New Delhi: India on Wednesday cancelled a controversial ₹ 3,600 crore defence deal to buy 12 helicopters from AgustaWestland International Ltd (AWL) following allegations that the company bribed Indian officials to secure the deal.

The choppers were to have been deployed in the communication squadron of the Indian Air Force, which ferries the president, prime minister and other important ministers.

The defence ministry said in a statement that the deal, signed on 8 February 2010, was being cancelled “on the grounds of breach of pre-contract integrity pact and the agreement by AWL".

Integrity pacts are inserted into contracts to help prevent corruption in deals.

The chopper deal became controversial after investigations in Italy revealed that top officials of the company may have paid Indian government officials and Indian Air Force (IAF) officers, including former air chief S.P. Tyagi, bribes to win the deal. Tyagi has denied the charges. AgustaWestland is owned by Italian company Finmeccanica.

The company has already delivered three of the 12 choppers. India, however, suspended payments to the company in February last year following the arrest in Italy of Giuseppe Orsi, the chief executive officer of AWL.

AgustaWestland said in a statement it “has not received any communication from India’s MoD (ministry of defence) in line with the reports today. The company is therefore unable to comment beyond reiterating the denial of allegations of wrong doing and the continued intention to robustly defend the company’s reputation".

The government statement did not specify if the deal would be tendered again.

Rumel Dahiya, a retired brigadier and deputy director general at the New Delhi-based Institute for Defence Studies and Analyses, said India was unlikely to float a new tender. “I don’t see the need for that. There is no urgent requirement for these choppers. Also, I think India can make do with the three that have already been delivered," he said.

The government also reversed its earlier stance that it did not want to get into arbitration on the issue, and said retired Supreme Court judge B.P. Jeevan Reddy will act as its arbitrator.

“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. However, AWL has since pressed for arbitration and has appointed an arbitrator from its side," the statement said.

The decision to go into arbitration was taken “to safeguard the interests of the government" following a fresh opinion from the attorney general, it added.

Dahiya was of the view that the government could possibly impose enough penalty on the company to recover the extra money that had been paid. “Perhaps, money equal to the cost of five such choppers has been paid, so that (the money) paid for the extra two has to be recovered," he said.

Soon after Orsi’s arrest in February, the government asked the Central Bureau of Investigation (CBI) to probe the deal. In June, the CBI widened its probe and opened a preliminary enquiry against a brigadier in the army.

The cancellation came after a meeting between defence minister A.K. Antony and Prime Minister Manmohan Singh in New Delhi earlier on Wednesday, the Press Trust of India said, citing government officials.

The government had sent several show-cause notices to the company in the last 10 months, but the company has consistently denied any wrongdoing. It was alleged that bribes of the order of one-tenth of the total deal amount had been paid.

In April, the Comptroller and Auditor General too raised doubts about the deal, including on the trial process conducted to finalise the vendor.

Subscribe to Mint Newsletters * Enter a valid email * Thank you for subscribing to our newsletter.

Share Via