SMPP business suspension is under consideration at the Ministry of Defence after the Central Bureau of Investigation (CBI) arrested the private ammunition maker's Chief Executive Officer, Ashish Kansal, in a bribery case linked to a Rs 500 crore supply contract.

No order has been issued yet. Neither the ministry nor the company has commented on the move.

SMPP business suspension under ministry consideration

The Department of Defence Production is weighing the step under procurement rules, officials have indicated. The ministry can act under the Defence Procurement Manual 2025 and its guidelines on penalties in business dealings with entities. These let the competent authority impose financial penalties, or suspend or ban dealings with a firm that uses corrupt practices, unfair means or illegal activities at any stage to secure a contract. The power applies even where no pre-contract integrity pact was signed.

Any action could reach beyond SMPP itself. According to reports on Friday, a suspension could extend to allied firms and certain business partners. Penalty rules revised by the ministry this year allow debarment of up to 10 years for misconduct and cover allied firms, joint ventures and entities formed through mergers or acquisitions, so that a sanction cannot be sidestepped through a related company.

MIL executive suspended from October 13

The ministry has already moved against the public servant in the case. Anil Kumar, Executive Director (Operations) of state-owned Munitions India Limited (MIL), was suspended with effect from October 13, the day of his arrest.

CBI alleges bribes over Rs 500 crore ammunition order

The case centres on a contract under which SMPP was to supply ammunition to MIL over one year. According to the CBI's First Information Report (FIR), Kansal stayed in regular contact with Anil Kumar about the contract. An SMPP employee, Ravit Kumar Tewatia, was also in touch with the MIL official as part of the alleged arrangement, the FIR said.

The agency alleges that Anil Kumar accepted illegal gratification from contractors and vendors and passed on sensitive procurement information in return. It had received information that a large payment from Kansal was due to reach him on October 12.

The FIR says he told his brother, B Harshavardhan, to travel to Pune the next morning to collect and hide the money. All three were arrested on Tuesday. Searches at Anil Kumar's Pune home recovered Rs 1.73 crore in cash, and total recoveries across locations came to around Rs 2.2 crore. A special court in Pune has remanded the three to CBI custody until October 19. MIL, headquartered in Pune, is one of the defence PSUs formed in 2021 when the Ordnance Factory Board was corporatised.

The CBI is also examining other contracts handled by Anil Kumar, and the roles of others named in the FIR. IDW's earlier report on the MIL bribery case arrests carries the agency's full account.

Hawala delivery led investigators to Kansal

Investigators first intercepted a late-night hawala cash delivery during a search, according to reports. At that stage they did not know who had sent it. Tracing the money back through a chain of intermediaries led them to Kansal, after which the agency moved to arrest him along with the MIL official.

SMPP grew from pulp packaging to drones

SMPP was incorporated in 1985 as S.M. Pulp Packaging Private Limited in Sangrur, Punjab. It now makes small arms ammunition, body armour and drones, and has partnered European defence group KNDS on artillery ammunition and loitering munitions. Kansal has been one of the most visible faces of India's private defence industry, appearing often on television and at public events and leading company delegations abroad.

The company has drawn scrutiny before. Its Peacekeeper (Agniveg) loitering munitions, delivered to the Army in June, raised questions over their indigenous content. IDW also reported on the Belarus drone deal and SMPP's Rs 4,000 crore IPO plans.

Ministry has used suspension powers before

Suspension is a summary administrative decision and does not have to wait for a trial. It can be ordered while a full inquiry is pending, once a complaint is referred to the CBI or another agency, or once the ministry learns that a criminal investigation has begun, under the ministry's penalty guidelines. Firms under action are named in a consolidated list maintained by its vigilance wing.

The Defence Procurement Manual 2025 replaced the 2009 manual and governs revenue procurement of around Rs 1 lakh crore a year. Suspensions under the penalty guidelines are reviewed periodically. In February 2025, the ministry extended its suspension of dealings with Vectra Advanced Engineering by a further six months, a suspension first imposed in August 2020.