Notice to Agusta for ending contract

The Defence Ministry has issued the final show cause notice to helicopter manufacturer Agusta-Westland to explain why its Rs 3,600-crore contract should not be cancelled for violating the terms of the pre-contract “integrity pact” seeking to ensure probity in defence deals.

The notice was issued after obtaining opinions of the Union Law Ministry and the Attorney General, who felt there was a breach of contractual obligations and the integrity pact by the UK-based firm, which is a subsidiary of Italian arms major Finmeccanica.

In the notice, issued on October 21, the Defence Ministry asked the firm to explain why "all or any action as prescribed, including cancellation of the contract, should not be taken against them for violating 

the terms of the integrity pact and the contract for procurement of 12 VVIP choppers." The firm was given 21 days to respond.

India has already paid Rs 360 crore and received three helicopters – two in VIP configuration and one in cargo configuration – which are now stationed in Palam air force station here. 

The Indian Air Force is flying the helicopters at the minimum level just to keep them functional.

Frozen deal
The deal was frozen in February, 2013, hours after the Italian police arrested the top boss of Finmeccanica. The Defence Ministry also ordered an enquiry by the CBI. The Comptroller and Auditor General too found several flaws with the VVIP chopper contract, signed in 2010.

The Defence Ministry went ahead with the cancellation procedure ignoring an warning from the IAF chief N A K Brown, who stated earlier this month that Mi-8 helicopters that ferry the VVIPs at the moment, would be phased out from 2014.

The Defence Ministry had first issued a show cause notice to AgustaWestland on February 15 asking it to explain within seven days the bribery allegations against it after the alleged scam was exposed in Italy. In its response the company denied all allegations.
In October, AgustaWestland initiated arbitration procedure against the Defence Ministry for unilaterally freezing the Rs 3,600-crore contract without providing any proof of wrong doing on the company's part.

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