Rs 3,600 crore VVIP chopper deal with AgustaWestland scrapped in view of bribery allegations

India on Wednesday cancelled its contract with UK’s AgustaWestland to buy helicopters for the Air Force citing alleged kickbacks in the Rs 3,600-crore deal, in what is seen as a move by the government to show its resolve to fight corruption as the country prepares for elections.

The decision to annul the 2010 deal, being probed by CBI for irregularities, came after a meeting between Prime Minister Manmohan Singh and Defence Minister AK Antony in New Delhi on Wednesday morning, defence ministry sources said.

The decision was taken 10 months after reports surfaced that two top executives of AgustaWestland, a unit of Italian defence contractor Finmeccanica, had allegedly paid bribes to bag the contract to supply a dozen AW101 helicopters to be used by Indian Air Force for carrying ministers and other VVIPs.






CBI had filed cases against retired Air Chief Marshal SP Tyagi and 14 others in the case in March. The former IAF chief had rejected allegations that he was involved in any wrongdoing in the deal. Italy is investigating the deal separately.

An AgustaWestland spokesperson in India was on holiday in London and not available to comment on the matter.

The government cancelled the contract “on grounds of breach of the Pre-contract Integrity Pact and the agreement by AWIL (AgustaWestland International Ltd)”, a defence ministry statement said, indicating the alleged bribing had triggered the integrity clause.

“Based on the opinion received earlier from the attorney-general of India, it has been the view of the government that integrity-related issues are not subject to arbitration,” the statement said. However, AgustaWestland has pressed for arbitration and even appointed an arbitrator.

In view of this development, the ministry, after consulting with the attorneygeneral, has nominated Justice BP Jeevan Reddy, a former judge of the Supreme Court, as its arbitrator, it said.

The British company had sought arbitration in the matter, alleging that India was acting “unilaterally”. Both AgustaWestland and Finmeccanica had said they were cooperating with the probe in India and Italy.

Three of the 12 helicopters have been delivered so far. The contract was frozen in February after allegations surfaced that Rs 360 crore was paid as bribe. Italy had arrested two executives, including Finmeccanica’s then chief executive Giuseppe Orsi in February. Orsi was the head of AgustaWestland at the time the India deal was signed. The executives had denied any wrongdoing. India has already paid 30 per cent of the deal amount. But after the arrest of Orsi, New Delhi suspended further payments to the company and stopped taking delivery of the remaining helicopters.