NEW DELHI: The Government on Tuesday said any company violating the terms of contract for defence purchases would have to pay a heavy price.

Making statements in both Houses of Parliament in response to allegations made by the National Democratic Alliance of the presence of middlemen in the Scorpene submarine deal, Defence Minister Pranab Mukherjee said the NDA Government completed negotiations for the deal in 2002 and the Finance Ministry approved it a year later. The United Progressive Alliance Government only reviewed the deal and reduced by Rs. 313 crore the price finalised by the NDA regime.

The Defence Ministry had introduced the concept of integrity pacts for all deals worth over Rs. 300 crore. In case of any breach such as the presence of middlemen, the pact provided for cancellation of the contract, recovery of the advance with penal interest, imposition of liquidated damages and recovery of the money paid to the middleman or agent. The first two integrity pacts were signed with two French companies for the submarine deal.

Mr. Mukherjee ruled out links between a leak of information in the Navy's war room and the Scorpene deal. His Ministry had referred the matter to the CBIfor filing criminal proceedings.

Mr. Mukherjee denied that the Government had kept quiet since the story broke early this year. Rejoinders were sent to a magazine, which published the article on February 14. A detailed reply to an unstarred question on the deal was given in the Rajya Sabha on March 8.

Another French company also denied the allegations and said the e-mails published in the article were fake. It had since filed a case in the Delhi High Court, which asked the magazine to respond to the allegations.

The contract signed with the two French companies was for Rs. 7,197 crore and not for over Rs. 16,000 crore, as had been made out by the magazine and on Monday by NDA leaders L.K. Advani and Jaswant Singh.

Another contract was signed with a public sector undertaking for Rs. 5,888 crore for indigenous construction of the submarines. In addition, Rs. 3,553 crore was earmarked for taxes and Rs. 2,160 crore for other items. The Minister denied that the Government paid Rs. 4,500 crore more than what was negotiated earlier. On the contrary, it re-examined the project even though all negotiations had been completed by the NDA Government and reduced the price.

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