India not yet decided if it should challenge Vodafone’s Rs 20,000-cr retro tax win

The finance ministry is yet to take a call on the appeal against the arbitration award in the Vodafone tax case. In light of the AG, KK Venugopal recusing himself from the process saying he was “”prohibited from advising the government in this case by the rules of conflict of interest” and the SG, Tushar Mehta in favour of it, maintaining that “the question of law — the power of an arbitral tribunal to virtually and substantially declare a parliamentary legislation of a competent Parliament of a sovereign nation to be non est and unenforceable — itself is an issue which needs to be challenged. I therefore, opine that the Union of India must challenge the said award and must all available proceedings to challenge the award and/or to protect the interest of Union of India,” the finance ministry has decided to seek the views of other ministries.

Mehta said India should explore a competent forum in Singapore and advised against approaching the Delhi high court or the Supreme Court. “From the award, it appears that the seat of arbitration is Singapore and prime facie the challenge may lie in the said arbitration before the municipal courts the municipal courts of Singapore” the SG suggested.

Two months after Vodafone won the taxation dispute in the SC in January 2012, the Centre had amended the tax laws retrospectively and, in 2013, it slapped the telecom giant with a tax demand of Rs 13,000 crore.

India may need to move fast to challenge the award in an appropriate forum keeping in mind the period of limitation that would be attached to the award. However, in the wake of the unfavourable arbitration award, the government may well like to consider repealing the controversial retrospective law that led to this demand in the first place.
CT Bureau