A leading Canadian newspaper, Globe and the Mail, reported that an Indian-born Canadian citizen, Nazir Karigar, is to be prosecuted on charges of paying off Mr Patel in a case in which a former Mumbai police chief also figures.
Mr Karigar is accused of paying bribes and being involved in a bid-rigging scheme in 2007 in an unsuccessful attempt to win the contract from Air India for computerised passenger face recognition biometrics system. The airline ultimately abandoned the plans for such a system.
According to the newspaper, investigators allege that in early 2007, Mr Karigar met Mr Patel, along with one of his political allies Laxman Dhoble.
Later, Mr Karigar described to others, including a person from CryptoMetrics, who has turned witness, the company bidding for the contract, how he allegedly gave USD 250,000 to Dhoble "to pass on to Mr Patel so the Minister could use his influence to make the project happen," the report said.
A part of the movement of that money has been documented in a lawsuit in the Supreme Court of New York where CryptoMetrics sued Mr Karigar, saying that it had paid him USD 250,000 on the condition that Air India contract would be signed within days, it said.
However, the newspaper also stated that there is no evidence in the court records that Mr Patel received the money. Stoutly denying the allegations, Mr Patel, when contacted for his reaction, said the claims of bribery appeared to be "a perfect con job" by somebody trying to convince his company that he could deliver a contract if he is paid.
Mr Patel disclosed that he had written to Prime Minister Manmohan Singh soon after the Delhi bureau chief of Globe and Mail had sought his reaction to the allegations on Monday.
He told the Prime Minister that he had made it clear to the journalist that the allegations were baseless and preposterous and that he would be constrained to examine all legal options to counter them.
Meanwhile, he had made some "preliminary enquiries" with Air India which had informed him that in 2006 the airline had floated a tender for the equipment. The tender was, however, scrapped "virtually at the inception", he wrote.
The Minister requested Singh to direct Air India to forward all relevant information and documents of the tender to PMO or to any agency "nominated by you".
He also wanted "factual position" to be conveyed to the authorities in Canada in order to avoid any embarrassment to the government or to him personally.
The newspaper said that the Canadian Justice Department was planning to prosecute Mr Karigar on charges that he violated the Corruption of Foreign Public Officials Act, a law that forbids payment of bribes abroad. The case is scheduled to be heard in September.
According to the newspaper, the case has been in the making for more than four years and involves Mr Karigar, the bankrupt Ottawa-area tech firm, former Mumbai Police Chief Hasan Gafoor and Mr Patel.
The newspaper quoted the Royal Canadian Mounted Police (RCMP) as alleging that Mr Gafoor who was then Director of Security at Air India, had conspired with Karigar, his childhood friend.
In a telephone interview to the newspaper, Mr Gafoor denied helping Mr Karigar rig the contract in favour of CryptoMetrics, saying that another department at Air India was responsible for awarding such contracts.
Mr Gafoor stated that he had not spoken to Mr Karigar in two or three years and was unaware that he had been implicated in a criminal conspiracy along with him. "My God", Mr Gafoor said, when told about the allegations.
He also pointed out that CryptoMetrics did not get the contract, "nor did anything come out of it".
The newspaper claimed that interviews with a number of sources close to the investigation as well as a review of documents filed in two legal proceedings in the US have revealed that the charges related to Mr Karigar were on behalf of CryptoMetrics, a company which had offices in New York area, Ottawa and Mumbai and which declared bankruptcy shortly after Mr Karigar was charged.
Quoting RCMP, it alleged that CryptoMetrics had received an internal draft copy of the Air India tender two months before it was officially released to other potential bidders.
It also alleged that at least USD 250,000 was wired by CryptoMetrics to India and distributed to Gafoor's Air India "co-workers, including a deputy in the security division." Mr Gafoor denied knowing about any bribes paid by Mr Karigar to his staff.
Police sources were also quoted to say that Mr Karigar and CryptoMetrics invited Air India officials to become part owners in the company and were offered shares. Police said the inducement ensured that only two firms were shortlisted for the contract, CryptoMetrics and a lesser known Canadian firm, Ipcon, the latter being a dormant company founded by Mr Karigar.
Mr Dhoble, described as Mr Patel's political ally, had declined to comment on the allegations in detail, the paper said.