The Ordnance Factory Board Scam


The Ordnance Factories are India’s network of 41 government-managed military-sector manufactories, nearly half of which predate the country’s independence in 1947. In May 2009, the recently retired director-general of the Ordnance Factories, Sudipta (or Sudipto) Ghosh, was arrested on suspicions of receiving bribes in connection with several procurement programs. A decade later, the case has yet to proceed to trial; nonetheless, as a direct consequence of the investigation the Ministry of Defence blacklisted four foreign arms vendors: Israel Military Industries (IMI), ST Kinetics (a subsidiary of Singapore Technologies Engineering), Rheinmetall Air Defence (RAD), and Corporation Zashchita (“Corporation Defense”) of Russia. Several Indian vendors were also implicated in the case and blacklisted. The most prominent procurement program set back by the corrupt activities was a contract awarded in March 2009 to IMI to build a factory for producing artillery charges, worth INR 11.75 billion or approximately USD 229 million (at March 2009 average exchange rates). Subsequent investigations found that Ghosh had approved a 20% down-payment to IMI without the proper approval, and that IMI had employed a local agent, Pradeep Rana, to help secure the deal. It remains unknown, however, whether the Central Bureau of Investigation has tied Ghosh’s suspiciously large bank savings to payments from Rana and his employers.

Key Facts




Israel Military Industries (Israel)

ST Kinetics (Singapore)

Rheinmetall Air Defence (Switzerland)

Corporation Zashchita (also known as “Corporation Defence”) (Russia)

T.S. Kishan and Co. Pte. Ltd. (India)

R.K. Machines Tools Ltd. (India)

Year of Deals:


Equipment Sold:

Bi-Modular Charge System (artillery charge) production factory (IMI)

SAR-21 license-produced close quarter battle carbines (ST Kinetics)

Various unidentified contracts (other firms)

Value of Deals:

USD 250 million (artillery charge factory)

INR 7.2 billion (USD 146 million, February 2009 exchange rates) (carbine production)

Sum Involved in Corruption Allegations:

INR 73.1 million (USD 1.43 million, March 2009 rates)

Dramatis Personae
Sudipta Ghosh, Director General Ordnance Factories, official photo from July 2008. OFB/Internet Archive.

Sudipta (or Sudipto) Ghosh – former director-general of the Indian Ordnance Factories; suspected of taking bribes in exchange for contracts. Charged with corruption and for possessing assets disproportionate with known sources of income.

Pradeep Rana – businessman; suspected agent for IMI and associate of the arms broker Sudhir Choudhrie. Charged in connection with the Ordnance Factories case.

Ashish Bose – Ghosh’s brother-in-law; suspected middleman and money-launderer. Charged in connection with the Ordnance Factories case.

Ramesh Nambiar – general manager at Air India; suspected of money-laundering and acting as a middleman. Charged in connection with the Ordnance Factories case.

Mohinder Singh Sahni (or Sawhney) – head of the Mokul Group of companies; suspected agent for Rheinmetall Air Defense and Corporation Zashchita, as well as the South African firm Denel on a 2005 arms deal. Charged in connection with the Ordnance Factories case.

J.K. Thapar – director at T.S. Kishan and Co. Pte. Ltd.; suspected of giving bribes worth INR 3,000,000 to Ghosh. Charged with bribery in the Ordnance Factories case.

Satish Mahajan and Sunil Handa – executives at R.K. Machines Tools Ltd.; suspected of giving bribes worth INR 250,000 to Ghosh. Charged with bribery in the Ordnance Factories case.

The Arms Deals

Of the contracts involved in the case, the most notable is a USD 229 million contract granted to Israel Military Industries (IMI) for the construction of a facility to produce Bi-Modular Charge System (BMCS) artillery charges. This system standardizes explosive propellant charges for artillery shells into two types, allowing for simpler procedures and logistics for firing at different ranges. The factory complex—which also included two separately tendered input plants for the feeder chemicals nitroglycerin and nitrocellulose—was expected to cost INR 9.4 billion (USD 196 million) when first approved in November 2001. An external partner, South Africa’s Denel, was originally contracted to provide transferrable technologies for the three-plant facility, located at Nalanda in Bihar, but was ousted in June 2005 due to corruption allegations in an unrelated arms deal. By January 2009, the expected cost of the Nalanda complex had increased to INR 21.6 billion (USD 442 million).

In March 2004, the Indian government launched a tender process for the construction of the BMCS plant. Price negotiations with the lowest bidder, IMI, failed in 2006. IMI had offered to build the plant for INR 5.72 billion in 2004, but increased its price by 15% to INR 6.55 billion by 2006—at the same time the Indian government was asking for a price reduction. The government decided to re-tender the contract in February 2007, which produced only two eligible bids: from IMI and Simmel Difesa of Italy. IMI was again the lowest bidder, but had increased its asking price to INR 10.9 billion. Internal Ordnance Factory estimates suggested the cost could be kept to around INR 8.3 billion, and thus the two sides again deadlocked on price. In December 2008, the Ministry of Defence asked the Cabinet Committee on Security, the final contracting authority, to increase the budget for the entire Nalanda project to INR 21.6 billion. The committee approved the new budget in February 2009; a subsequent audit conducted by the Comptroller and Auditor General (CAG) found that Ghosh and others took the approval of the revised budget as a signal to go ahead and accept the IMI offer at a price of INR 11.75 crore in March 2009. The CAG found that the budget approval did not include specific approval of the BMCS project and that Ghosh had overstepped his authority. In addition, Ghosh had approved a 20% down-payment, 5% over the normal maximum allowance, without specific authorization.

Employees at work at the Ordnance Factory in Medak District on Oct. 30, 2009. Getty/AFP/Noah Seelam.

The other firms implicated in the Ordnance Factory scandal either contested or held a number of contracts which Ghosh oversaw. Several foreign firms were blacklisted without formal charges or even learning which deals they were suspected of corrupting. ST Kinetics was interested in selling small arms, light howitzers, and towed guns to the Indian military; the CAG report documented that Ghosh pushed the Ministry of Home Affairs to sign onto a plan to purchase ST Kinetics’ locally-built carbines despite unsatisfactory performance and high prices. Rheinmetall Air Defence (RAD), formerly known as Oerlikon Contraves and purchased by Rheinmetall in 1999, was negotiating with the Ordnance Factories to sell the Skyshield 35 air defense gun system and other anti-air missile systems between 2005 and 2007. Corporation Zashchita, named in Indian documents as “Corporation Defence” and identified as Zashchita by Indian officials, held contracts to supply armored passenger vehicles to the Indian Ministry of Defence between 2008 and 2012. The two Indian firms, T.S. Kishan and Co. Pte. Ltd. and R.K. Machines Tools Ltd., produced artillery shells and supplied the Ordnance Factory sites at Avadi and Chanda.

Corruption Allegations

Sudipta Ghosh, the former director general of the Ordnance Factories, is suspected of taking bribes in connection with a large number of contracts. The precise allegations against Ghosh and his co-conspirators are contained in court filings, notably a First Information Report of 2009 and a chargesheet of June 2010 filed by the Central Bureau of Investigation (CBI), the details of which have been withheld. Press reporting on the filings suggest that Ghosh and his co-accused wife, Kajal Ghosh, benefitted from kickbacks associated with arms deals. The scope of the bribes is unknown; up to INR 60 million in cash, jewelry, and bank deposits were found at their properties during a CBI raid in 2009, although only INR 14.1 million were seized by the CBI. Another INR 11.4 million was seized from co-conspirators. The CBI also believes it has found a Singaporean bank account in Ghosh’s name holding another INR 47.6 million. Pradeep Rana and Mohinder Singh Sahni have been identified as local agents for IMI, RAD, and Corporation Zashchita. Ashish Bose, who is Ghosh’s brother-in-law, and Ramesh Nambiar are suspected of being middlemen or money-launderers in the conspiracy.

Investigations and Outcomes

The criminal prosecutions against Sudipta Ghosh and his co-accused have disappeared from public view, largely overshadowed by the action taken by the Ministry of Defence to blacklist the firms involved in the scandal. According to publicly available court filings, Ghosh was denied the right to travel abroad in 2014 while the investigation was ongoing. A 2018 tax case against Ghosh and his wife—which they won—mentioned that a CBI case remains ongoing. It is unclear why such a high-profile case has not made any progress a decade after the start of investigations. Similarly, it is unclear whether separate trials against the co-conspirators have moved forward.

Director General Ordnance Factories Sudipta Ghosh (l) presents an assault rifle to Indian Army Chief General Deepak Kapoor at DEFEXPO 2008, Feb. 2008, in New Delhi. Getty/AFP/Prakash Singh.

In June 2009, the Ministry of Defense froze contracts with seven firms named in the CBI investigation. These were the foreign firms IMI, ST Kinetics, BVT Poland, and Media Architects (Singapore), and the local Indian firms HYT Engineering, T.S. Kishan, and R.K. Machines Tools. Two foreign firms, BVT Poland and Media Architects (Singapore), and one Indian firm, HYT Engineering, were not included on a blacklist released in March 2012; media reporting suggests that BVT Poland was affirmatively cleared by the CBI. The March 2012 blacklist added two additional foreign firms, however, namely RAD and Corporation Zashchita. RAD was so desperate to keep itself off the blacklist that it may have tried to bribe officials to ensure that outcome. According to a chain of emails shared with the CBI by a co-conspirator, RAD transferred USD 530,000 to an agent, Abhishek Verma, for that purpose. Verma and his wife were charged in June 2012 for a range of offenses, but were acquitted on the grounds that the emails failed procedural evidentiary standards and that the CBI should have charged the co-conspirator, a C. Edmonds Allen, based in New York, if they believed a case existed.

ST Kinetics, IMI, and RAD have vocally objected to their blacklisting, particularly as none of their employees or corporate entities have been directly charged with wrongdoing in the scandal. IMI lost a case before the Delhi High Court challenging its blacklisting in 2013. A large performance guarantee, worth INR 2.2 billion, was seized in March 2012. Although media reports from 2014 suggested the Indian government was planning on quietly removing IMI from its blacklist, as of 2018 this had not happened. Both ST Kinetics and RAD are pursuing litigation to force the government to shorten their blacklisting from ten years to five, per new guidelines promulgated long after the Ordnance Factory scandal took place.

In the meantime, India’s Defense Research and Development Organisation and the Ordnance Factories are working together to continue the BCMS project indigenously. A tender for the nitroglycerine and nitrocellulose plants at Nalanda was implicated in a new scandal in September 2018 when losing firms raised the fact that the two short-listed companies, Bowas Induplan Chemie of Austria and Dott Mariano Pravisani of Italy, are controlled by the same firm, Bohlen Industrie GmbH, a holding company belonging to descendants of the artillery manufacturing magnate Gustav Krupp von Bohlen und Halbach. The complainants further alleged to the Ordnance Factories and the CBI that the contracting officers knew of the common ownership.

Banner Image Credit

Image Caption: Firepower demonstration by an Indian artillery unit on Dec. 31, 2011. Location unknown.
Image Source: Wikimedia/Creative Commons, Krishna Chaitanya Velaga.

Sources (Click to Expand)

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