Supreme Court to hear plea against High Court order on Vodafone arbitration

NEW DELHI:The Supreme Court is scheduled to hear on Tuesday the government’s appeal against a Delhi High Court order that allowed Vodafone to go ahead with arbitration proceedings against India in its Rs 11,000-crore tax dispute under the India-United Kingdom bilateral treaty. The British telecom company has already initiated arbitration under the India-Netherlands Bilateral Investment Protection Agreement (BIPA).

The income-tax department had slapped the tax demand on the Dutch unit of the telecom company for not levying withholding tax when it acquired Hutchison Telecom’s stake in Hutchison Essar Ltd for $11 billion in 2007.

In an interim ruling, the Delhi High Court had in August first restrained Vodafone from going ahead with the arbitration under the India-UK bilateral treaty considering that a parallel mediation was already going on. In its final ruling in October, the high court allowed the company to go ahead with the second arbitration. The matter was mentioned before a bench of the Supreme Court headed by Chief Justice Dipak Misra, who posted it for hearing on Tuesday.


The government has maintained that tax issues are not a subject matter of bilateral investment protection treaties.

The Supreme Court held in 2012 that Vodafone was not liable to pay tax on the transaction. The United Progressive Alliance government then amended the law retrospectively, which made Vodafone liable to pay taxes. The tax demand has now crossed Rs 20,000 crore, including interest and penalty. Earlier this year, the income tax department had also issued a notice to Hutchison Telecommunications International Ltd (HTIL), seeking total tax of over Rs 32,000 crore, including interest and penalty, on the capital gains made by the company.