In a statement, the defence ministry said: "The government of India has terminated with immediate effect the agreement that was signed with Messrs AgustaWestland International Ltd. (AWIL) on Feb 8, 2010, for supply of 12 VVIP/VIP helicopters on grounds of breach of pre-contract integrity pact and the agreement by AWIL."
"Based on the opinion received earlier from the Attorney General of India, it has been the view of the government that integrity related issues are not subject to arbitrations. However, AWIL has since pressed for arbitration and appointed an arbiter from its side."
"In view of this, the MOD (ministry of defence) sought afresh the opinion of the Attorney General. With a view to safeguard the interest of the government, MOD has nominated Justice B.P. Jeevan Reddy as its arbitrator."
Scrapping of the deal with AgustaWestland - the British subsidiary of Italian firm Finmeccanica - comes more than a year after reports that two top officials of the company allegedly paid bribes to bag the contract for the chopper maker.
AgustaWestland has already delivered three of the choppers.
The cancellation came after Defence Minister A.K. Antony met Prime Minister Manmohan Singh earlier in the day, defence ministry sources said.
India froze payments for the VVIP choppers after Finmeccanica's then chief executive was arrested in Italy in February for allegedly paying bribes of Rs.360 crore to secure the deal.
On Oct 21, the defence ministry issued a show cause notice to the Anglo-Italian firm for cancellation of the deal and was given time till Nov 26 to reply.
AgustaWestland then sought a meeting with the ministry and was been given 15 days' more to reply to the notice.
Faced with cancellation of the deal, the firm earlier this month sent a notice to the defence ministry, asking it to get involved in the arbitration process.
The deal was inked in February 2010 for supply of 12 VVIP helicopters to IAF. India had paid around 45 percent of the total contract value for the choppers which were meant to ferry the president, the prime minister and other VVIPs.
Former Indian Air Force chief S.P. Tyagi had come under the scanner in connection with the kickback allegations.
--IANS (Posted on 01-01-2014)