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October 23, 2013

India serves final show cause notice to AgustaWestland for contract cancellation

The Indian Ministry of Defence (MoD) has served the final show cause notice to AgustaWestland, moving a step forward towards the cancellation of the AW101 helicopters supply contract over corruption allegations.

AW-101 helicopter

The Indian Ministry of Defence (MoD) has served the final show cause notice to AgustaWestland, moving a step forward towards the cancellation of the AW101 helicopters supply contract over corruption allegations. AgustaWestland was to deliver a total of 12 AW101 medium-lift helicopters to the Indian Air Force (IAF) for VVIP transport missions under a €560m contract awarded in March 2010. The MoD, however, froze the contract and further payments earlier this year following allegations that the Anglo-Italian company paid INR3.6bn ($58.8m) in bribes to European and Indian middlemen, including former IAF chief air chief marshall SP Tyagi. AgustaWestland had denied any wrongdoing then, and has last week announced that it has invoked arbitration proceedings against the MoD for ‘unilaterally’ freezing the contract. In its notice, the ministry asks the company 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 pre-integrity pact and the contract for procurement of 12 VVIP choppers.’

”AgustaWestland had denied any wrongdoing then, and has last week announced that it has invoked arbitration proceedings against the MoD for ‘unilaterally’ freezing the contract."

 AgustaWestland has been given a four-week deadline to reply to the notice. Meanwhile, unnamed defence ministry sources were quoted by Dainik Bhaskar as saying that the government has ‘enough material’ to proceed in the case. ”Documents available with the Defense Ministry and that with CBI have lead to the show cause notice,” the sources stated. When questioned about the arbitration process invoked by AgustaWestland, the sources said the proceedings are not applicable on the breach of pre-contract integrity pact of the MoD. IAF has so far taken delivery of three helicopters, having paid approximately 45% of the total contract value, which can still be recovered if the contract is cancelled.


Image: The AW101 medium-lift helicopters were scheduled to be operated by IAF for VVIP transport missions. Photo: © 2012 AgustaWestland.

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