The Comptroller and Auditor General (CAG) blasted dedicated defence PSU Bharat Electronics Limited (BEL) for signing a procurement contract with the Zurich-based Rheinmetall Air Defence even after the latter was named in a CBI report for paying kickbacks.
The kickbacks paid in the Ordnance Factory scam led to the defence ministry freezing ties with Rheinmetall that was eventually blacklisted for 10 years by the defence ministry in April 2012 after the final CBI report in the case.
CAG’s report which was tabled in Parliament on Thursday termed as "inappropriate" the actions of a Joint Secretary to let BEL enter into the contract.
"BEL entered into a contract for procurement with Rheinmetall Air Defence, Zurich, despite the fact that CBI was investigating the firm's deals for alleged corrupt practices in earlier contracts which had a risk of the firm being blacklisted," the report said.
"The signing of a contract with a firm whose credibility was under examination for alleged corrupt practices and placing purchase orders committing heavy liability was hasty and without adequate assessment of associated risks. This resulted in blocking of company funds of Rs 502 crore for an indefinite period," it said.
Eventually when Rheinmetall was blacklisted in April, 2012, BEL requested that it should be allowed to continue technical assistance and supplies from the firm which was rejected by the Ministry.
BEL terminated its contract with Rheinmetall in August 2012 but the foreign vendor initiated court proceedings against the PSU.
The CAG said it had informed the Ministry about the case in January and it was waiting for the reply till the finalisation of the report.