The Defence Ministry on Thursday asked Italian Finmeccanica’s subsidiary AgustaWestland U.K. to “categorically state the clear position, in view of current developments, indicating specifically if any financial transaction has taken place with any Indian individual/entity” violating the “Integrity Pact” or any other terms and conditions of the contract for purchase of 12 VVIP helicopters. This comes two days after it ordered a CBI inquiry into allegations of bribery and warned of cancellation of the Rs. 3,600-crore contract

Amidst allegations of kickbacks and undue influence reportedly used to bag the deal, the Ministry warned AgustaWestland of “strict action, including cancellation of contract, recovery of payment, blacklisting and penal action against the vendors.”

The Ministry, under attack since allegations of kickbacks to the tune of Rs. 363 crore surfaced, has already put on hold all further payments to AgustaWestland, which has so far delivered three choppers, meant to ferry VVIPs.

The delivery of the remaining nine choppers is also said to have been kept on hold.

As its political opponents sought to put the UPA government in the dock, the main Opposition BJP demanded a Supreme Court-monitored probe. Senior BJP leader and former Defence and External Affairs Minister in the NDA government Jaswant Singh came out in support of the former Air Chief, S.P. Tyagi, saying allegations should not be made before the truth became known.

Italian prosecutors have told a court that his three cousins were allegedly paid bribes to the tune of Rs. 72 lakh to get the requisite specifications for the tender changed. One of them, Sanjeev Tyagi, rejected the charge as “absolutely baseless.”

Parameters changed to prevent single-vendor

Mr. Singh admitted that the parameters for purchase of these helicopters were changed on the directions of the then National Security Adviser (NSA), Brajesh Mishra, but defended the decision saying it was done to avoid a single-vendor situation. He favoured an expeditious and thorough probe into the allegations of payment of kickbacks.

In a 35-point fact-sheet on acquisition of AW-101 choppers for the Indian Air Force, the Defence Ministry reiterated that the government “is determined to take all possible legal and administrative action against the guilty parties and accordingly has ordered a thorough probe by the Central Bureau of Investigation.”

Giving in detail the timeline of acquisition of AgustaWestland choppers, the Defence Ministry said the proposal was approved by the high-power Cabinet Committee on Security (CCS) on January 18, 2010 and the contract was concluded for the supply of 12 AW-101 VVIP helicopters on February 8, 2010.

Specifications change helped AgustaWestland

Pointing out that it followed the established procurement procedure transparently at all stages, the Ministry said that security aspects as required by the elite Special Protection Group (SPG), which provides security to the Prime Minister and the IAF, were fully taken into consideration.

“The role of the Prime Minister’s Office which began in 2003 was to ensure that security, communication, and other requirements of VVIP security were taken care of and the helicopter for VVIP use is selected on the basis of broad-based Qualitative Requirements (QRs),” the five-page fact-sheet, issued by Defence Ministry spokesman Sitanshu Kar, said.

It said that at a meeting convened on November 19, 2003 by the then Principal Secretary to the Prime Minister, he observed that his main concern was that the framing of the mandatory requirements had led into a single vendor situation. It was also noted that the PM and the President rarely made visits to places involving flying at an altitude beyond 4,500 metres. It was decided at the meeting to change the mandatory requirement for operational altitude of 4,500 metres, making the higher flying ceiling of 6,000 metres and a cabinet height of 1.8 metres desirable. The changes were incorporated after deliberations between March 2005 and September 2006. At that time, Brajesh Mishra was Principal Secretary to the PM.

After evaluation by the technical committee, proposals of Sikorsky of the U.S. and AgustaWestland were recommended for field trials of their helicopters. While field evaluation trial of AgustaWestland was carried out in the U.K, those of Sikorsky were conducted in the U.S in January-February 2008. The trial team submitted its report in April 2008, recommending AW-101 helicopter of AgustaWestland for induction into service. In 2009, the Contract Negotiation Committee (CNC) recommended conclusion of the contract at a negotiated price of Euros 556.62 million.

The Ministry said the contract with AgustaWestland included specific provisions against bribery and the use of undue influence. In addition, the firm signed an “Integrity Pact” with the government which is valid from the date of signing and extends up to five years or the complete execution of the contract whichever is earlier. Under this pact, the bidder commits itself to taking all measures necessary to prevent corrupt practices, unfair means and illegal activities during any stage of the bid or during any pre or post-contract stage. “Any breach of the pact entitles the buyer to take action, including cancellation of the contract without giving any compensation.”

Taking note of a report of February 2012 in The Hindu, quoting Finmeccanica which stated that its subsidiary was not involved in “any irregularity in the deal,” the Ministry said that it sought a factual report from Indian embassy in Rome.

Subsequently, the Defence Ministry received more than one communication from AgustaWestland confirming that the statements in the press were “completely unfounded and have been issued with malicious intent” and that “no commissions whatsoever were paid” in the case.

Stressing that the MoD consistently pursued the matter through the Ministry of External Affairs since foreign governments were involved, it said “as soon as information was available of one concrete step having been taken by the concerned foreign investigative authorities, namely, the arrest of Giuseppe Orsi, CEO of Finmeccanica on February 2, 2013, the MoD handed over the case to the CBI for investigation and put on hold all further payments to AgustaWestland.” The Indian embassy in Rome has also been requested to provide the factual position and any other relevant information.

Meanwhile, Italian news agency ANSA, in a report from Rome, said Finmeccanica named its new president and chief executive officer Alessandro Pansa, replacing Mr. Orsi, who is under investigation. AgustaWestland's current CEO Bruno Spagnolini was also put under house arrest.

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