AgustaWestland gets cancellation notice

Firm gets 21-day notice; MoD says internal mechanism found proof.

The Defence Ministry has issued a final notice to Italian firm AgustaWestland for cancellation of the VVIP chopper contract,bringing to end a process that was started in February. The move came after MoD received legal opinions from the Law Ministry and the Attorney General that there is enough evidence to prove wrongdoing in the deal.

In a notice issued Monday,the firm has been asked to explain why all or any action including cancellation of the contract should not be taken for violating the terms of the pre-contract integrity pact that had been signed. The integrity pact is a safeguard that gives the MoD sweeping powers to cancel contracts and even recover payments made in case a vendor indulges in corrupt practices.

While the government had frozen the contract since February after repeated reports in The Indian Express revealed that an Italian probe revealed that middlemen had been hired and illegal bribes worth 51 million euros were paid to bag the contract,sources said Mondays show-cause is a final notice to the firm that the contract is being cancelled. To abide by the process,the ministry has given AgustaWestland 21 days to respond to the notice.

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Though the Italian firm had initiated the legal process of arbitration,claiming that the freeze on payments since February was a breach of the contract,sources in the MoD said the proceedings will no longer be applicable as the deal is being cancelled on the basis of a violation of the integrity pact.

Sources pointed out that the arbitration process pertains to disputes in payments or the terms and conditions of the contract. In this case,however,sources said as the integrity clause is being invoked,there is no ground for any arbitration process. It is believed that the Italian firm will,however,have the option of approaching an Indian court of law if it wishes to contest the decision of the government to cancel the deal.

While sources have confirmed that the MoD is set to cancel the deal after the 21-day period,it is still not clear how the cancellation process will proceed. As things stand,three choppers have been delivered to India while payments worth over 252 million euros have been made to the firm.

One option being considered is that the delivered choppers be taken back and the money returned by the Italian firm. However,the opinion of all stakeholders,including the Air Force that has been tasked with transporting VVIPs,will be taken before a call on the matter.

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