The Italian authorities have also filed extradition requests for two alleged intermediaries in the affair who reside in Switzerland.
The issue of Italian businessman Ottavio Quattrocchi and his role in Bofors gun contract is a lingering wound the Congress has not been able to deal with since 1990s. Quattrocchi's role in the bribery scandal, and his proximity to Rajiv Gandhi and Sonia Gandhi is believed to have contributed to the defeat of the Congress Party in the 1989 elections.
The Finmeccanica group has been operating in India since 1970s and had participated in the recently concluded Aero India shows under its operating companies AgustaWestland, Alenia Aermacchi, DRS Technologies and Selex ES.
The $735 million deal was to sell 12 high-security AgustaWestland choppers for use by the country's VVIPs. The Italian government has 30 percent share in Finmeccanica and claims that it has always done business in India through official channels.
The source said that three other people had been placed under house arrest as part of the probe, including the Chief Executive of Finmeccanica helicopter unit AgustaWestland, Bruno Spagnolini.
Orsi has always denied wrongdoing in the helicopter contract. Italy's corporate class has been shaken recently by a series of corruption cases, notably a derivatives scandal at Banca Monte dei Paschi and an alleged bribery case involving oil service group Saipem.
The latest series of scandals have become an issue in Italy's campaign for parliamentary elections to be held later this month.
CBI probe ordered
Meanwhile, as the news about arrests filtered in from Italy, the Defence Ministry ordered a CBI probe into the chopper deal. the deal is worth Rs 4000 crore and allegations of bribery to the tune of Rs400 crore have been raised in the media.
Orsi as CEO
Orsi has been a darling of the market because of his administrative skills. He has been implementing the company's biggest revamp to reduce debt of nearly 4 billion euros with enhanced business and assets sale to raise at least a billion euros this financial year.
However, Italian Prime Minister Mario Monti said "there is an issue with the governance of Finmeccanica at the moment and we will deal with it."
The rating agency Standard & Poor's cut Finmeccanica's debt rating below investment grade last month over concern that asset sales would not sufficiently improve capital levels. Even the anti-corruption watchdog Transparency International gave "C" grade last year to the company indicating that there was only "moderate" evidence that anti- corruption systems were in place.
What is Agusta business?
In the helicopter industry sector, AgustaWestland has been present in India since 1970 and has delivered helicopters for both military and commercial use. It has wide range of model such as the AW-119, AW-109 LUH, AW-139, NH-90 and AW-101, and over 50 AgustaWestland commercial aircraft have been sold in India in the last six years.
In Mar 2012, Indian Rotorcraft Limited, a joint-venture between AgustaWestland and Tata Sons, began construction on a new helicopter production facility in Hyderabad.
OneIndia News (with agencies inputs)