Acting tough, India on Wednesday scrapped a Rs 3,600 crore VVIP helicopter deal with Anglo-Italian firm AgustaWestland for alleged payment of kickbacks to the tune of Rs 360 crore, nearly a year after the scam surfaced creating a political storm here.

 The 2010 deal was for supply of 12 helicopters for Indian VVIPs, out of which three had already been delivered when the controversy erupted in February last year with the arrest of two top officials of the firm.

Former IAF chief S P Tyagi is one of the accused in the case which is being probed by the CBI.

India is also expected to levy damages of more than 500 million Euros on the Anglo-Italian firm while invoking the clauses under the Integrity pact of the deal, sources said.

“The Government of India has terminated with immediate effect the Agreement that was signed with AgustaWestLand International Ltd (AWIL) on 08 February, 2010 for the supply of 12 VVIP helicopters on grounds of breach of the Pre-contract Integrity Pact (PCIP) and the Agreement by AWIL,” a Defence Ministry release said.

The Defence Ministry had already frozen the deal in the wake of the allegations of kickbacks amidst a political storm that rocked even Parliament.

After scrapping the deal, India has now decided to go in for arbitration and has appointed former Justice Jeevan Reddy on its behalf.

The cancellation came after a meeting between Defence Minister A K Antony with Prime Minister Manmohan Singh here earlier in the day, Defence Ministry sources told the news agency.

“AWIL has since pressed for arbitration and appointed an arbitrator from its side. In view of this, MoD sought afresh the opinion of the Attorney General. With a view to safeguard the interests of the Government, Defence Ministry has nominated Justice BP Jeevan Reddy as its arbitrator,” it said.