India's Defense Ministry said Friday that it had put the deal to purchase the 12 helicopters on hold and sent a notice to Finmeccanica's AgustaWestland helicopter division seeking cancellation of the agreement. The company was given a week to respond to the notice.
AgustaWestland said in a statement Saturday that it would reply within a week. It also said it was "confident" it would demonstrate "full compliance" with the law.
India launched an investigation into the 560 million euro ($750 million) deal after Finmeccanica's chief executive was arrested in Milan on Tuesday on charges he paid bribes to obtain the contract.
India signed the contract with AgustaWestland in February 2010. Three of the helicopters were delivered in December.
Giuseppe Orsi, the recently removed CEO of Finmeccanica, and Bruno Spagnolini, chief of AgustaWestland, are being investigated on corruption charges involving business done in India.
Indian Defense Ministry officials have said the contract includes an integrity clause against bribery or the use of undue influence. Under the terms of the clause, if any person or the company is found to have bribed officials or made any kind of payoff, the agreement can be scrapped and the firm blacklisted.
This is not the first time that a defense deal in India has been mired in allegations that a company paid millions of dollars in kickbacks to Indian officials. In the 1980s, then-Prime Minister Rajiv Gandhi's government collapsed over charges that the Swedish gun manufacturer Bofors AB paid bribes to supply Howitzer field guns to the Indian army.
Following the Bofors scandal, India banned middlemen in all defense deals.
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