NEW DELHI - Federal investigators on Tuesday formally launched an investigation into former Indian Defense Minister George Fernandes, a political associate and a former navy chief for alleged irregularities in the purchase of a missile system from Israel six years ago.

Fernandes immediately denied any wrongdoing. "I have nothing to do with the deal," he was quoted as saying on national television Tuesday evening.

The Central Bureau of Investigation, India's equivalent to the FBI, registered the case and began a formal investigation into the defense deal - the first step toward prosecution, the agency said in a statement.

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Any charges will be brought in a court on completion of the investigation within three months.

In 2000, India's Defense Ministry signed a contract to buy seven Barak anti-missile systems and 200 missiles from Israel Aircraft Industries Ltd., despite objections by a government-run defense organization that a similar system was available within the country, the CBI statement said.

The agency on Tuesday raided the homes and business premises of six men who had acted as middlemen in the deal, in the cities of New Delhi,
Bangalore, Mumbai and Chandigarh, it said.

According to Indian law, foreign companies are not allowed to employ local agents and pay them fees, but this does take place in practice on occasion.

According to the suspicions, bribe money was transferred to the Indian agents through local branches of Israeli companies. Investigators are also probing Russian and South African companies in the affair.

The Israel Aircraft Industries said in response to the allegations that "this never happened." The Defense Ministry also responded to the report, saying that Israel is cooperating with the investigation into the Israeli and foreign company's activity.

India has become the largest and most important market for Israeli weapons export in the past 15 years, generating about $U.S. three billion at the present time. Almost every major arms company in Israel is involved in the export deals with India.

Israeli companies are up against fierce competition and sources familiar with the Indian market have said in the past, "we cannot operated in this country and other countries without bribing officials who can help promote the arms deals."

"A sum of 20 million rupees [$434,780] was allegedly paid to the then-president of a political party who functioned from the residence of the then-defense minister by middlemen, while the then-treasurer of the party was paid several million [rupees] in the deal," the statement said.

The Press Trust of India news agency identified Jaya Jaitely as the then-president of the Samata Party, or Socialist Party, and R. K. Jain as its treasurer.

"Opinion of the government-run Defense Research and Development Organization was overruled by the then-defense minister [Fernandes] at the behest of the middlemen," the statement said.

The CBI in the deal also implicated Sushil Kumar, who was navy chief at the time. It said he had recommended the import of the weapons systems based on a misrepresentation of facts."The then-defense minister not only approved the proposal for import of Barak AMD Systems, but tried to get the proposal approved by the Cabinet Committee on Security," the statement said.

The negotiated rate of $268 million was also $17 million more than an earlier agreed rate, for which there was no proper justification, the statement said.