NEW DELHI (Reuters) - India will move to recover bank guarantees from an aborted 560-million-euro helicopter deal with Italy’s Finmeccanica SIFI.MI, the defense ministry said, after an Italian court lifted a freeze on 228 million euros held with European banks.
New Delhi scrapped the deal with Finmeccanica’s AgustaWestland unit in January, after graft allegations made against the company almost a year earlier.
The delay highlights the slow headway the Congress party then in power was able to make on vital defense contracts.
Congress suffered its worst ever defeat in India’s general election in April and May. Hindu nationalist Narendra Modi, leader of the Bharatiya Janata Party (BJP), is due to be sworn in as prime minister on Monday night.
The overall value of the guarantee scheme with Deutsche Bank SpA DBKGDE.UL, Deutsche Bank AG DBKGn.DE, Intesa Sanpaolo ISP.MI and the State Bank of India SBI.NS was around 300 million euros, Reuters reported in January.
India said in February it had cashed in two small bank guarantees but an Italian judge later blocked its efforts to recover the remaining 278 million euros. On Friday, an Italian court revoked the freeze on 228 million euros of that figure.
“<The ministry> is studying the order and will take immediate steps to recover the amounts fully,” India’s defense ministry said in a statement on Sunday.
Details will only emerge after the new defense minister takes office, a ministry spokesman told Reuters on Monday.
Finmeccanica has said it will seek to protect the guarantees through an arbitration process launched this year after the contract for a dozen high-end helicopters was cancelled.
Defense is one of four key portfolios, including finance, home affairs and foreign affairs, over which speculation is mounting ahead of the swearing-in of Modi’s cabinet, set for Monday night. Modi is an extremely private figure who has kept even senior party leaders in the dark about his choices.
India’s outgoing defense minister, A. K. Antony, was nicknamed “St. Antony” for his anti-corruption zeal. Yet his propensity to cancel deals and blacklist companies has hobbled India’s much-needed push to update its military.
Reporting by Shyamantha Asokan; Editing by Frank Jack Daniel and Clarence Fernandez