Govt can encash bank gurantee in copter deal

Govt can encash bank gurantee in copter deal

Govt can encash bank gurantee in copter deal

India has won a legal battle in Italy, where a court upheld the defence ministry's claim to encash a hefty bank guarantee, given by arms major AgustaWestland while securing a lucrative commercial contract to sell 12 VVIP helicopters to the Indian Air Force.

“The appellate court in Milan, in its judgment on Friday (May 23), has substantially upheld the government's claims against AgustaWestland International Ltd (AWIL), AW Spa and Deutsche Bank, Italy, on the encashment of bank guarantees and performance bond in the VVIP helicopter case,” said defence ministry spokesperson Sitanshu Kar here on Sunday.

The victory comes more than two months after a lower court in Milan restrained the defence ministry from encash the bank guarantee worth €278 million (approximately Rs 2,360 crore). “The (appellate) court also ordered AWIL and AW Spa to reimburse the government's legal costs. The defence ministry is studying the order and will take immediate steps to recover the amounts fully,” said Kar.

Within weeks of scrapping the scam-tainted VVIP helicopter deal on January 1, the ministry got back Rs 240 crore after encashing two bank guarantees deposited at State Bank of India.

But a parallel process to encash the guarantees deposited in a foreign bank was stalled when AgustaWestland legally challenged the defence ministry and obtained a stay from the Ordinary Tribunal in Milan.

Once encashed, the bank guarantee would be adjusted against the advance payment, which the defence ministry has already made.

In 2010, India had signed a Rs 3,727-crore (€556 million) contract with AgustaWestland—a subsidiary of Italian arms heavyweight Finmeccanica—for supplying a dozen AW-101 choppers, out of which three had been delivered.