India on Wednesday terminated a controversial Rs. 3,727-crore contract with AgustaWestland to supply 12 VVIP helicopters to the Indian Air Force, invoking the integrity pact to scrap the deal in which the UK-based firm allegedly paid middlemen more than Rs. 375 crore in bribes.
A photo of AgustaWestland AW101 chopper, configured to meet diverse roles for pre-dominantly Maritime and Utility tasks. Photo: agustawestland.com
A source said defence minister AK Antony met Prime Minister Manmohan Singh before the official announcement.
Under the integrity pact, the bidder commits that bribes will not be offered and any violation empowers the government to cancel the contract and recover money already paid.
AgustaWestland, a subsidiary of Italian defence group Finmeccanica, now faces the scary prospect of being blacklisted for up to 10 years.
Finmeccanica was angling for defence contracts worth more than Rs. 50,000 crore in the Indian market. “No decision has been taken on blacklisting the firm yet. A call will be taken after the CBI finishes its probe,” the source said.
Former IAF chief Air Chief Marshal SP Tyagi and his cousins are among those accused of taking bribes.
The firm had in October invoked arbitration to resolve issues surrounding the deal.
A spokesperson of AgustaWestland in the UK said the firm had not received any communication from India about the cancellation. “The company is therefore unable to comment beyond reiterating the denial of allegations of wrongdoing.”
The defence ministry on Wednesday reiterated that “integrity-related issues” were not subject to arbitration, citing an opinion from the attorney general. A spokesperson, however, said the government had nominated Justice BP Jeevan Reddy as its arbitrator “to safeguard the government’s interest”, based on fresh inputs from the country’s top law officer.
This is the first instance of a contract being cancelled after deliveries had begun, raising a question mark on the fate of three AW-101 choppers already parked in IAF hangars. The choppers could be returned.
The AgustaWestland kickbacks case will come up for hearing next on January 9 before an Italian court. Guido Haschke, one of the middlemen in the deal, has made references such as “POL,” “AP” and “FAM” in a hand-written note, ostensibly pointing to the initials of politicians and bureaucrats who allegedly had to be “handled” before the contract was inked.
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