Italian chopper deal: Govt threatens to blacklist Italian firm

Seeking to contain damage arising out of the alleged kickbacks in the VVIP chopper deal, government on Thursday asked the Italian firm Finmeccanica to state whether any money was illegally paid to any Indian entity or individual coupled with a warning of blacklisting it.

Under attack over alleged payment of kickbacks to the tune of Rs362 crore in the Rs 3,600 crore deal, the Defence Ministry also threatened to take legal action, including cancellation of the contract and recovery of money paid for the deal if it was proved that bribes have been paid.

As charges flew thick and fast and BJP targeted the government demanding a Supreme Court-monitored probe, one of its leaders and former Defence Minister Jaswant Singh came to the rescue of former Air Chief S P Tyagi saying allegations should not be made before truth is known.

Italian prosecutors have told a court that three cousins of Tyagi have been paid bribes to the tune of Rs 72 lakh to get the requisite specifications for the tender changed through the then Air Chief Marshal. One of them cousins, Sanjeev Tyagi outright rejected the charge as "absolutely baseless".

Through the change in specifications, AgustaWestland's helicopter AW-101 became eligible to participate in the bid for 12 helicopters.

Issuing a fact-sheet of the sequence of events involved in the deal clinched in 2010, the Defence Ministry noted that the mandatory technical requirements of the chopper were changed in the tender during the Vajpayee government in 2003, with the then National Security Adviser Brajesh Mishra playing a key role.

Seeking to show determination to act in a tough manner, the Minister said the CEO of AgustaWestland has been asked to "categorically state the clear position in view of the current developments indicating specifically if any financial transaction has taken place with any Indian individual/entity which would be violative of the Integrity Pact or any other terms and conditions of the contract."

Noting that the contract with AgustaWestland carried an integrity pact that bars paying of bribes or involvement of middlemen, the Defence Ministry warned of "strict action including cancellation of contract, recovery of payment, blacklisting and penal action can be taken against the vendors."

It said the government is "determined to take all possible legal and administrative action against the guilty parties and accordingly has ordered a thorough probe by CBI."

Giving details, the fact-sheet said the first Request for Proposal was issued in March 2002 mandating requirement of 6,000 metre (18,000 feet) flying altitude for selection of the chopper.

This requirement made it clear that AgustaWestland could not participate in the deal.

However, in a meeting taken by the then NSA (Brajesh Mishra), it was noted that the President and the Prime Minister have rarely made visits to places involving flying at an altitude beyond 4500 metres (15,000 feet) and it was decided to make the mandatory requirement for operational altitude 4500 meters.

"The higher flying ceiling of 6000 meters, and a cabinet height of 1.8 meters could be made desirable operational requirements," it said.

Mishra suggested that the then IAF Chief and Defence Secretary may jointly review the matter to draw up realistic mandatory requirements satisfying operational, security and convenience requirements of VVIPs and also set in motion a fast track process for selection and acquisition of the replacement helicopters.

"In pursuance of the above directive, the Operational Requirements (ORs) were deliberated at length between IAF, NSA, SPG/PMO and Defence Ministry between March, 2005 to September, 2006 and the above indicated changes were incorporated," the Ministry fact-sheet stated.

In these deliberations, the stakeholders took a decision to increase the number of choppers for VVIP duties from eight to 12.

After freezing the requirements, the Defence Ministry issued the RFP on September 27, 2006 after which three vendors, namely Sikorsky, AgustaWestland, AW-101 helicopter and Russian Rosoboronexport responded to it. The Russian firm's bid was rejected as it did not deposit the earnest money and integrity pact.

After comprehensive field evaluation trials, in which the SPG was also represented, Sikorsky was declared to be non-compliant for not meeting four staff requirements.

The Ministry said during the contract negotiations, the Air Headquarters recommended inclusion of more systems on-board the chopper including Traffic Collusion Avoidance System (TCAS-II) and Enhanced Ground Proximity Warning System (EGPWS) for all 12 helicopters and SPG/PMO recommended inclusion of Medevac System for 8 VVIP helicopters.

After agreeing to induct these systems on board the choppers, the Contract Negotiations Committee (CNC) recommended conclusion of the contract at a negotiated price of EURO 556.262 million (around Rs 3,600 crore).

"On completion of CNC the proposal was submitted for approval of the Cabinet Committee on Security (CCS), which considered the proposal in its meeting held on 18 January 2010 and approved the proposal and a contract was signed on February 8, 2010," the Ministry said.

The Defence Ministry said the contract signed with AgustaWestland includes "specific contractual provisions against bribery and the use of undue influence. Article 22 of the contract deals with penalty for use of undue influence. This clause entitles the ‘Buyer’ to cancel the contract with the ‘Seller’ and recover from him the amount of any loss arising from such cancellation."

The Ministry said any breach of the provisions of the Integrity Pact entitles the ‘Buyer’ to take actions against the ‘Seller’ which includes forfeiture of the earnest money, performance bond, cancellation of the contract without giving any compensation, to recover all the sums already paid with interest, to cancel any other contracts.

It also debars the bidder from entering into any bid from the Government for a minimum period of five years which may be extended.