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India moving to 'fully recover' AugustaWestland bank guarantees

26 May 2014

India's defence ministry, in a last blast before a new government takes over, said on Sunday it will take "immediate steps to fully recover" the over 250 million in bank guarantees provided by AgustaWestland in the 556 million (Rs3,546 crore) contract for 12 VVIP helicopters, which was scrapped on 1 January over kickback allegations.

"The appellate court in Milan on Friday has substantially upheld the claims of the Indian government against AgustaWestland International Ltd (AWIL), AgustaWestland Spa and Deutsche Bank, Italy, on the encashment of bank guarantees and performance bond in the VVIP helicopter case," the defence ministry said in a statement.

"The court also ordered AWIL and AW Spa to reimburse legal costs of the Indian government. MoD is studying the order and will take immediate steps to recover the amounts fully," it added.

The ministry has already cashed the "integrity pact bank guarantee" submitted by AgustaWestland, the UK-based subsidiary of Italian conglomerate Finmeccanica, in the State Bank of India's Parliament Street branch in New Delhi.

In February last year, after the arrest of the then Finmeccanica CEO Giuseppe Orsi in Italy, the defence ministry had frozen all further payments to AgustaWestland. This was done even though only three of the 12 AW-101 helicopters had been delivered by then, with around 45 per cent of the total contract value already paid to the company.

AgustaWestland had submitted two bank guarantees to match the payments - one advance of 15 per cent and another of 30 per cent, as well as "5 per cent earnest money" and "5 per cent performance bond" as part of the integrity pact.

There are "enough safeguards" built into the integrity pact and the contract inked with AgustaWestland in February 2010 to "protect India's interests" and impose "punitive damages" on the company, officials said.

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