India has decided to file an appeal against the decision of the Italian court, a Defence Ministry spokesperson said.
India has already encashed bank guarantees of around Rs 240 crore deposited in banks in India but it is yet to recover the bank guarantees deposited in banks of Italy.
An Italian court in Milan yesterday accepted a plea by AgustaWestland's parent company Finmecannica to stop India from encashing over Rs 2,360 crore (Euro 278 million).
"With this measure, the Court granted the requests made by the companies of the Finmeccanica Group, recognising the manifestly abusive enforcement of the guarantees made by the Indian Defense Ministry, given the vagueness of the complaints made in relation to alleged breaches of contract," Finmeccanica said in a statement.
"The Milan court has confirmed the ruling made last January, prohibiting...the payment of collateral of more than 278 million euros deposited in relation to the contract," it said.
India terminated the Rs 3,600 crore deal on January 1 for procuring 12 VVIP AW-101 choppers for the IAF on allegations of payment of kickbacks and involvement of middlemen in the acquisition process by the Anglo-Italian firm.
The Italian court had put a stay on India's effort to encash the bank guarantees in an earlier hearing on January 8.
After the cancellation of the contract, India had also decided to go in for arbitration with the Anglo-Italian firm and the two sides have nominated their members in this regard.
The Anglo-Italian firm has already supplied three choppers to India and the delivery of the remaining nine was put on hold after Defence Minister AK Antony ordered a CBI probe into the corruption allegations after the arrest of Finmecannica's former CEO Guiseppe Orsi and AgustaWestland's former head Bruno Spagnolini in Italy in connection with the probe going on there.