According to sources, the deal was scrapped as the incumbant Government was not inclined to take risks with this episode, particularly at time when polls are ahead in the first half of 2014. The involvement of an Italian conglomerate also added to the perceived risks. Hence the Government decided to cancel the dubious deal even though proceedings are ongoing in an Italian court and an enquiry by the Central Bureau of Investigation (CBI) is in progress.

Faced by the allegations of huge kickbacks for over an year now, the deal ran into rough weather. The decision to cancel the deal came just before Indian officials were to question one of the three middlemen in the deal Guido Ralph Haschke, through their lawyer on January 6 during the ongoing proceedings in an Italian court. Haschke had allegedly made veiled references to possible kickbacks to Indian politicians, bureaucrats and IAF officers in a hand-written 'draft budget' two years before the contract was actually inked.

AgustaWestland is a UK-based subsidiary of Italian conglomerate Finmeccanica.

A 'draft budget' document prepared by Haschke in 2008 in conjunction with another alleged middleman, Christian Michel, having access to Indian politicians, was presented by Italian prosecutors in the court. Micel is a London-based consultant and the 'draft budget' revealed some alleged fraud.

Haschke, his partner Carlos Gerosa and Michel were allegedly paid kickbacks totalling 51 million euros (around Rs 400 crore) to swing the deal for AgustaWestland.

The watchdog Central Bureau of Investigation (CBI) is also conducting a parallel probe into the case after registering an FIR, against former IAF chief Air Chief Marshal SP Tyagi and 14 others, in March last year. The Indian Defence Ministry also first issued a showcause cancellation notice to AgustaWestland last February

As the process of enquiry by the CBI began all further payments to the Anglo-Italian firm was witheld even after induction three of the 12 AW-101 helicopters, with around 45% of the total contract value already been paid, which were meant to ferry the President, Prime Minister and other VVIPs.

'Guido Haschke and Carlo Gerosa managed to send 5.6 million Euros through Mohali-based IDS Infotech and Chandigarh-based Aeromatrix Info Solutions Private Ltd to India and kept the remaining amount of about 24.30 million euros received from AgustaWestland with themselves in the account of IDS Tunisia,' says the CBI FIR.

After receiving legal opinion from the law ministry, the Ministry of Defence initiated the process of final cancellation in November 2013. Both the law ministry and the attorney general were of the opinion that there was 'a clear violation' of the pre-contract integrity pact and the contractual obligations by AgustaWestland and suggested 'strict action including the cancellation of contract, recovery of payment, blacklisting and penal action'.

The Indian Defence Ministry turned down AgustaWestland's plea for arbitration proceedings, saying that the firm had violated pre-contract terms.

According to Haschke's 'draft budget' 3 million euros have been earmarked for a person identified as 'AP', while 15/16 million euros have been shown against 'FAM' possibly meaning family. The document also lists beneficiaries, refering possibly to key officers like 'DS' (possibly Defence Secretary), 'JS AIR', 'AFA', 'DG Acquisitions' as well as 'CVC' (possibly Central Vigilence Commission) under the head 'BUR' (possibly meaning bureaucrats), with 8.5 million euros being budgeted for them.