India's Defence Ministry said today that it has put a €560 million (£483m) contract to purchase helicopters from Italian company Finmeccanica on hold amid allegations that bribes were paid to obtain it.
A formal notice has been sent to Finmeccanica's AgustaWestland helicopter division seeking cancellation of the contract.
"With today's show cause notice, the operation of the contract has been put on hold. The company has been asked to reply to the notice in seven days," the ministry said.
India has launched its own investigation into the deal after the Italian aerospace giant's chief executive Giuseppe Orsi was arrested in Milan on Tuesday on charges that he paid bribes to obtain the contract.
Indian Defence Ministry officials have said the contract includes an integrity clause against bribery or the use of undue influence, under which the agreement can be scrapped and the firm blacklisted.