Govt to encash bank guarantee in copter deal

Will help India recover part of Rs 1,800-crore payment

A day after cancelling the VVIP helicopter deal, the Defence Ministry has initiated the process to cash a bank guarantee worth euro 270 million that chopper manufacturer AgustaWestland gave to the government before signing the euro 556 million contract.

Cashing the bank guarantee, worth almost Rs 1,800 crore (as per a back of the envelop calculation), would help India recover part of the payment, it made to the Anglo-Italian firm for six AW-101 helicopters. While three of them had arrived in December 2012, another three platforms were due to arrive by June, 2012 as a part of the Rs 3,727 crore defence deal.

But when the controversy on the allegation of corruption broke in February 2012, the ministry froze all transaction with Agusta halting the delivery of the second batch of three more choppers. The Defence Ministry on Wednesday cancelled the controversial deal, which is being investigated by the Central Bureau of Investigation and Italian authorities.

Several Indian individuals and companies including a former chief of the Indian Air Force were indicated in the probe so far. “A process is on to encash the bank guarantee for recovering the money,” said a ministry official. The government is understood to have paid almost 45 per cent of the money, though there is no official confirmation on the amount.

Previously, the ministry recovered Rs 244 crore from a bank guarantee given by the Israel Military Industries for a commercial deal involving the proposed Nalanda ordnance factory.
The Defence Ministry appointed a retired Supreme Court judge Justice (rtd) B P Jeevan Reddy as its arbitrator to safeguard the government's interest in an arbitration proceedings initiated by the firm.

Agusta picked up former Kerala High Court Chief Justice BN Srikrishna as its arbitrator under the Indian Arbitration and Conciliation Act 1996.

“AgustaWestland is left with no other option but to invoke arbitration through Counsel; the next step prescribed by the contract. This is not a step we take lightly. While the arbitration proceedings themselves are confidential, the issues in question relate to the unilateral suspension of the contract. Neither the contract nor the associated integrity pact confers such rights on the Indian Ministry of Defence,” the company said in a statement in October.

Meanwhile, principal opposition BJP has demanded a probe into the scrapped chopper deal to find out the money trail and the beneficiaries including those named as "family" and "AP" in Italian documents.

"The abrupt cancellation of the AgustaWestland helicopter deal should not lead to stopping the probe of beneficiaries of the slush money," BJP leader Ravi Shankar Prasad said.