Defence Minister A K Antony Tuesday said army chief Gen V K Singh did inform him about Lt Gen (retd) Tejinder Singh offering a bribe of Rs 14 crore but did not want to pursue the matter.
Antony told parliament he would investigate the army chief's allegations and was ready to cancel any contract if there was corruption.
The minister Monday ordered a Central Bureau of Investigation (CBI) inquiry into the allegations.
"He (army chief) told me Lt Gen Tejinder Singh offered him bribe but he told me he did not want to pursue it. No written complaint was given. Till today I have not received any written complaint from him in the matter and after yesterday's (Monday) report, I have ordered a CBI inquiry," Antony told parliament.
The defence minister said he started his political career in 1958 as a student union leader and had fought corruption all through his life.
"From day one as defence minister I have cleared my position that I am for modernisation of forces but will not tolerate corruption. I have nothing to hide and will say nothing but the truth," he said.
Antony assured the house that he will go to any extent to probe the army chief's allegation.
"Will take action, nobody will be spared. Will cancel all contracts if any corruption was found. If I am wrong, punish me. But I have done my best," he said.
Singh has disclosed that he was offered a kickback of Rs.14 crore in his office by a retired defence officer, sending shockwaves through the defence establishment.
Singh has contended that he had informed Antony immediately about the conversation.
Antony also promised to streamline the defence procurement process. "We are also discussing how to tighten the system and improve the procurement process," said Antony.