India today officially notified a ban on Italian conglomerate Finmeccanica group of companies from bidding in fresh contracts even as the Central Bureau of Investigation (CBI) is investigating the alleged kickbacks in the VVIP helicopter deal by its UK-based subsidiary AgustaWestland.
While the ongoing arms contracts with the group will continue, fresh contracts will not be allowed till further orders, a defence ministry source said on Tuesday.
The move follows the cancellation of a €560 million ($751 million) order with AgustaWestland for 12 helicopters for VVIP use in the wake of charges by Italian prosecutors that the defence group had paid bribes to Indian officials to win the contract.
"Where a tender process is yet to commence, a company under the Finmeccanica group of companies should not be given tender papers for purposes of bidding," defence ministry said, setting out new rules for dealing with the firm.
As per the defence ministry, contracts already signed with Finmeccanica and procurement of products and spares under ongoing contracts will continue.
The ministry said cases in which a Finmeccanica company is a "subcontractor or supplier to a contracting party with the government of India" will also go ahead as usual.
But, cases where Finmeccanica group companies have been declared the lowest bidder (L-1) but the contract is yet to be inked, "shall be put on hold until further orders".
"Where the tender process is ongoing but no vendor has been declared as L-1 as yet, the Finmeccanica group of companies may also not be considered in the tender, provided the tendering can be satisfactorily completed with other competitors," the ministry said.
Defence ministry had put all dealings with the Finmeccanica group, including the acquisition of guns and torpedoes for warships to helicopters and radars, on hold till it received the attorney-general's opinion.
Attorney-general Mukul Rohatgi, however, had advised the government against "a complete ban" on Finmeccanica, saying that would jeopardize the battle-readiness of the armed forces and impinge on national security.
The Narendra Modi government had ruled out blacklisting global engine manufacturer Rolls-Royce, which too is under CBI scanner for allegedly employing agents and paying hefty commissions, on the grounds of "operational urgency and national security".
Apart from ongoing contracts like the supply of Selex radars or Otomelara naval guns, Finmeccanica is vying for military contracts worth over $6 billion in India.
These include the Rs1,800-crore project to buy 98 'Black Shark' heavy-weight torpedoes manufactured by another Finmeccanica subsidiary Whitehead Alenia Sistemi Subacquel (WASS) for the six Scorpene submarines being built at Mazagon Docks in Mumbai.
It has also bid for supply of naval multi-role helicopters (MRHs), along with other contenders such as European NH-90 choppers, which have Finmeccanica as a partner, and the American Sikorsky-70B choppers.
The first contract for the 16 MRHs is to be followed by a bigger $3 billion one for 123 helicopters.