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Vodafone Arbitration Award Case: SC to hear appeal in sept

By Ruchi Upadhyay 
Updated Date

New Delhi: Sources said the Indian government’s appeal against an international arbitration tribunal’s demand for back tax of Rs 22,100 crore from Vodafone Group Plc has been transferred to a senior court in Singapore and the hearing is scheduled for September.

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An international arbitration court on September 25 last year rejected tax authorities’ demands for back tax and fines of Rs 22,100 crore related to the British telecom giant’s acquisition of an Indian operator in 2007.

In December the government applied to Singapore to annul the award, primarily on the basis of jurisdiction. Two sources with knowledge of the matter said the proceedings have been transferred to a senior court, which has been fixed for hearing in September.

The appeal was filed in a Singapore court because the Southeast Asian nation was the seat of the arbitration.

Similarly, the government challenged the order of a three-member tribunal in the Permanent Court of Arbitration in The Hague, which asked India to refund USD 1.2 billion, plus interest and costs, to British oil and gas company Cairn Energy Plc.

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The government used a 2012 law that gave tax authorities the power to reopen previous cases to demand tax from Vodafone and Cairn on alleged capital gains made several years ago.

Both Vodafone and Cairn had challenged the tax demands under bilateral investment protection treaties and initiated arbitration. India lost both the arbitrations.

Sources said the government is of the view that taxation does not fall under investment protection treaties with various countries and that the law on taxation is a sovereign right of the country.

Vodafone International Holding (a company from the Netherlands) bought 100 percent of the Cayman Islands-based company CGP Investments in February 2007 for US$11.1 billion, in order to indirectly acquire 67 percent control of Hutchison Essar Limited, an Indian company.

The tax department felt the deal was designed to evade capital gains tax in India and imposed a tax demand, which was rejected by the Supreme Court in 2012.

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To prevent misuse and to plug the loopholes in such indirect transfer of Indian property, the government amended the law in 2012 to make such transfer taxable in India.

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