Finmeccanica Chief Giuseppe Orsi, arrested three days ago on charges of corruption and tax fraud, today resigned as chairman but claimed innocence in the choppers scam.
Orsi. who remains in jail, also resigned his board of directors position, his lawyer, Ennio Amodio said in Busto Arsizio, near Milan.
Orsi, who was questioned by prosecutors on Friday, faces allegations of paying bribes to win a 560-million-euro contract for the company's AgustaWestland unit to supply helicopters for use by senior Indian politicians.
Orsi has denied any wrongdoing.
Meanwhile, the Indian defence ministry has initiated proceedings to cancel the deal and has given the company seven days to respond.
Bruno Spagnolini, the CEO of the helicopter unit, remains under house arrest.
Orsi has told Italian judges he is unaware of any wrongdoing. He also denied knowing those named in a probe as brokering the deal in India and said that he had no link with SP. Tyagi, former head of India's air force or his relatives.
'I never knew anything about illicit operations,' Orsi said according to his lawyer, adding that he had never met members of the 'Tyagi family' -- the alleged recipients of the bribes according to leaks in Italian media.
Italian prosecutors, in an preliminary investigation report filed in an Italian court, claim Finmeccanica executives allegedly paid bribes to Mr. Tyagi through his cousins.
The Indian government has so far taken delivery of three of the 12 rotorcraft in the deal signed in 2010.
AgustaWestland beat an offering from United Technologies Cor.’s Sikorsky unit, bidding the S-92. Russian Helicopters, which entered the competition with an Mi-17-based offering, was eliminated early in part because the firm did not submit the required integrity report.
The Italian investigation has been going on for months and India launched its own police inquiry this week after Orsi's arrest. Indian investigators said on Friday they will travel to Italy next week to find out details of the case against Orsi.
Indian officials have complained that the Italian investigators were not sharing any details of the case.
The opposition Bharatiya Janata Party and the media have said the government should have acted sooner on signs that something was amiss, after an internal defence ministry investigation found nothing wrong with the deal.
The issue is expected to dominate the first few days of the budget session in India's parliament when it opens next week.
The image of the Congress party-led government has been tarnished in the last four years by corruption scandals in the sale of mobile phone spectrum, coal fields and contracts for the 2010 Commonwealth Games in Delhi.
With inputs from Reuters