India to encash 228 m euros bank guarantees of Agusta

Defence Ministry spokesperson Sitanshu Kar said the ministry is “studying the order and will take immediate steps to recover the amount fully”.

After cancelling the VVIP chopper deal for 12 AW 101 helicopters earlier this year on charges of bribery, the defence ministry had moved to encash the bank guarantees that are part of the procurement contract as a safeguard against corrupt practices.

India’s effort to recover 278 million euros in the form of bank guarantees from the Deutsche Bank were, however, thwarted after AgustaWestland obtained a stay from a local court.

Following this, India went in for a long drawn appeal process, at the end of which the Italian court ruled on Friday that 228 million euros of the claims made by India need to be unfrozen. As things stand, India has already paid 252 milllion Euros or 45 per cent of the contract cost for the 12 VVIP choppers. Out of these 12, three have been delivered.

With the encashment of the bank guarantees, India will have fully recovered the payments it made to the Italian company since 2010 when the deal was inked. In addition, India also wants to impose additional penalties on the Italian company for breach of the integrity pact.

The fate of the three delivered choppers — that are not being flown for VVIP duties — will depend on the out come of an arbitration process that has been initiated by the Italian company.

India on its part is not keen to operate the choppers and wants them to be returned to AgustaWestland.

After losing the appeal in the Milan court, the Italian company has also conceded that the ruling allows India to encash the guarantees, but has claimed that it will “assert its rights” to recover the money during the ongoing arbitration process.