At issue is the Indian government's purchase of 12 helicopters from Finmeccanica unit AgustaWestland under a $750.4 million contract, India's Business Standard reported Monday.
The report said there is a possibility that Indian government officials could be involved in taking kickbacks for changing the terms and conditions of a purchase agreement to favor Finmeccanica's bid for the contract.
The company denied the allegations.
"AgustaWestland is not involved in any irregularity concerning the supply of helicopters in India," Finmeccanica said in a statement. "No notice related to the investigations has been served."
The contract refers to 12 Finmeccanica AW101 helicopters and was awarded to AgustaWestland after a comprehensive evaluation after a lengthy review process prior to the awarding of the contract in February 2010.
News of the investigation sent Finmeccanica shares slumping 8.5 percent.