Suspension of dealings with defence firm over AgustaWestland probe won’t affect ongoing contracts: Delhi HC

The company alleged before the single-judge bench of Justice Prathiba Singh that it had been a regular supplier of various defence equipment and parts since 2007. It was argued that it had several ongoing contracts with the ministry and had also submitted its bids in response to various requests for proposals. The company argued that the Dec 9 order came as a “complete surprise” as it learnt about the order from the media.

It was submitted that no notice was issued to the company prior to the suspension. It was further submitted that the reason given for the Centre’s action was an alleged “intimation from the CBI regarding ongoing investigation against Defsys in relation to the AgustaWestland VVIP helicopter case”.

It was Defsys’s case that the company had no connection with the AgustaWestland case. The court was informed that Defsys was “neither an accused, nor has it ever been called for investigation in the said case”, and therefore the suspension order must be stayed.

The court was informed by the company that a list of ongoing contracts had been submitted to the Centre’s counsel. As of Dec 22, Defsys’s bankers “put on hold and suspended all remittances and other dealings” in respect of the company after the Centre’s suspension order, the court was further told.

The Centre’s counsel submitted that “insofar as the existing contracts of the petitioner which are already ongoing with the Ministry of Defence are concerned, the same would not be affected” by the suspension order. The Centre also submitted that as per the 2016 guidelines, in case of intimation received from an investigation agency, suspension can be ordered even without notice, especially in cases involving national security.

After the Centre’s statement, the court in its Dec 23 order said, “The said statement is taken on record. In view of the said statement made by the Ministry of Defence, the impugned order dated 9th December, 2022 would not take effect insofar as it relates to existing ongoing contracts including offset contracts executed prior to 9th December 2022.”

The court further ordered that the company’s bankers “shall not, in any manner, cause impediments in the day-to-day functioning of the petitioner qua the said existing contracts”. Defsys’s contracts that are “still in the initial stages” are likely to be concluded with any third party, the company is permitted to approach the court, it was clarified.

The matter is listed on January 17, 2023 for a hearing on the company’s stay application, directing the Centre to file its response in the meantime.

In 1999, the Indian Air Force floated a proposal for the acquisition of 12 helicopters to ferry top government functionaries. In 2010, the deal was granted to AgustaWestland for over Rs 3,600 crore. This was, however, followed by allegations that technical specifications had been tweaked—including by lowering the service ceiling of the helicopters from 6,000m to 4,500m—to help AgustaWestland qualify and win the bid, for which bribes were allegedly paid.

The CBI registered an FIR on March 14, 2013, after a preliminary inquiry. The FIR named former IAF chief S P Tyagi and 12 other individuals as accused, apart from four companies. These individuals included members of the Tyagi family and three middlemen—Michel, Carlo Gerosa and Guido Haschke.