Tax demand: SC allows Voda to initiate second arbitration

New Delhi, December 14 

The Supreme Court today allowed telecom major Vodafone to initiate the second arbitration against India by paving the way for appointment of the presiding arbitrator/chairman in connection with a tax demand of Rs 11,000 crore through a retrospective law of 2012. Vodafone said India does not have any jurisdiction on the issue as there is an investment pact with the UK.

The Centre argued that it was an “abuse of the process of law” as the cause of action of the second arbitration was the same as the first one and is against the same host state.

A Bench of Justices AK Sikri and Ashok Bhushan said the chairman can be appointed so that the arbitration tribunal is set up but it should not commence hearing till the Delhi High Court decides the pending matter by January 10.

The top court was hearing the Centre’s plea challenging the October 26 order of the high court asking the Vodafone Group to participate in the process of appointing a presiding arbitrator in its second arbitration.

Vodafone had in 2014 initiated arbitration proceedings under the India-Netherlands Bilateral Investment Protection Agreement (BIPA) in connection with the tax demand raised against it, which are still going on.

In the second arbitration initiated in January 2017, Vodafone had initiated the process under the similar India- United Kingdom BIPA in connection with the tax demand.

Additional Solicitor General Maninder Singh said there were four findings in the HC order which were in favour of the government, but the October 26 order should not have allowed starting the process of appointment of the presiding arbitrator. He said the high court had observed that it was an abuse of the process of law as it was against the same cause of action, facts and parties and the Centre was forced to appoint an arbitrator. — PTI

Case file

• The govt is of the view that the $11-bn buyout of stake of Hutchinson Telecommunications International Limited in Hutchinson Essar Limited by Vodafone was liable for TDS 
• As Vodafone had not deducted the TDS, the government had raised the demand of Rs 11,000 cr which was quashed by the SC on January 20, 2012
• Thereafter, the govt made a retrospective amendment to the I-Tax Act which re-fastened the liability on Vodafone