By Santanu Choudhury
The Wall Street Journal
Oct. 23, 2013 12:56 p.m. ET
NEW DELHI—India Wednesday initiated a process to cancel a 556-million-euro helicopter contract with AgustaWestland, just over two weeks after the U.K.-based unit of Italian defense contractor Finmeccanica SpA invoked arbitration against the Indian government.
India's defense ministry had in February frozen payments to AgustaWestland and suspended deliveries following allegations that bribes were paid to Indian officials to help AgustaWestland win the 2010 deal to supply a dozen AW101 helicopters. Defense Minister A.K. Antony had said the government would take strict action against anybody who acted improperly. This could include cancellation of the deal, blacklisting of those involved, recovery of money and penal action, he had said.
A final notice has been issued to AgustaWestland over the contract, a senior official at India's defense ministry told The Wall Street Journal.
The company has been given 21 days to respond, he said, but declined to elaborate on the contents of the notice.
A spokesman for AgustaWestland in India said the company "will review the letter [from the defense ministry] and we will respond appropriately."
A spokesman for Finmeccanica in Italy declined to comment.
Indian and Italian authorities are separately investigating the allegations of corruption in the deal. Both companies had earlier denied any wrongdoing and offered to cooperate with investigators in Italy and India.
The deal has become the subject of a raging controversy in India with opposition parties attacking the Congress party-led coalition government over the bribery allegations.
The country's federal auditor in an August report blamed the defense ministry of breaking bidding rules to give the contract to AgustaWestland.
The ministry had declined to comment on the allegations. AgustaWestland had not commented on the report.
The AgustaWestland issue has also led to concerns in India that future acquisitions of weapons could be delayed because of greater government scrutiny.
AgustaWestland said on Oct. 4 that it has begun arbitration proceedings against the Indian government over the contract. AgustaWestland said it took the step as it didn't receive any response from the defense ministry to several requests since April 2013 for discussions about the contract.
India had initially ordered the helicopters for use by its senior politicians. It has received three of the helicopters between November 2012 and February 2013.
—Gilles Castonguay in Milan contributed to this article.
Source: http://online.wsj.com
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