Giuseppe Orsi, the president of Finmeccanica, was arrested over charges of bribery and embezzlement.
Prosecutors accused him of having received a €51 million bribe in exchange for securing the sale of 12 Agusta Westland helicopters to the Indian government. The deal was worth around €560 million.
Mr Orsi, who has denied any wrongdoing, has been under investigation for months. The allegations refer to 2010, when he was head of the defence group’s helicopter division.
The managing director of Agusta Westland, Bruno Spagnolini, was put under house arrest.
During an interview with RAI state television, Prime Minister Mario Monti said: “There is a problem with the governance of Finmeccanica at the moment and we will face up to it.”
According to the Guardian, India will blacklist Finmeccanica and cancel a deal to buy 12 helicopters from the Italian defence group if allegations of bribery are proven against the company, defence minister AK Antony said on Wednesday.
Antony said India’s Central Bureau of Investigation (CBI) had been ordered to investigate the purchase of the luxury choppers – destined for use by India’s political leadership. He said that if the allegations were proved true, those involved would be punished.
“If anybody is guilty, they will have to pay the price, we will have to take actions, no one will be spared,” he told reporters.