Cracking the whip, India on Friday initiated action to scrap the deal for purchase of 12 VVIP helicopters from Italian firm AgustaWestland in the wake of allegations that kickbacks to the tune of Rs 362 crore were paid to bag it.
The defence ministry issued a showcause notice to AgustaWestland, asking it to explain within seven days the bribery allegations, ministry spokesman Sitanshu Kar said.
The notice asked the company why the Rs 3,600 crore deal of 2010 should not be scrapped.
"The defence ministry issued a formal showcause notice to AgustaWestland seeking cancellation of the contract and taking other actions as per terms of the contract," the spokesman said.
The notice comes a day after the ministry warned of legal action, including invoking integrity pact, which provides for cancellation of the contract if bribes are paid and recovery of the money already paid.
India has already received three of the 12 helicopters and paid up to 30 per cent of the amount.
After the arrest of Finmeccanica Chief Executive Officer Giuseppe Orsi in Milan on Tuesday in connection with the bribery charges, India had put on hold the receipt of the remaining helicopters as well as rest of the payment.
Former air chief S P Tyagi has been accused of being a beneficiary of alleged kickbacks said to have been received by his three cousins but he has denied any wrongdoing.
The government on Thursday formally asked Finmeccanica, the parent company of AgustaWestland, to state whether any money was illegally paid to any Indian entity or individual "which would be violative of the Integrity Pact or any other terms and conditions of the contract".
The defence ministry had said on Thursday that the government is determined to take all possible legal and administrative action against the guilty parties and accordingly has ordered a thorough probe by the Centtral Bureau of Investigation. It noted that the contract with AgustaWestland carried an integrity pact that bars paying of bribes or involvement of middlemen, the ministry warned of "strict action including cancellation of contract, recovery of payment, blacklisting and penal action can be taken against the vendors."
The ministry said the contract signed with AgustaWestland includes "specific contractual provisions against bribery and the use of undue influence. Article 22 of the contract deals with penalty for use of undue influence. This clause entitles the ‘Buyer’ to cancel the contract with the ‘Seller’ and recover from him the amount of any loss arising from such cancellation."
"Article 23 of the contract entitles the ‘Buyer’ to consider cancellation of the contract without any entitlement or compensation to the ‘Seller’ who shall be liable to refund all payments made by the ‘Buyer’ in terms of the contract along with interest," it said.
The ministry said any breach of the provisions of the integrity pact entitles the ‘Buyer’ to take actions against the ‘Seller’ which includes forfeiture of the earnest money, performance bond, cancellation of the contract without giving any compensation, to recover all the sums already paid with interest, to cancel any other contracts. It also says debars the bidder from entering into any bid from the government for a minimum period of five years which may be extended.