NEW DELHI—India has officially barred Finmeccanica from bidding on its future weapons-supply deals but has allowed the Italian defense major to continue with its existing contracts.

In 2012, the Indian defense ministry put on hold all ongoing and prospective deals with the Finmeccanica Group after its U.K. subsidiary AgustaWestland allegedly breached a pre-contract integrity pact concerning the now-canceled purchase of 12 VVIP transport helicopters for the Indian air force (IAF).

In an Aug. 26 directive, the ministry states that Finmeccanica companies should be eliminated from all acquisition projects in which tendering has yet to commence, provided there are valid alternatives.

This will prevent Finmeccanica’s aerospace arm, Alenia Aeromacchi, from bidding for the $2.5 billion tender to partner with a private Indian company on the production of 56 transport aircraft. Alenia Aeromacchi had even suggested opening an assembly line in the country if its C-27J aircraft was selected to replace the aging Avro-748.

However, according to official and company sources, the policy will not affect the bid for 16 naval multi-role helicopters (MRH), in which the European NH90 is competing with the Sikorsky S-70B . India plans to increase the order to 123 helicopters, at a cost of over $3 billion.

A defense ministry official says the ministry’s latest policy is in sharp contrast to India’s earlier practice of blacklisting companies involved in corruption scandals. "We didn’t want the ongoing procurement process to suffer by banning such companies from selling in the country," he adds. In 2012, the defense ministry blacklisted six companies.

The directive puts a question mark on the future of a program by Whitehead Alenia Sistemi Subacquel (WASS), another subsidiary of Finmeccanica, which has been declared the lowest bidder in the tender for 98 Black Shark torpedoes for India’s six Scorpene submarines being built in Mumbai.

A spokesman for Finmeccanica says,"We haven’t received any official communication from any of the relevant authorities... And WASS is still hoping to win the deal."

The text of the policy document allowing Finmeccanica to continue working on existing contracts says, "Where contracts are under execution, there is no reason not to proceed with the contracts… Where contract has already been executed, but spares, upgrades etc are still required on a regular basis, the contracts would be [continued]," ensuring the continued supply of equipment such as the 76mm naval gun, which state-run Bharat Heavy Electricals Ltd. is building under license from Finmeccanica’s armaments wing, Oto Melara. The Italian firm may also be able to supply 13 127mm guns for India’s front-line warships, since it is the sole vendor after BAE Systems opted not to offer its 5-in. (127mm), 62-caliber Mk. 45 Mod 4 Naval Gun System for the $243.5 million tender.

The final clause in the notification permits the vendor to participate in every defense deal in India, as long as the company under Finmeccanica Group Company remains a subcontractor or a supplier to a contracting party with the government of India.

This will ensure that work continues on the integrated surveillance systems that Selex Electronics Systems (ES) is fitting on the indigenous aircraft carrier INS Vikrant in association with the Russian Scientific Research Institute for Long-Distance Radio Communications, and other communication systems for the IAF.

The document does not mention the controversial AW101 VVIP helicopter contract, which India terminated January 2014 after Italian prosecutors charged Finmeccanica’s former chief executive, Giuseppe Orsi, and another company official with conspiring to bribe Indian officials, including the IAF chief, to win the $734 million deal.

Orsi and the other executive have pleaded not guilty. The former Indian air force head, Satish Tyagi, has denied any wrongdoing.

Of the 12 AW101s in-contract for 2010, India has received three. The IAF was forced to ground these helicopters a couple of months back for want of spare parts. India, meanwhile, also has recovered most of the money it paid, by encashing AgustaWestland’s bank guarantees, worth €228 million.