Anglo-Italian helicopter company AgustaWestland has invoked arbitration over India's defence ministry's decision to freeze a €556-million (Rs4,650-crore) contract for purchase of 12 AW-101 helicopters.
India suspended the deal for acquiring the VVIP fleet, after the arrest of Giuseppe Orsi, chief of Finmeccanica, the Italian parent of the company that manufactures the AgustaWestland, in Italy on 12 February, for allegedly bribing Indian officials to secure the contract.
The defence ministry suspended the purchase after Orsi's arrest on 12 February 2013, for allegedly bribing Indian officials to secure the contract. Orsi headed AgustaWestland from 2010 to 2012, when the contract was secured.
India also froze payments on the €560-million contract for supply of 12 helicopters after it became evident that officials of the defence ministry and some politicians were involved in the copter scam.
Investigations are progressing in Italy and India over the allegations that AgustaWestland paid bribes to win the 2010 deal.
AgustaWestland, however, denies the allegations and insists that the contract does not specifically provide for suspension of payment and that Indian authorities have failed to responded to its requests for bilateral discussions since April.
"The need to resolve this issue has left AgustaWestland with no other option but to invoke arbitration; the next step prescribed by the contract. This is not a step we take lightly," it said.
The company said arbitration would be conducted under the Indian Arbitration and Conciliation Act of 1996. Of the three arbitrators, one each would be chosen by the buyer and seller and the third would be nominated under the agreement of both sides, the company said.
India has already taken delivery of three helicopters while three others are ready for delivery to India since April and three others are close to completion and work on another three have started at the company's plant in Somerset In Britain, according to AgustaWestland spokesman Guy Douglas.
The government froze the copter deal after the Comptroller and Auditor General (CAG) of India, in August, found some ''wrongdoing'' in the deal.
In its report, the CAG noted that the contract was in violation of the defence ministry's initial set a condition that the helicopters should be able to fly to an altitude of 6,000 metres, which the AgustaWestland copters are incapable of.
The AW101 was certified to fly only to 4,572 metres. The ministry later lowered the minimum altitude requirement to 4,500 metres, the auditor said.
Jackie Callcut, chief executive of AgustaWestland's India unit, said the altitude requirement was changed to avoid a single-bidder situation.
"The altitude requirement was an irrelevance to AgustaWestland anyway; it was well known the AW101 would have been re-certified to 6,000 metres if needed," she said in a separate statement.
AgustaWestland in a statement issued on Friday said the MoD has ignored repeated requests for discussions on the suspension. The company has, therefore, exercised the next option available to it - arbitration.
''The ongoing need to resolve this issue has left AgustaWestland with no other option but to invoke arbitration through Counsel; the next step prescribed by the contract. This is not a step we take lightly,'' said AgustaWestland.
The contract mandates that arbitration proceedings would be conducted in India under the Indian Arbitration and Conciliation Act, 1996.