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India’s attorney general, Goolamhussein Essaji Vahanvati, ruled last week that AgustaWestland breached contractual obligations and an associated “integrity pact” in winning a $787 million <a href="http://www.ainonline.com/aviation-news/ain-defense-perspective/2013-02-15/india-moves-scrap-aw101-contract-over-bribery-probe">contract to supply 12 AW101 VIP helicopters to the Indian Air Force (IAF)</a> in 2010, raising the possibility the government will cancel the deal. AgustaWestland and parent company Finmeccanica have continued to deny any wrongdoing and on October 4 the Italian manufacturer formally requested arbitration over the stalled contract. In a written statement AgustaWestland said, “We have no further information compared to what [has been] published by the press. We have not received any Show Cause Notice for the contract cancellation. We have recently launched an arbitration process on contract suspension.”


The uncertainty surrounding the helicopter purchase has raised concerns that India’s military could be disadvantaged by possible legal wrangling, which seems likely to delay the procurement. Also, if the Indian government prohibits AgustaWestland from competing for other contracts, it could find itself having to accept a single-vendor framework for future procurements. “This is not just an internal matter but an international one that has geopolitical ramifications,” a senior Ministry of Defense (MoD) official, speaking on condition of anonymity, told AIN.


“This can become a double-edged sword,” the MoD official said. “[The government] should find some other ways that don’t harm the country.” In his view, the Indian government’s silence on the issue could breed uncertainty that might cause defense manufacturers to rethink their investments in India.


The IAF chose the AW101 over the Sikorsky S-92 for its VIP squadron in March 2010. Reports of corruption first surfaced in the media last year, and <a href="http://www.ainonline.com/aviation-news/aviation-international-news/2013-09-03/corruption-trial-set-resume-orsi-and-spagnolini">subsequent investigations resulted in former Finmeccanica CEO Giuseppe Orsi and AgustaWestland CEO Bruno Spagnolini facing charges in Italy</a>. The Indian government suspended the contract in February, after AgustaWestland had delivered three helicopters. A fourth AW101 is ready for delivery and the rest are in advanced stages of construction.


With spares deliveries also suspended, the delay is affecting current IAF operations. “The IAF is using the helicopters sparingly for training,” Air Chief Marshal N.A.K. Browne told AIN. With future AW101 deliveries in limbo, the service may also have to rethink plans to retire its existing VIP fleet of Mil Mi-8s beginning next year. “Some decision has to be taken soon on how to move forward,” Browne said at an October 4 press conference.

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