CBI to investigate VVIP helicopter contract alone after Italy closes case - Broadsword by Ajai Shukla - Strategy. Economics. Defence.

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Wednesday 30 July 2014

CBI to investigate VVIP helicopter contract alone after Italy closes case

By Ajai Shukla
Business Standard, 31st July 14

Sixteen months after the sensational arrest in Italy of Finmeccanica chief executive, Giuseppe Orsi, on charges of bribing Indian officials to facilitate the sale of twelve AW-101 VVIP helicopters to the Indian Air Force (IAF), the Italian prosecutors who were investigating the case have dropped charges against the Italian defence conglomerate.

Jolted by that arrest, India’s ministry of defence (MoD) had unilaterally suspended the Euro 556 million (Rs 4,480 crore) helicopter contract with Finmeccanica subsidiary, AgustaWestland. It was formally terminated on New Year’s day.

Now, with the Italian probe closed, the MoD must rely on an on-going investigation by the Central Bureau of Investigation (CBI) that has shown little progress so far.

After the MoD handed over the case to the CBI, the agency took just days to file a First Information Report (FIR) against former IAF boss, Air Chief Marshal SP Tyagi, and 12 others, alleging cheating and criminal conspiracy. The accused denied all charges against them.

Since that initial FIR in Mar 2013, the CBI has filed no further reports or even a chargesheet. The CBI has interviewed Tyagi once, as well as three former civil servants who later became state governors --- former national security advisor, MK Narayanan; former Special Protection Group (SPG) chief, BV Wanchoo; and former Intelligence Bureau chief, ESL Narasimhan.

The CBI is determined to pursue its investigation, though it has relied heavily on investigations by Italian prosecutors. “It is a complicated case; but our investigations are at an advanced stage”, insists CBI spokesperson, Kanchan Prasad.

Off-the-record, MoD officials claim “clear evidence” that AgustaWestland violated an “integrity clause” in the contract, which prohibits the employment of middlemen or agents to facilitate the deal. The Italian investigation centred on three alleged middlemen --- Guido Haschke; Christian Michel and Carlo Gerosa --- who allegedly bribed key Indian decision-makers.

The latest developments were promulgated on the Finmeccanica website on Tuesday evening, which stated: “Finmeccanica announces that the Italian Prosecutor has discontinued investigations relating to the contract for 12 AW101 VVIP helicopters signed with the Indian Ministry of Defence in 2010.”

The statement admitted that Finmeccanica would pay a “negligible fine”, but this was “not in any way an admission of any wrongdoing or liability” by the company.

As part of the arrangement, says Finmeccanica, “The (Italian) Prosecutor specifically acknowledged the non-involvement of Finmeccanica in the alleged wrongdoing, recognizing that that since 2003, Finmeccanica has implemented – and regularly updated – an organizational, management and audit model, sufficient to prevent unlawful conduct, whilst ensuring that significant attention is given to compliance processes in order to uphold the adequate standards of ethics and appropriate conduct.”

Since the contract was suspended, the MoD and AgustaWestland have remained in a standoff, with three VVIP helicopters having already been delivered to India, and several more ready for delivery. The MoD has encashed bank guarantees worth about Rs 2,200 crore that had been provided by AgustaWestland.

Yet, the Italian helicopter giant has signalled that it would confront India’s MoD legally to protect its reputation. On Oct 4, 2013, AgustaWestland invoked arbitration under the Indian Arbitration and Conciliation Act, 1996. The MoD stated on Nov 26 that it would not accept arbitration, but then nominated an arbitrator on Jan 1, when it terminated the contract. A third, neutral, arbitrator must be appointed by mutual consent.

At the heart of the allegations against AgustaWestland was a change in specifications that allowed the AW-101 to be eligible for purchase. The IAF’s first tender (in 2002) demanded a helicopter that could operate at altitudes of up to 6000 metres. After just one helicopter qualified (the EC-225 Eurocopter) the National Democratic Alliance (NDA) government began a process of reconsideration in Nov 2003 that eventually led to another tender in Sept 2006, which diluted the requirement to 4500 metres.

A MoD fact sheet, issued on Feb 15, 2013, points out that the decision involved both the NDA and the UPA governments, and two IAF chiefs --- including Air Chief Marshal S Krishnaswamy who preceded Tyagi.

The fact sheet says: “The procurement case was, thus, progressed in accordance with the established procurement procedure in a transparent manner with all stages of procurement being followed meticulously.”

It remains unclear then what violation the CBI investigation seeks to unearth.


  1. English are English... SFO take action...

  2. Just conclude that bribes were paid, address the loop holes and complete the delivery of those fine machines and start using them.

    - then I woke up !


  3. He he he... CBI like they did in quattrochi case. Traitors


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