The Defence Ministry on Tuesday ordered a Central Bureau of Investigation (CBI) probe into a contract for purchasing 12 AgustaWestland helicopters from Italian defence firm Finmeccanica following the arrest of company chief executive Giuseppe Orsi in Italy on corruption charges relating to a Rs 4000-crore (€ 560 million) deal.
 
The contract was signed in 2010. The helicopters were meant for VVIPs in India.
However, Rome has turned down New Delhi’s request for information on its investigation into the deal. Italy said the probe was going on under the supervision of the judiciary and the executive authorities could not share anything about it with a foreign government.

The Italian police arrested Orsi on Monday in Rome over a probe into a tangle of corruption cases involving the company, which has been doing business in India since 1970s and was present at Aero India in Bangalore last week.

Bruno Spagnolini, chief executive officer of AugustaWestland—a subsidiary of Finmeccanica registered in the UK—was placed under house arrest, according to Italian news agency Ansa.

One of the contracts under scanner is the sale of 12 helicopters, produced by AgustaWestland, for Indian Air Force's VVIP squadron in Palam. Orsi is alleged to have paid bribes to secure the Indian contract.

“The Defence Ministry has referred the case of purchasing 12 helicopters from Agusta Westland (UK) to the CBI for enquiry,” ministry spokesperson Sitanshu Kar said.

The first three helicopters arrived in December. The second batch of three more choppers are scheduled for June followed by three more in December and the last three by March 2014.

Sources said the ministry had not taken any decision on putting the delivery on hold at the moment and would await the outcome of the CBI probe.

Bribery to bag contracts is barred in India. Since 2006, military deals have been accompanied by an integrity pact, which can be invoked to penalise companies paying bribes.

An integrity pact is essential with any military deals more than Rs 100 crore and offset contracts more than Rs 300 crore.

Last April, the Defence Ministry invoked the “integrity pact” to recover Rs 244 crore from Israel Military Industries before blacklisting the company on corruption charges.

Allegations of corruption on VVIP chopper deals had surfaced in the last one and a half years following an Italian probe into unethical dealings of the Finmeccanica, which was widened later to include the Agusta Westland contract.

The Defence Ministry through the Ministry of External Affairs had sought in vain information from the Italian and UK governments on their investigations.

In November, Secretary (West) in the Ministry of External affairs gave an aide-memoire (informal diplomatic message) to the Italian ambassador underlying the importance of promptly responding to the Indian request with information. But no information came from Rome.

The Agusta helicopters were chosen because of its superior features which include better performance in all-weather conditions, cabin space and comfort, self-protection suits, safety and low operating costs.

After its top boss was arrested, Finmeccanica in a statement said ongoing projects would continue as usual and hoped clarity would be established soon reposing faith on judges.

Last year the company denied in April and October the allegation of paying any bribe or commission or consultancy fee to anybody for securing the Indian VVIP chopper contract.

AgustaWestland claimed its relationships with Indian defence ministry were always conducted through official channel, in line with all applicable rules.

Defence Minister A K Antony said in Parliament last year that any complaint or allegation received would be investigated and contractual provisions might be invoked, in case any wrong doing “is established, in addition to action that may be required under law.”

On Italy’s refusal to provide information to India, the official spokesman of the Ministry of External Affairs, Syed Akbaruddin, said: “We have not received any response from them so far on that. The argument being that this is in Italy a judicial process.” 

On October 29 last, Debabrata Saha, the then Indian Ambassador to Rome, met officials of the Italian Government to “impress on them the importance that New Delhi placed on receiving information from them relating to any Indian national or any Indian entity or any middlemen” who might have been benefited from the alleged payoffs.