Rs 3600 crore VVIP chopper deal scrapped

India on Wednesday cancelled its Rs 3,600 crore deal with Anglo-Italian firm AgustaWestland for the supply of 12 VVIP choppers to the Air Force in view of charges that kickbacks to the tune of Rs 360 crore had been paid in it.

The decision to scrap the 2010 deal was taken more than a year after reports surfaced that two top officials of the company had allegedly paid bribes to bag the contract. Former IAF chief S P Tyagi is one of the accused in the case, which is being probed by the Central Bureau of Investigation.

The cancellation came after a meeting between Defence Minister A K Antony with Prime Minister Manmohan Singh in Delhi earlier in the day, said defence ministry sources.

The deal was for the supply of 12 helicopters for VVIPs. Of these AgustaWestland, has already delivered three choppers.

India has now decided to go in for arbitration with the Anglo-Italian firm, defence ministry sources said. The government had frozen the contract in February last year for the supply of 12 AW-101 VVIP choppers to the IAF after allegations that Rs 360 crore were paid as bribe. Two top officials of the company were arrested in Italy in this regard.

India had already made 30 per cent of the total payment.

The defence ministry had issued two show-cause notices to the Anglo-Italian firm during the last ten months. The firm denied any wrongdoings in its response but the government rejected their contention.

The defence ministry had also got access to the documents seized from the alleged middlemen in Italy and they formed the basis for the scrapping of the contract, sources said.

Soon after the defence ministry ordered a freeze on the deal months ago, the company had alleged that the Indian government was acting "unilaterally" and invoked arbitration proceedings against it. The defence ministry had then refused to be drawn into a legal battle with the company.

The Comptroller and Auditor General had also highlighted loopholes in the deal.

Soon after the arrest of the firm's former CEO Guiseppe Orsi in Italy in connection with the case, Antony had suspended the rest of the payments to be made to it, along with the delivery it was due to make to the IAF of the remaining nine choppers.