STEng – BT

ST Kinetics braces itself for fallout from India

It’s official now and the fallout could be far-reaching.

Singapore Technologies (ST) Kinetics confirmed that it had received a formal order from the Indian defence agency blacklisting it from defence deals with the government of India for the next decade.

Legal documents reveal that the land systems company may also face potential damage settlement and criminal charges.

The Singapore company has already indicated that it would take legal steps in India to clear its name.

ST Kinetics had maintained, until recently, that ‘there were no official statements or notifications from the Indian authorities’ on an alleged blacklisting of the company from doing business with the India’s defence procurement agency, the Ordnance Factory Board (OFB).

But the company yesterday said ‘it has since received an Order dated 5 March 2012 from the OFB ordering: (a) the cancellation of all agreements with ST Kinetics, specifically a Non-Disclosure Agreement signed on 11 August 2008 with the OFB; and (b) that ST Kinetics be debarred from entering into any contract with the OFB for a period of 10 years’.

Last year, ST Kinetics had approached the Delhi High Court after receiving a show-cause notice on why it should not be barred from doing business with the Indian government. The court said that ‘the notice (by OFB) proposes to take action against the petitioner (ST Kinetics)’ which entails ‘cancellation of the Non-Disclosure Agreement; debarring the petitioner from entering into a contract with Government of India for a period of ten years, and; recovering from the petitioner the loss sustained by the Ordnance Factory Board due to cancellation of the agreement.’

ST Kinetics confirmed yesterday that the non-disclosure agreement has been cancelled and it has been blacklisted by the Indian government for 10 years. It remains to be seen if this would now lead to any damages incurred by the company.

The court order, dated May 11, 2011, also specified that the alleged conduct of corruption ST Kinetics was suspected of is deemed as criminal.

‘The alleged conduct of the petitioner (ST Kinetics), in the present case, however, if believed to be true, is a criminal conduct,’ the judge ruled.

The company was dragged into the case following a report by the Comptroller and Auditor-General of India (CAGI), which outlined the behaviour of the former director-general of OFB, Sudipta Ghosh, who is at the heart of the case, and his involvement with ST Kinetics and six other defence companies ranging from India, Israel, Russia and Switzerland.

ST Kinetics had an agreement with Mr Ghosh’s agency to supply 50,000 Singapore Assault Rifles (SAR) 21 carbines to the Indian home affairs ministry (MHA). Mr Ghosh claimed that ST Kinetics would co-produce the weapons with an Indian partner. No such arrangement existed, the report said.

Mr Ghosh recommended that MHA purchase the weapons even though they had failed one of the two trials they were put through, the report added.

Nevertheless the court order states that both parties had ‘entered into a Non-Disclosure Agreement (NDA) on 30 July, 2008 / 11 August, 2008 … as a preliminary step to explore the possibility of supply of the required Arms and Ammunition by the petitioner (ST Kinetics) to the respondent (OFB)’.

ST Kinetics’ senior counsel in Delhi had petitioned against OFB taking the three actions listed in the show-cause notice on the grounds that there is breach of the NDA by the Singapore company as he argues that this has yet to be decided by arbitration proceedings.

The judgment in the court order rejected this notion though as it separated the NDA from any alleged corruption practice. ‘During the course of execution of a contract with the Government, if a party is alleged to have indulged in a corrupt practice, the said conduct may not only lead to the termination of the contract, which would be an action taken in terms of the contract, but would also entitle the Government to take action against such a party … This alleged conduct falls outside the realm of the contractual obligations of the parties.’

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