The controversy revolving around the Rafale deal arose after the Ministry of Defence, India signed a deal worth €7.8 billion with France's Dassault Aviation for 36 multirole fighter aircrafts. The origin of the deal lies in the Indian MRCA competition, a multi-billion dollar contract to supply 126 multi-role combat aircraft to the Indian Air Force (IAF).
The much talked-about controversy came to an end after the Supreme Court's judgement on November 14,2019. In a major win for the Narendra Modi-led BJP government and another setback for the Congress, the apex court dismissed all the petitions seeking a review of its December 2018 judgement and upheld the Rafale deal, stating that no irregularities or corruption have been found.
The Defence Ministry announced on January 31 2012 that Dassault Rafale had won the MMRCA competition to supply the Indian Air Force with 126 aircraft, along with an option for 63 additional aircraft. The first 18 aircraft were to be supplied by Dassault Aviation fully built and the remaining 108 aircraft were to be manufactured under license by Hindustan Aeronautics Limited (HAL) with a transfer of technology from Dassault. Rafale was chosen as the lowest bidder based on life-cycle cost, which is a combination of cost of acquisition, operating cost over a duration of 40 years and cost of transfer of technology. In January 2014, it was reported that the cost of the deal had escalated to $30 billion (₹1,86,000 crore), with each aircraft costing $120 million (₹746 crore). In February 2014, defence minister A. K. Antony said that the procedure of calculation of life-cycle cost was being re-examined and the contract could not be signed in the fiscal year 2013-14 due to budgetary constraints.
After a series of arguments and disagreements over the new cost, the then defence minister Manohar Parrikar said that the Sukhoi Su-30MKI could be acquired as an alternative to Rafale. Air Chief Marshal Arup Raha disagreed, saying that the Su-30MKI and Rafale had different capabilities, they were not interchangeable. As February 2015 approached, reports of the cancellation of the deal started to emerge. However, during an official visit to France in April 2015, Indian prime minister Narendra Modi announced that India would acquire 36 fully built Rafales citing "critical operational necessity".
As per the new deal, India would acquire 28 single-seat aircraft at a cost of €91.1 million (₹681.7 crore) each and 8 dual-seat aircraft at a cost of €94 million (₹703.4 crore) each. The deal also included tailor-made enhancements for the Indian Air Force at a cost of €1.8 billion (₹13,470 crore), a weapons package costing €710 million (₹5,313 crore) and a performance-based logistics agreement at a cost of €353 million (₹2,641 crore).
Merely a day after the signing of the agreement between Rafale and the government, Indian National Congress spokesperson Manish Tewari asked for details of the agreement to be made public and questioned if there was an escalation of per-aircraft cost from ₹715 crore to ₹1,600 crore. A couple of months later in November 2016, minister of state for defence Subhash Bhamre informed the Lok Sabha that the cost of each Rafale aircraft acquired under the IGA was approximately ₹670 crore. In November 2017, Congress leader Randeep Surjewala alleged that procurement procedures were bypassed in acquisition of Rafale and questioned if there was an escalation of per-aircraft cost from ₹526.1 crore to ₹1,570 crore. The then defence minister Nirmala Sitharaman refuted all the claims of Congress. Air Chief Marshal Birender Singh Dhanoa also denied the allegations and said that the agreement for 36 aircraft was signed with better terms than the one that was being negotiated under MMRCA tender. The French government also denied all the allegations. Another allegation cane the BJP's way in November 2017, when Congress leader Randeep Surjewala alleged that HAL was bypassed in the Rafale contract and questioned the presence of Anil Ambani in France during Modi's announcement to acquire 36 fully built aircraft. He also alleged that the necessary government approvals were not obtained before the formation of the joint venture between Dassault Aviation and Reliance Defence Limited.
The Supreme Court of India agreed to hear a public interest writ petition seeking cancellation of the inter-governmental agreement alleging corruption in September 2018 after Kapil Sibal moved the court. On 14 December 2018, the court dismissed all the petitions seeking a probe into the alleged irregularities in the deal, and gave a clean chit to the Union government on all the three aspects, viz., the decision making, pricing and selection of Indian offset partner. The court said in its ruling that it has "studied the material carefully" and is satisfied with the decision making process, and that it found no evidence of wrongdoing.