Govt set to scrap deal, sends notice to chopper firm

FP

Under pressure after Italian investigators unearthed the role of middlemen and the alleged payment of kickbacks in the Rs 3,546 crore AgustaWestland VVIP chopper deal for the IAF, the defence ministry Friday started the process of cancelling the contract signed in 2010.

The action comes a year after The Indian Express first reported the corruption allegations in the deal that was being probed by Italian authorities.

Two days before the ministry said that it would cancel the deal and initiate action to recover the money already paid to AgustaWestland, this newspaper was the first to report that former IAF Chief S P Tyagi had been accused by Italian prosecutors of taking a bribe to swing the deal.

"The Ministry of Defence has initiated action for cancellation of contract for procurement of 12 AW101 helicopters for the use of VVIPs. The ministry today issued a formal showcause notice to AgustaWestland of UK seeking cancellation of contract and taking other actions as per the terms of the contract and the Integrity Pact," Defence ministry spokesperson Sitanshu Kar said.

The seven-day notice mentioned in the statement is a formality mandated in the contract for the 12 choppers signed with the firm. Sources said there will be no rethink on the matter and that the deal is now effectively cancelled.

"MoD had already put on hold further payments to the company on Wednesday. With today's showcause notice, the operation of the contract has been put on hold. The company has been asked to reply to the notice in seven days," Kar said.

The cancellation will be a test case for the stringent anti-corruption clause in the Defence Procurement Procedure (DPP) as it is being used for the first time. It empowers the government to not only cancel a contract midway but to also recover money already paid, along with penalties.

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