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The Central Bureau of Investigation (CBI) said on Tuesday it is investigating the role of a former defense minister George Fernandes and a retired navy chief in a bribery case related to a multi-million-dollar deal in 2000 to buy missiles from Israel.

Former top officials are suspected of taking almost $435,000 in bribes to push the acquisition of Barak missiles from the Israel Aircraft Industries in a deal signed in 2000.

The CBI, which is India's equivalent of the FBI, charges that Fernandes and then navy chief Admiral Sushil Kumar were influenced by middlemen to push the deal, overruling objections by the state-run defense agency. Fernandes and Kumar reject the allegations.

The former president of the Samata Party, Jaya Jaitely, and the party's fomer treasurer, R. K. Jain, are suspected of pocketing 20 million rupees or $434,780, the CBI said.

India and state-run Israel Aircraft Industries signed a $269 million deal to supply the Indian navy with Barak missiles to protect its warships as part of New Delhi's efforts to modernize its army.

The deal was among 48 cases referred by the defense ministry to the CBI in 2004 and 2005 as it suspected irregularities in some of them and that commissions were paid to middlemen, the investigating agency said in a statement.

Bribes were also paid to the defense minister's political party, the CBI said after an investigation that involved raiding the homes of six middlemen in the cities of New Delhi, Bangalore, Mumbai and Chandigarh on Tuesday.

The state-run Defense Research and Development Organization's opinion against the missiles "was overruled by the then RM at the behest of the middleman/agent", the CBI said, RM being a reference to Fernandes as the Raksha Mantri.

Kumar is suspected of misrepresenting facts in recommending the deal with the IAI.

"The then Chief of Naval Staff colluded with other accused persons and put up a note directly to RM to import six Barak systems, misrepresenting facts," it said.

Fernandes rejected the allegations, calling them "rubbish".

"The missile had been selected before I went into the ministry. It was already there. Thereafter the navy insisted that they needed it," the former minister told reporters. "If the navy wanted something, it was my duty to see that they got it."

Former navy chief Kumar also denied any wrongdoing. "I am shocked and surprised. The missile defense system project was with the navy for years before I took over as chief," Kumar told Reuters.

Fernandes was hit by an arms scandal in 2001 when a news Web site released video tapes showing a string of officials apparently taking cash from journalists posing as arms dealers.

That scandal forced Fernandes to quit as minister but he returned to his post seven months later in the middle of an investigation into the scandal. He was later cleared of any wrongdoing.

Israel's Defense Ministry commented that India is investigating Israeli companies that exported defense products to India in the years 1998 to 2001, and that the Israeli and Indian defense ministries arrangement cooperating to the satisfaction of both parties.

A top source at the IAI commented, "This never happened. The IAI is not involved in paying bribes. We have nothing to hide and will cooperate as required."

India is a huge market for Israel's military industries. IAI alone sells there hundreds of millions of dollars a year in products. The biggest deal was in 2004, with the IAI sold the Indian air force $1.1 billion worth of early-warning Phalcon planes.