Vedanta Resources PLC v. Government of India

Case summary

At a glance

Parties: Union of India (plaintiff) v. Vodafone Group Plc and Vodafone Consolidated Holdings Ltd (defendants). Note: the case record is titled Vedanta Resources PLC v. Government of India, but both published documents concern the Vodafone dispute.
Case no.: CS(OS) 383/2017 and I.A. 9460/2017 (High Court of Delhi)
Court: High Court of Delhi at New Delhi; Justice Manmohan
Forum and rules: Underlying arbitration: ad hoc arbitration under the UNCITRAL Arbitration Rules 1976
Treaty: India–United Kingdom BIPA (Article 9); the parallel arbitration was brought under the India–Netherlands BIPA
Underlying award(s): None. The suit sought to stop the India–UK BIPA arbitration started by the notice of arbitration of 24 January 2017.
Sector: Telecommunications; taxation
Outcome: Suit dismissed on 7 May 2018. The ex parte anti-arbitration injunction of 22 August 2017 was vacated, and India was left free to raise abuse of process before the India–UK BIPA tribunal.
Amount: No order as to costs. The underlying tax dispute involved a capital gains demand of Rs. 12,000 crores.

The dispute

These documents concern Vodafone, not Vedanta, although the case record names Vedanta Resources PLC. In January 2012 the Supreme Court of India quashed a capital gains tax demand of Rs. 12,000 crores against Vodafone International Holdings B.V. (VIHBV). Parliament then passed the Finance Act 2012, which amended the Income Tax Act with retrospective effect. VIHBV started arbitration under the India–Netherlands BIPA. India objected that tax disputes fell outside that treaty. Its UK parent companies, Vodafone Group Plc and Vodafone Consolidated Holdings Ltd, then served a notice of arbitration under the India–UK BIPA on 24 January 2017. India sued in the Delhi High Court for a declaration that the second arbitration was an abuse of process and for an anti-arbitration injunction. Vodafone argued that Indian courts have no jurisdiction over treaty disputes or over it, that the tribunal must decide its own jurisdiction (kompetenz-kompetenz), and that India had suppressed material facts.

Key holdings

The Court has jurisdiction over the defendants in personam and over the subject matter. Vodafone had purposefully availed itself of Indian jurisdiction by investing and doing business in India. The defendants, VIHBV and its Indian subsidiary form a single economic entity. ¶¶ 72–75
Indian courts face no threshold bar to dealing with BIT arbitrations. The agreement to arbitrate between an investor and the host State is not itself a treaty. It is a sui generis contractual arrangement, justiciable under principles of international law. ¶¶ 77–88, 103
Investment treaty arbitration is not commercial, so the Arbitration and Conciliation Act 1996 does not apply. Indian courts therefore keep an inherent power to restrain treaty arbitrations that are oppressive, vexatious, inequitable or an abuse of process. That power is to be used only in compelling circumstances, where the court has been approached in good faith and no other effective remedy exists. ¶¶ 89–91, 104, 117–119
Multiple claims by companies in the same vertical corporate chain against the same measure are not an abuse per se, especially since India itself disputes jurisdiction under the Netherlands BIPA. Vodafone is held bound by its offer to consolidate the two arbitrations before the UK treaty tribunal if India consents. ¶¶ 120–128
India failed to disclose the letters of 7 and 11 August 2017 to and from the President of the ICJ, which showed there was no urgency. The Court gave India the benefit of the doubt and made no finding of wilful suppression. ¶¶ 129–132
The India–UK BIPA tribunal is now constituted. Under kompetenz-kompetenz, abuse of process must be raised before it. India, having already raised the issue before the Netherlands BIPA tribunal, could not seek the same relief in a national court. The suit was dismissed, the 22 August 2017 injunction vacated, and no order was made as to costs. ¶¶ 133–140, 149–150

Procedural history

20 January 2012The Supreme Court of India quashed the Rs. 12,000 crores capital gains tax demand against VIHBV. The Finance Act 2012 followed.
17 April 2012VIHBV served a notice of dispute under the India–Netherlands BIPA. Its notice of arbitration followed on 17 April 2014.
15 June 2015Vodafone Group Plc and Vodafone Consolidated Holdings Ltd served a notice of dispute under the India–UK BIPA. They served a notice of arbitration on 24 January 2017.
11 August 2017Union of India filed suit CS(OS) 383/2017 in the Delhi High Court.
22 August 2017The High Court granted an ex parte interim injunction against further steps in the India–UK BIPA arbitration. The same day, the India–Netherlands BIPA tribunal declined India's interim measures application and said abuse of process should be raised before the UK treaty tribunal.
7 September 2017After the President of the ICJ set a deadline for a default appointment, India appointed its arbitrator.
26 October 2017The High Court recorded Vodafone's proposals and clarified that the parties could take part in appointing the presiding arbitrator.
14 December 2017The Supreme Court disposed of India's SLP(Civil) No. 33885/2017. It allowed the tribunal to be constituted but barred it from starting hearings before 10 January 2018.
7 May 2018Judgment: suit dismissed and the 22 August 2017 injunction vacated.