NEW DELHI: The Delhi High Court on Monday rejected the Central government’s plea challenging telecom major Vodafone’s move to initiate two international arbitration proceedings against India in connection with a tax demand of Rs 11,000 crore under a retrospective law of 2012. The court has now allowed the second arbitration proceeding initiated by Vodafone under the India-UK Bilateral Investment Protection Agreement (BIPA) for the same matter.
Hearing the case, Justice Manmohan said the Centre could approach the United Kingdom arbitration tribunal under the India-UK BIPA to have its grievance addressed. “The present suit and application are dismissed with liberty to the plaintiff, Union of India, to raise the issue of abuse of process before India-United Kingdom BIPA that now stands constituted. The said tribunal will decide this issue on its own merit without being influenced by any observation made by this court,” the judgment note said.
Vodafone had initiated two arbitration proceedings under the India-UK BIPA and India-Netherlands BIPA. The Centre had told the Delhi High Court that the Vodafone Group had abused the process of law by initiating two international arbitration proceedings.
Challenging the second arbitration proceeding, the government had said the two claims were based on the same cause of action and they sought identical relief, but from two different tribunals constituted under two different investment treaties against the same host state.
The second arbitration proceeding was stayed by the Delhi High Court in August last year, but the Supreme Court allowed the process of appointment of arbitrators for the second arbitration proceeding in December. It, however, barred the start of proceedings until the Delhi High Court had decided on the validity of the second arbitration.
The history
The Supreme Court, in 2012, had quashed the then UPA-II government’s Rs 11,000 crore tax demand against Vodafone.
The then Manmohan Singh government had amended the income tax laws with retrospective effect and reinstated the tax liability, which had, by then, swelled to Rs 20,000 crore.