Indian police open probe into Rolls-Royce's dealings with three state firms

NEW DELHI (Reuters) - Indian federal police have opened an investigation into Rolls-Royce Holdings Plc <RR.L>, alleging the UK-based engine maker and its Indian arm improperly used a third-party to conduct business with three Indian state-owned companies.

In a report published on Tuesday, India's Central Bureau of Investigation (CBI) also said officials from the Indian companies - Hindustan Aeronautics Limited (HAL), ONGC <ONGC.NS> and GAIL <GAIL.NS> - may have been involved in improper procurement from Rolls-Royce.

Rolls-Royce provided engine spare parts to HAL for servicing gas turbines used by GAIL and ONGC, both of which are involved in the oil and gas sector, the report said.

The report said Rolls-Royce's appointment of Ashok Patni, director at a Singapore-based firm called Aashmore Private Ltd, as a commercial adviser in dealing with the three government-owned firms violated regulations and the arrangement may have been used for paying kickbacks to officials.

In an emailed statement, a Rolls-Royce spokesperson said that the police report related to the use of intermediaries by company’s erstwhile energy business in India, and that no current employee had been involved in those deals.

"We await contact from the CBI and will respond appropriately," the spokesperson said.

Spokesmen for GAIL and ONGC did not immediately respond to questions from Reuters. Gopal Sutar, a spokesman for HAL, declined to comment.

Aashmore and Patni could not be immediately reached for comment.

Between 2007 and 2011, Rolls-Royce conducted more than 200 transactions with the three companies for the supply of materials and spare parts, for which Aashmore was paid commission of at least 550 million rupees (£6.6 million), the CBI report said.

(Reporting by Devjyot Ghoshal; Editing by Martin Howell, Mark Potter and Frances Kerry)