New Delhi High Court Orders Government to Explain Suspension of Defence Company in AgustaWestland Case
The Delhi High Court has directed the central government to provide an explanation for the suspension of a private company, Defsys Solutions, from doing business with the Ministry of Defence (MoD) in the AgustaWestland case. Defsys Solutions is currently under investigation by the Central Bureau of Investigation (CBI) in connection with the AgustaWestland VVIP chopper scam case.
In an order on September 5th, Justice Prathiba Singh emphasized that while the competent authority has wider discretion in defence procurement due to security considerations, this discretion cannot be unlimited. The court stressed the importance of fairness, non-arbitrariness, and compliance with the principles of natural justice even in cases involving defence procurement guidelines.
Defsys Solutions Private Limited challenged the Defence Ministry’s order, issued on December 9th, 2022, which suspended the company from any business dealings with the Centre for a period of one year or until further orders. The ministry had received information from the CBI about an ongoing investigation against Defsys in relation to the AgustaWestland VVIP helicopter case.
The suspension was executed based on the Ministry of Defence’s 2016 Guidelines for Penalties in Business Dealings with Entities, which includes provisions for suspending business dealings on grounds of national security. However, Justice Singh expressed concern about the extensive power granted to authorities in the case of entity suspension, stating that it gives unbridled power to the authorities.
The court emphasized the importance of adhering to the principles of natural justice, stating that national security concerns should only override the duty of fairness in exceptional cases. Mere citation of national security considerations is insufficient; there must be a valid justification for not following the principles of natural justice.
According to the High Court, suspension is considered an interim measure preceding debarment or banning and should be treated as such. The court ruled that indefinite suspension without following the prescribed safeguards for banning is not permissible.
The High Court also expressed concern about the lack of clarity regarding the allegations, investigation, and duration of the investigation against Defsys. It questioned why the CBI only informed the Ministry of Defence about the investigation in December 2021, nine years after the start of the AgustaWestland investigation.
Justice Singh ordered the authorities to issue a show cause notice to Defsys within two weeks, explaining the reasons for the suspension. The court also directed the authorities to provide relevant material to the company regarding the suspension.
In conclusion, the Delhi High Court has called for an explanation from the central government regarding the suspension of Defsys Solutions in the AgustaWestland case. The court highlighted the importance of fairness and compliance with natural justice principles even in cases involving defence procurement guidelines. It emphasized that national security concerns should only override fairness in exceptional cases and ruled that indefinite suspension without following the prescribed safeguards is not permissible. The court has ordered the government to issue a show cause notice to Defsys and provide relevant material to the company within two weeks.
