India Rejects AgustaWestland Defense of Helicopter Contract

India’s defense minister rejected U.K. helicopter company AgustaWestland’s assertion that it abided by anti-graft rules while securing a $753 million contract, as a panel of lawmakers is set to probe allegations of corruption.

Antony said during a debate in parliament today that he does “not believe” a response given by the unit of Anglo-Italian defense and aerospace manufacturer Finmeccanica SpA, whose chairman was arrested this month for alleged fraud and tax evasion. In a statement last week, the company denied wrongdoing in the deal for 12 civilian aircraft.

Under pressure from opposition parties to explain why Antony’s ministry had not acted upon earlier media reports of malpractice in the pact, the government won consent from the upper house of parliament for a three-month investigation by a panel of 30 lawmakers.

Some of the ruling Congress party’s leading rivals, including the Bharatiya Janata Party, walked out of the chamber, saying the government was attempting to hide the truth.

Two investigations are already in progress: one by Italian prosecutors and another by India’s Central Bureau of Investigation.

Companies Blacklisted

After it receives the preliminary report from the CBI, the defense ministry “will take the strongest action as per the integrity pact” that governs the agreement with AgustaWestland, Antony said. “I want to know the truth. I want to punish the guilty.” He reminded lawmakers that the government had blacklisted six defense companies in recent years after allegations of graft emerged.

The controversy this month led to the arrest in Italy of former Finmeccanica Chairman and Chief Executive Officer Giuseppe Orsi, who denies the charges against him. Orsi headed AgustaWestland when the deal was signed. The current chief of the unit, Bruno Spagnolini, has been placed under house arrest.

In India, the defense ministry on Feb. 15 issued a so-called show-cause notice giving AgustaWestland seven days to defend itself against the bribery allegations surrounding the deal signed in 2010. It also suspended further payments to AgustaWestland and dispatched an investigator to Italy.

The CBI on Feb. 25 named former air force chief S.P. Tyagi and 10 other people who may have benefited from the helicopter sale. Four companies were also mentioned for allegedly receiving kickbacks in the deal. Tyagi has denied any wrongdoing in appearances on Indian television channels.

Futile Exercise

AgustaWestland, the world’s second-largest helicopter maker, denied any violation of the contract agreement. “AgustaWestland confirmed that its conduct has been fully compliant with the rules which regulate the AW101 helicopters contract signed with India,” the company said in a statement Feb. 21.

Opposing the probe by a parliamentary panel, Arun Jaitley of the BJP said it would be an “exercise in futility” as lawmakers don’t have powers to extradite suspects or carry out interrogations. He branded the move a “diversionary tactic.”

Allegations of graft surrounding the sale of artillery by Sweden’s Bofors AB contributed to the defeat of the Congress party government of then premier Rajiv Gandhi at elections in

1989. Congress, elected in back-to-back elections in 2004 and 2009, is now headed by Gandhi’s Italian-born widow, Sonia. The next general election is due by May next year.

Singh’s government has been assailed by rivals over corruption charges since 2010 as scandals linked to the hosting of that year’s Commonwealth Games and an earlier sale of mobile-phone permits emerged. The accusations against his administration -- which led to a cabinet minister being jailed and put on trial -- helped trigger a two-year logjam in policy making and an economic slowdown.

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