New Delhi/Rome: India Tuesday ordered a probe into the $750 million deal for 12 VVIP AgustaWestland helicopters following the arrest of the chief of its parent company - Italy's Finmeccanica on corruption charges in the contract.
Finmeccanica CEO Giuseppe Orsi, who had been under investigation, was arrested Tuesday.
A report in the online version of Corriere della Sera newspaper said Orsi had been arrested for bribes allegedly paid to secure the sale of 12 helicopters to India. Three other people had been placed under house arrest as part of the probe, including Bruno Spagnolini, the head of Finmeccanica's helicopter unit AgustaWestland, said the report.
Orsi has been under investigation for embezzlement for several months. He has always denied any wrongdoing and has vowed to clear his name.
Prosecutors allege he profited illegally from the sale of 12 helicopters to India.
Italy's Prime Minister, Mario Monti, said in an interview with Italian television: "There is a problem with the governance of Finmeccanica at the moment and we will face up to it."
"Magistrates will do their work. I'm sure they will do it thoroughly and in the best way possible." The Italian government owns a 30 percent stake in Finmeccanica.
The contract for the helicopters had been signed in February 2010.
This is not the first time that the allegations have surfaced. Three of the helicopters have already been delivered to the Indian Air Force (IAF), the first of them in December 2010.
Some 30 percent of the contracted amount has already been paid and the remaining would have to paid as and when the remaining nine machines are delivered. As of now, no wrongdoing has been proved, said informed sources.
A scale model of the helicopter had formed part of the IAF tableaux during the Jan 26 Republic Day parade.
Explaining the rationale for the CBI probe, a defence ministry statement said: "Press reports have appeared from time to time on the subject of Italian prosecutors having initiated a probe into the alleged unethical dealings of M/s. Finmeccanica, Italy. The probe had been widened to include the Indian contract signed with M/s. AgustaWestland.
"In view of the media reports" the defence ministry, through the external affairs ministry, "had sought information from the governments of Italy and UK. No specific inputs were, however, received substantiating the allegations".
"In a recent report, appearing in certain sections of the media, it has been reported that the chairman of M/s. Finmeccanica has been arrested in connection with the investigation into the case of the sale of helicopters to India.
"The contract signed with M/s. AgustaWestland includes specific contractual provisions against bribery and the use of undue influence as well as an Integrity Pact," the ministry statement said.
Since no specific input has been received so far from the two governments, MoD (ministry of defence) has decided to refer the case to CBI for inquiry," the statement added.
Finmeccanica, in a terse release from Rome on the issue, backed Orsi "with the hope that clarity is established quickly, whilst reaffirming its confidence in the Judges".
It also said that the "operating activities and ongoing projects of the Company will continue as usual".
The IAF has sought the AgustaWestland choppers as a replacement for its Mi-17 cargo helicopters that have been modified for VVIP deployment. The Comptroller and Auditor General has adversely commented this, saying it was a waste of resources.
The Indian external affairs ministry said it has asked Italian authorities for information about the issue.
"The Indian mission in Rome has asked the Italian government for information that they may have in connection with allegations which have been made on the matter.. We have not received any response from them so far, the argument being that this is in Italy a judicial process," external affairs ministry spokesman Syed Akbaruddin told reporters in New Delhi Tuesday.