The investigation could delay the purchase of new helicopters that are meant to replace the Indian army's ageing fleet of Cheetah and Chetak helicopters, a report by India Today said.
The Defense Acquisition Council set up a technical oversight committee led by a general who will complete a report by the end of May.
In the trials were Eurocopter's AS550 C3 Fennec and Russia's Kamov KA-226T, India Today said.
The current acquisition glitch comes after the first round of initial bids was annulled in December 2007 because bidders hadn't followed tender guidelines. Anew bid for helicopters, to be used for reconnaissance and surveillance operations, particularly in high-altitude areas, was floated in July 2008.
The oversight committee will consider concerns that during trials there was a lack of evacuation facilities for passengers. It also was alleged that it was difficult to fit a stretcher into the cabin of the Eurocopter helicopter, India Today said.
Eurocopter later informed the Defense Ministry that it would provide bulged doors for evacuation of casualties on stretchers.
A third bidder, the Anglo-Italian AgustaWestland, was rejected before the final trials process because its helicopter's engine was a prototype.
A report in December by the Indian Express newspaper said Kamov and Eurocopter would go head-to-head in final flight trials and Eurocopter was looking more favorable because of its single engine, making it less expensive that the twin-engine Kamov.
The decision to put the trials process under the microscope is part of the government's attempts to make procurement much more transparent and less open to allegations of corruption.
Earlier this month Defense Minister A.K. Antony said there will be "no cover up and no vendetta" when it comes to defense purchases and allegations of irregularities, a report by the Economic Times said.
"India's interests are our only concern," said Antony.
"Corruption will not be tolerated. Even if there is suspicion, a probe will be ordered," he said on the sidelines of a function for the Indian coast guard.
"When people do not get contracts, there will be criticism and allegations. Some companies do try to influence officials and if it is proved, action will be taken".
He said six companies recently had been blacklisted.
The foreign blacklisted companies are Israel Military Industries, Singapore Technologies Kinetics, Rheinmetall Air Defense Zurich and Corporation Defense Russia. The two Indian businesses are T.S. Kisan and Co. and R.K. Machine Tools.
The ban followed a 2009 investigation by India's Central Bureau of Investigation that looked into allegations of bribes to defense officials including Sudipta Ghosh, the former director of Ordnance Factories to win contracts.
India also is looking to purchase 71 more Russian-made Mi-17 V5 helicopters on top of the 80 on order from the manufacturer Kazan Helicopters, the Press Trust of India reported in February.
Antony formally inducted the first batch of Mi-17 V5 medium-lift choppers into the air force earlier that month.
India signed the contract with Kazan in 2008 to supplement its existing fleet of around 150 Mi-8 and Mi-17 helicopters used for cargo and for VIP transport, the PTI report said.
Of the 71 helicopters in the new order, 59 would be for the air force to replace Mi-8 and Mi-17 V aircraft and six would be for border security forces. The remaining six would be sent to police forces around the country, an unnamed air force official told PTI.