Finmeccanica Chairman and Chief Executive Officer Giuseppe Orsi attends a convention in Rome December 18, 2012.
Finmeccanica Chairman and Chief Executive Officer Giuseppe Orsi attends a convention in Rome December 18, 2012. Reuters

The Indian government on Wednesday cancelled a $750 million defense deal with an Anglo-Italian company, AgustaWestland International Ltd, following allegations that the company bribed Indian officials to win the deal, a charge denied by the UK-based company.

The agreement signed on Feb 8. 2010, involved the purchase of 12 helicopters to be deployed in the communication squadron of the Indian Air Force, which ferries top government officials, including the president and the prime minister. The deal hit a road block after investigations in Italy had revealed that the company may have paid bribes to top Indian defense officials, including former Air Force chief S.P. Tyagi, to secure the contract.

The defense ministry, in a statement, said that “India has terminated with immediate effect the agreement that was signed with M/s. AgustaWestLand International Ltd. (AWIL) on 08 February, 2010 for the supply of 12 VVIP/VIP helicopters on grounds of breach of the Pre-contract Integrity Pact (PCIP) and the Agreement by AWIL.”

In February, the Italian government arrested Giuseppe Orsi, the then-chief executive of the Italian firm Finmeccanica (BIT:FNC), the parent company of AgustaWestland, on bribery charges related to the deal, prompting India to suspend the contract and order its own investigation into the matter.

At the time, India had taken delivery of three AW101 choppers and another three helicopters were ready to be shipped. However, when the Italian inquiry's findings came to light, the defense ministry suspended the contract and the payment for the choppers. Both the companies, Finmeccanica and AgustaWestLand, and Tyagi have denied the allegations.

AgustaWestland said in a statement that it “has not received any communication from India’s MoD (ministry of defense) 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,” Mint, a business newspaper, reported.

An investigation by the Comptroller and Auditor General of India in August had showed that the defense ministry had altered its initial technical specifications for the helicopters, allowing AgustaWestland to bid. Initially, the ministry had required the choppers to be capable of flying at an altitude of 19,685 feet, but later brought the limit down to 14,763 feet. AW101 choppers are certified to fly at a maximum altitude of 15,000 feet.

The ministry said that though terminations for violating the integrity pact, normally included in agreements to prevent corruption, are generally not subject to arbitration, the Indian government had opted for arbitration to safeguard national interests. AgustaWestland had sought for arbitration in October.

“AWIL has since pressed for arbitration and appointed an arbitrator from its side. In view of this, MoD sought afresh the opinion of the Attorney General. With a view to safeguard the interests of the Government, MoD has nominated Hon’ble Mr Justice BP Jeevan Reddy as its arbitrator,” the statement said.