AgustaWestland on Saturday obtained a temporary stay order against the Indian government’s attempts to encash a € 279-million bank guarantee underwritten by a pool of Italian banks. A Milan court has fixed a mid-February date to look into the merits of the case. Sources in Milan indicate that AgustaWestland has for the moment stymied India’s attempts to encash a significant part of the bank guarantee. The company moved the court in an urgent appeal under Article 700 of the Italian Code of Criminal Procedure, arguing that such sureties fall under Italian jurisdiction.
India earlier scrapped the deal for the sale of 12 VVIP helicopters estimated at Rs. 3,600 crore after it was revealed that middlemen had been used with a payment of Rs. 360 crore in kickbacks. India’s Defence Ministry announced that it was moving to encash the bank guarantees furnished by the company and underwritten by a consortium of banks. The Ministry said it would also seek additional damages.
Two types of bank guarantees were involved in the deal: one for € 27 million in performance bonds guaranteed by the State Bank of India and other Indian financial institutions and the other for € 279 million was underwritten by a consortium of banks led by UniCredit.
AgustaWestland foiled New Delhi’s attempts to lay its hands on the second lot of guarantees. The company contested New Delhi’s request on the grounds that the Indian government had accepted the arbitration process. AgustaWestland said it considered the Indian request non-justifiable and that the company risked suffering “an imminent and irreparable prejudice.” Judges accepted these arguments and ordered a temporary stay and fixed a hearing for mid-February. The arbitration proceedings are likely to begin during the same time.