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In June 2005, it was reported that South African Arms firm Denel was alleged to have made illegal pay-offs to win a multi-million dollar army contract in India.

The Indian Express newspaper reported that Denel had admitted engaging Varas Associates, based in Britain's Isle of Man, between 2001 and 2004 to provide "technical assistance" to win a contract to supply hundreds of rifles to the Indian army. The contract was worth $3.9-million contract. Indian law bans the use of middlemen to win defence contracts.

The report followed a probe ordered in April by India's defence ministry into all contracts awarded to Denel by the previous Hindu national government.

Earlier in June 2004, the Indian CBI filed a corruption case against Denel claiming it paid 12.75 percent commission on deals it secured and that Varas had sought to obtain price information.

Later, in October 2005 India cancelled all existing contracts with Denel.