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Italian judge blocks recovery of AgustaWestland guarantees; India to appeal

18 March 2014

India has decided to file an appeal against the decision of an Italian court that barred India from recovering Rs2,360 crore (about 278 million euros) in bank guarantees over the scrapped helicopter deal with AgustaWestland, a group company of Italy's Finmeccanica.

''The Government of India will be filing an appeal against the order of the Italian court in Milan in the case relating to encashment of bank guarantees in the contract for the procurement of 12 VVIP/VIP helicopters from AgustaWestland International Ltd (AWIL). Simultaneously, the government will vigorously pursue all options for encashment of the bank guarantees,'' the defence ministry said in a brief statement.

A court in Milan yesterday accepted a plea by AgustaWestland's parent company Finmecannica to stop India from encashing over Rs2,360 crore (278 million euros) in bank guarantees.

''With this measure, the court granted the requests made by the companies of the Finmeccanica Group, recognising the manifestly abusive enforcement of the guarantees made by the Indian defence ministry, given the vagueness of the complaints made in relation to alleged breaches of contract,'' Finmeccanica said in a statement.

''The Milan court has confirmed the ruling made last January, prohibiting...the payment of collateral of more than 278 million euros deposited in relation to the contract,'' it said.

India scrapped the Rs36,00 (about 450 million euros) contract with Anglo-Italian helicopter maker AgustaWestland, a unit of Italy's Finmeccanica, for 12 high-end helicopters in January following allegations of bribery in securing the order.

The court ruling that confirms an earlier court order that blocked three out of five guarantees means that an overall amount of around Rs2,350 crore (276 million euros) remains to be recovered from the Italian contractor.

India had already cashed in two bank guarantees worth Rs240 crore backing the cancelled contract.

Following the cancellation of the contract, India had decided to go in for arbitration with the Anglo-Italian firm and the two sides had nominated their members in this regard.

Augusta Westland has already supplied three choppers to India and the delivery of the remaining nine was put on hold after defence minister AK Antony ordered a CBI probe into the corruption allegations following the arrest of Finmecannica's former CEO Guiseppe Orsi and AgustaWestland's former head Bruno Spagnolini in Italy in connection with a similar bribery case in Italy.

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