The Rs 3,600 crore (560 million euro) contract signed with AgustaWestland in February 2010 for supply of 12 VVIP AW-101 helicopters was cancelled in January 1, this year over allegation of graft charges.

After the cancellation of the contract, India had also decided to go in for arbitration with the Anglo-Italian firm and the two sides have nominated their members in this regard.
An Italian court in Milan on Monday accepted a plea by AgustaWestland’s parent company Finmecannica to stop India from encashing over Rs 2,360 crore.

Subsequent to this development, India decided to file an appeal against the decision of the Italian court, a Defence Ministry spokesperson said on Tuesday while asserting that the Government “will vigorously pursue all options” for encashment of the bank guarantees.

'The government of India will be filing an appeal against the order of the Italian court in Milan in the case relating to encashment of bank guarantees in the contract for the procurement of 12 VVIP helicopters from AgustaWestland International Ltd. Simultaneously, the government will vigorously pursue all options for encashment of the bank guarantees,' a defence ministry official said

India has already encashed bank guarantees of around Rs 240 crore deposited in banks in India but it is yet to recover the bank guarantees deposited in banks of Italy.

Commenting of the Italian court's acceptance of its plea Finmeccanica in a statement said : “With this measure, the court granted the requests made by the companies of the Finmeccanica Group, recognising the manifestly abusive enforcement of the guarantees made by the Indian Defense Ministry, given the vagueness of the complaints made in relation to alleged breaches of contract.”

“The Milan court has confirmed the ruling made last January, prohibiting...the payment of collateral of more than 278 million euros deposited in relation to the contract,” Finmeccanica said.

In connection with the dubious AgustaWestland deal, the watch dog in India, the Central Bureau of Investigation (CBI) has registered a case against 19 people, including 6 companies to probe the alleged kickbacks.

After the arrest of then Finmeccanica CEO Giuseppe Orsi in Italy, the Indian Defence Ministry in February 2013 had frozen all further payments to AgustaWestland, with around 45% of the total contract value having been already paid to the company.

Orsi and former AgustaWestland head Bruno Spagnolini, who have both denied the allegations, are on trial in Italy

India has already cashed in two bank guarantees worth Rs.2.4 billion submitted in the State Bank of India, while it is demanding encashment for the guarantees with Deutsche Bank abroad.