The Indian government is seeking repayments worth some $367 million from the troubled Italian firm AgustaWestland over a scrapped helicopter deal.
India last week cancelled a $770 million deal with AgustaWestland for 12 AW101 helicopters over what it termed a breach of integrity relating to alleged corruption.
However, India agreed to AgustaWestland's calls for arbitration last week. It will use this process as part of its push to get back the amount it has already paid, defence ministry officials were quoted as saying by Reuters.
The three-person arbitration tribunal will consist of one person chosen by each side and one mutually-agreed neutral member.
AgustaWestland has received just over 43 percent of the deal's value, a sum that the Anglo-Italian firm matched with bank guarantees to be reclaimed after the helicopters were delivered, the officials said.
The company also put up a separate small deposit worth 5 percent of the contract, bringing the total value of the guarantees to around $770 million.
"The government now wants to get back all our money by invoking the bank guarantee," a defence ministry official was quoted as saying. "This has to be returned."
State-controlled Finmeccanica did not respond to requests for comment.
In February last year, India froze payments for the helicopters and launched the official probe after Italian police arrested Giuseppe Orsi, Finmeccanica's then chairman and chief executive, for allegedly paying bribes to middlemen to secure the deal.
"Terminating the contract now is at best premature, plus there is an issue of reputation here that could have an effect on the company globally," a AgustaWestland official was quoted as saying, adding arbitration in the hope of totally reversing the decision to scrap the deal, arguing that the corruption allegations are yet to be proved.
Defence Ministry officials insist Finmeccanica will not be blacklisted, conceding competition for some important deals has been hurt by barring several groups in recent years. The company is competing for the contract to supply 56 helicopters to the Indian navy.