UPDATE 1-India does not believe AgustaWestland bribery denial

Wed Feb 27, 2013 8:32pm IST

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NEW DELHI Feb 27 (Reuters) - India's defence minister said he did not believe AgustaWestland's denial that it paid bribes in a $750 million helicopter deal, but would wait for an inquiry before deciding on action that could see the order cancelled.

Defence Minister A.K. Antony said the company had responded to a show cause notice demanding it explain accusations by Italian prosecutors that millions of euros in kickbacks were paid to clinch the deal for a dozen luxury helicopters.

India has frozen payments for the helicopters pending an inquiry by the country's Central Bureau of Investigation (CBI) and has said it is seeking to cancel the deal.

"They have denied the whole thing. We don't believe it," Antony said during a rowdy parliamentary debate in which he came under opposition fire for not investigating the allegations of corruption earlier.

He did not explain why he did not accept the denial.

Earlier this month, Italy arrested Giuseppe Orsi, the head of Finmeccanica, the parent company of AgustaWestland, on accusations he organized bribe paying. Orsi, now in custody, has since resigned.

"We are waiting for the CBI," Antony said, reiterating that under an integrity pact signed by the company, India had the right to cancel the contract and pay no compensation if bribery were proved.

In recent years, India has emerged as the world's largest weapons importer, but procurements are periodically held up by allegations of corruption. Finmeccanica could be blacklisted in India for at least five years if investigators prove bribery.

Finmeccanica and AgustaWestland both declined to comment. Finmeccanica shares were largely unmoved after Antony's comments, up 0.2 percent at 3.7 euros at 1501 GMT.

The defence minister, nicknamed St. Antony for his squeaky-clean image, asked the CBI to investigate the allegations for the first time earlier this month, despite the fact that they first surfaced a year ago.

Opposition leader Arun Jaitley questioned Antony's argument that the government had not acted sooner because Italy had refused to share details of its investigation, saying the minister was "passing the buck."

"Italians have done their job by arresting the bribe giver, you have not done the job to arrest the bribe taker." (Reporting by Satarupa Bhattacharjya; Writing by Frank Jack Daniel; Editing by Helen Massy-Beresford)

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