Despite 13 years' toil, the Bofors inquiry is set to fail

Delhi investigators have found no explicit links between the Indian billionaires and the notorious arms kickbacks scandal

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Hindujas unlikely to face charges over Bofors affair

The monkeys were chattering and leaping from floor to floor of the crumbling old court building. Out in the dusty yard, oath commissioners and notaries public hammered away at rusty old Remingtons, while sweepers scooped up the dust and an old man hefting a huge earthenware pot shuffled from desk to desk selling water, a few paise per pitcher.

It was India all right, but for the billionaire Hinduja brothers, who had been facing charges in the Bofors kickbacks scandal for more than a decade, it was not the homecoming they could have wished. Nor did the hearing before Special Judge Ajit Bharihoke in Room 120 on 19 January this year yield the result they desired.

Locked into a tight scrum of lawyers, court officials and journalists in the well of the court, the three businessmen heard Mr Bharihoke turn down their request for permission to leave India forthwith.

Successive hearings over the following months echoed Mr Bharihoke's decision. But finally on 14 May, the Supreme Court allowed two of them to fly back to London. The conditions, however, were stringent: they had to submit personal bonds worth more than 300m rupees – equivalent to more than £4.6m – the highest in Indian legal history. And the third brother, Prakash, had to stay behind as a "surety".

All of which attests to the seriousness of the allegations against these sons of the soil who have made good so spectacularly abroad. For more than 10 years the manoeuvres by the brothers in the Swiss courts prevented the Indian investigators, the Central Bureau of Investigation (CBI), gaining access to bank documents relating to apparently mysterious accounts code-named Tulip, Lotus and Mont Blanc, which prosecutors hoped would allow them to crack open the Bofors case. The Swiss finally agreed to pass on the documents. In the meantime, Srichand and Gopichand Hinduja bid for UK citizenship, in negotiations involving Peter Mandelson which are well known, and Prakash applied for and obtained a Swiss passport.

But today it looks as if the CBI's toil of 13 years will come to nothing. New documents shown to The Independent indicate that, in the words of a senior lawyer in Delhi and a former top investigator in the case, "It's going to be very, very, very difficult for the prosecution to sustain the case against them."

The story began more than 16 years ago, and the two principals, Rajiv Gandhi and Olof Palme, are both long dead. Since 1975, India had been considering how best to equip its army with up-to-date 155mm guns. By 1982, the two top manufacturers in a shortlist of four were Sofma of France and Bofors of Sweden, in that order. Over the next three years, in the course of six assessments, Sofma came out top every time.

But then in September 1985, Mr Gandhi, who had become India's Prime Minister the previous November, met the Swedish Prime Minister Olof Palme at the United Nations in New York – and from then on the developments were rapid.

Later that month, Mr Gandhi took over India's defence portfolio, becoming Minister of Defence as well as Prime Minister. On 20 January 1986, Olof Palme made a working visit to Delhi, and on the eve of his arrival the joint secretary in Mr Gandhi's office passed the Prime Minister a note indicating that both the French and the Swedish guns were technically acceptable – suddenly they were neck and neck. Following Mr Palme's visit, a new assessment concluded that Bofors was in fact the better of the two guns – the first assessment out of seven to do so.

The deal between the Government of India and Bofors, worth $2.1bn (£1.47bn), was finally approved on 24 March 1986. Bofors had gone from also-ran to outright winner in a mere six months.

India's ambassador to Sweden at the time, Bhupatray Oza, wrote 10 years later: "Such a dramatic turnaround was unknown and unthinkable in the bureaucratic culture of India ... I was stunned by the speed." One year later, on 16 April 1987, Swedish public radio broke the story that the Bofors contract had been won by paying massive bribes to senior Indian politicians and defence figures. India categorically denied the charges, calling them "false, baseless and mischievous".

The government said: "The government's policy is not to permit any clandestine or irregular payments in contracts. Any breach of this policy by anyone will be most severely dealt with." The bluster fooled few. Despite an official Indian policy, initiated by Gandhi's mother, Indira, in 1976, of banishing middlemen from the arms procurement process, everyone knew that kickbacks remained rife. General Krishnaswami Sundarji, the man who had obligingly reclassified the Bofors gun as the best available back in February 1986, and who was quickly rewarded with promotion to chief of army staff, said two years later: "Money was being made... Many governments have been getting a percentage of these large deals... I don't think it is a new phenomenon."

The widespread belief was that Rajiv Gandhi was the prime beneficiary. That was the view of Bhupatray Oza, who as Indian ambassador in Stockholm had a ringside seat. It was the view of the Indian public, who in 1989 gave Gandhi's Congress Party a drubbing at the polls. It was also the view of the CBI, which finally in October 1999 listed the late prime minister (he was assassinated in 1991) as one of those against whom they would have framed charges if he had still been alive to answer them. But without solid evidence, all of this was just supposition. The task for investigators and journalists has been to trace the route taken by Bofors's alleged bribes, said to amount to $30m (£21m), and identify their final beneficiaries. It has been a long slog.

The Hinduja brothers' connection to Bofors has been known for 13 years.

In April 1988, The Hindu newspaper claimed that a Hinduja-owned company called Sangam, registered in the UK, was one conduit for the funds. Gopichand Hinduja was in contact with the managing director of Bofors, Martin Ardbo, in February 1987, and clear references to him ("GPH") were found in Mr Ardbo's diary seized in November 1987 by the Swedish police. Back then, Gopichand Hinduja denied having any relations with Bofors. Today the brothers say that money was indeed received from Bofors but it had no connection to the gun contract.

So what was it for? "Commercial sensitivity" no doubt will forbid them to tell. Their case is helped by the fact that, in contrast, funds paid by Bofors to two other suspects in the case, Win Chadha and Ottavio Quattrocchi, a Gandhi family friend, are allegedly explicitly linked in bank documents to the gun deal.

In the absence of explicit links between the brothers and the gun purchase, and with no evidence that the funds they received from Bofors were transferred to public servants, experts here believe that the CBI's case against them, due to be resumed in court next month, now has only the slimmest chance of success.