The defence ministry (MoD) on Friday initiated action for cancellation of the contract inked in February 2010. It issued a formal show-cause notice to the UK-based subsidiary of Finmeccanica to explain within a week why the contract should not be cancelled.
The Times of India had reported on Thursday that the government was fast veering around to cancelling the VVIP helicopter deal after it first put on hold all further payments to AgustaWestland since the deal was fast emerging as a test-case for defence minister AK Antony, who has built his entire political career on probity, with fingers being raised about the year-long delay in ordering a CBI probe despite allegations of huge kickbacks in the deal consistently emanating for almost an year.
"If the contracts for the Bofors howitzers and the HDW submarines in the mid-1980s could be terminated midway, even if they hit the operational readiness and modernization of the armed forces in a major way, these are just choppers meant for VVIP travel," said a top government source had said on Thursday.
Despite having inducted only three of the AW-101 helicopters till now, with the remaining nine slated for delivery in batches of three each in March, May and July, the defence ministry has earlier this week put on hold all further payments to AgustaWestland. India so far has paid a little over 50% of the total amount to this UK-based subsidiary of Italian military giant Finmeccanica.
With the budget session of Parliament fast approaching on February 21, there were indications that the MoD would not even wait for the CBI to submit a formal report. The MoD has also written to the chief executive officer of AgustaWestland to "categorically" state the "clear position" in view of the current developments, asking him to specifically indicate if any financial transaction has taken place with any Indian individual or entity.
Both the contract and integrity pact inked with AgustaWestland contain specific provisions by which "strict action including the cancellation of contract, recovery of payment, blacklisting and penal action" can be unleashed against the vendor.
Article 22 of the inked contract, for instance, deals with the penalty for the "use of undue influence". It entitles the "buyer" to cancel the contract with the "seller" and recover from him the amount of any loss arising from such cancellation.
Article 23, in turn, deals with agents and agency commission, requiring the "seller" to confirm and declare that the company has not engaged any individual or firm - Indian or foreign - to intercede or facilitate in any way with the Indian government or its officials. Any breach of the integrity pact, in turn, entitles the "buyer" to take actions against the "seller", ranging from forfeiture of the earnest money and performance bond to contract cancellation and recovery of the sum already paid with interest.
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