Telecom giant Vodafone on Friday won a significant ruling against the Indian government in an international court over Rs 20,000 crore in dues which it had described as unfair.
The international arbitration tribunal in The Hague ruled that the Indian government’s imposition of a tax liability on Vodafone is in breach of the investment treaty agreement between India and the Netherlands, sources told news agency Reuters.
The tribunal, in its ruling, said the government must cease seeking the dues from Vodafone and should also pay over Rs 40 crore to the company as partial compensation for its legal costs, the source said.
The issue goes back to 2007 when Vodafone bought a 67 percent stake in Hutchison Essar for USD 11.1 billion. At the time, the Indian tax authorities had termed the structure of the multi-billion dollar transaction as a tax avoidance scheme and had slapped a demand of Rs 20,000 crore, including a penalty. The issue saw litigation, stretching all the way up to the Supreme Court. And in 2012, the Supreme Court of India had quashed the tax demand, ruling on Vodafone’s favour.
Soon after the SC verdict, the then Finance Minister Pranab Mukherjee, moved an amendment bill in the Parliament, which featured retrospective amendments going back to 1962. These amendments, after vetting from the parliament, allowed the tax department to overturn the Supreme Court Judgment in Vodafone’s favour and to again raise the Rs 20,000 crore tax bill.
In April 2014, Vodafone International Holdings initiated Arbitration Proceedings under the India – Netherlands Bilateral Investment Treaty. It is under this treaty, that the Permanent Court of Arbitration in Hague had conducted hearings between the two sides.
Vodafone Idea has refused to comment on the issue.
Vodafone was represented at Hague by DMD Advocates. DMD advocates issued a statement saying, “Vodafone has finally got justice. Hopefully, this award brings an end to all litigation around the issue.”
