The 2016 multi-billion dollar deal between the Indian government and French aircraft manufacturer Dassault has become mired in corruption allegations, with critics accusing Modi of using the agreement to favour a key backer.

Several petitions by activists and politicians had demanded the court order a probe amid claims the prime minister violated defence procurement rules.

But the country's top court refused to intervene, saying it had "no doubt in the process" of procurement.

The French company initially won the contract to supply 126 fighter jets to India in 2012 but negotiations floundered.

Dassault promised to deliver 18 fly-away jets, with the remaining aircraft being manufactured in India in collaboration with the state-run Hindustan Aeronautics Limited (HAL).

However, during a visit to France in 2015 Modi scrapped the deal, signed under the previous Congress government, opting for 36 fly-away planes instead for an estimated sum of $9.4 billion.

They signed a formal agreement in 2016, with the first aircraft to be delivered in 2019.

The new agreement saw Dassault partner with India's Reliance business conglomerate headed by billionaire Anil Ambani.

Several reports say Dassault was forced to choose Reliance by Modi despite having almost no aviation experience.

Under Indian defence procurement rules, foreign companies winning contracts must "offset" or reinvest half the total value in joint ventures or purchases with Indian firms.

Friday's ruling is seen as a victory for the Modi's right-wing Hindu nationalist government that suffered a major electoral debacle in state polls early this week.

The Bharatiya Janata Party lost three key states to the opposition Congress Party, which has been rigorously attacking Modi over the multi-billion-dollar deal.

"This decision is wrong in my opinion," Prashant Bhushan, one of the petitioners told reporters outside the court Friday.

"(Our) campaign will certainly not drop and we will decide if we will file a review petition," he said.

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DASSAULT AVIATION