Telecom major Vodafone on Tuesday initiated arbitration proceedings against the Indian government under the bilateral investment treaty (BIT) between India and Netherlands.
Finance minister Pranab Mukherjee said that the government would study the notice and decide on its course of action.
Analysts were sceptical about the move. “Vodafone has a weak case. If it seeks protection under this pact, it will contradict its stand in the Supreme Court,” said the head of telecom practice of a Delhi-based law firm. “Moreover, the $11 billion that Vodafone paid to Hutch did not come to India as investment, and went to Hutch promoters.”
The case relates to a deal in 2007 when Vodafone, through its group firm Vodafone International Holdings, bought Hutchison Telecommunications India’s stake in Hutchison Essar for $11.7 billion.
The IT department held that Vodafone should have deducted tax at source from the payment made to Hutchison.