Vodafone case Appeal: Centre mum, telco feels govt will contest arbitral award

The central government on Tuesday remained non-committal on its decision whether to challenge an international tribunal’s award in the Vodafone tax case under the India-Netherlands BIPA. Without making any statement on whether the Indian government would challenge the arbitral award, additional Solicitor General Chetan Sharma asked the Delhi High Court to defer the proceedings indefinitely with liberty to revive the appeal to restrain Vodafone Group Plc from initiating second arbitration proceedings under the India-UK Bilateral Investment Protection Agreement(BIPA).

Sharma urged a Division Bench of justices Rajiv Sahai Endlaw and Asha Menon that “let the appeal be deferred. It can’t be that UKBIPA be a gun on my head…”He also termed the India-UK BIPA as “misconceived” and initiating arbitration under it as an abuse of process.

Counsel Anuradha Dutt, appearing for Vodafone, reiterated that the telecom major will not proceed with the second arbitration until the international award already passed is set aside. “It is clear that the Centre is going to file an appeal,” she said.

The court adjourned hearing in the matter with the remark that it would pass an order in the appeal. In 2018, Vodafone had initiated the second arbitration proceeding under the India-UK BIPA, over the tax imposed on it for its $11billionacquisitionof the Indian assets of Hutchison in 2007. The government moved the HC against this second arbitration, but its petition was rejected. It then appealed before the Division Bench.

Vodafone on September 25 had won a major international arbitration case against the Indian government in which the Permanent Court of Arbitration had held India in breach of the India-Netherlands Bilateral Investment Treaty. While quashing the income tax department’s demand of Rs 22,000 crore as tax, penalty and interest on Vodafone, the Hague tribunal had held that India violated the bilateral investment treaty with the Netherlands by retrospectively amending the law. The tribunal, in its ruling, said the government’s demand is in breach of “fair and equitable treatment” and it must cease seeking the dues from Vodafone. It also directed India to pay 4.3million pounds ($5.47 million)to the company as compensation for its legal costs.

Vodafone had challenged the tax department’s demand of Rs 7,990 crore in capital gains taxes, which went up to Rs 22,100 crore after including interest and penalty. In 2012, the government lost the Vodafone tax case related to its $11-billion acquisition of 67% stake in the Indian mobile-phone business owned by Hutchison Whampoa in 2007 in the Supreme Court. It subsequently brought in the controversial retrospective amendment which overturned the SC judgment. The government had initiated a conciliation process with the company in 2013 but dropped it once Vodafone invoked arbitration under the BIT. The government’s stand had been that tax matters are not under the purview of BIT.