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Updated: June 5, 2013 01:42 IST

Cabinet okays non-binding conciliation with Vodafone

Sujay Mehdudia
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Union Cabinet sends out a strong signal to foreign investors and seeks to dent the criticism on the stability of the Indian tax regime

Sending out a strong signal to foreign investors and seeking to dent the criticism on the stability of the Indian tax regime, the Union Cabinet on Tuesday approved a conciliation process with British telecom giant Vodafone in the $2-billion (Rs. 11,200 crore) tax dispute case originating from its 2007 acquisition of Hutchison’s stake in Hutchison Essar.

However, the outcome of the case would have to ultimately be approved by Parliament.

The Vodafone case had almost become a trendsetting issue as the decision to make retrospective tax claims drew strong criticism from global corporate groups and led to virtual intervention by the British government at the highest level. The case led to a negative sentiment among the foreign investors.

Briefing journalists after the Cabinet meeting, Finance Minister P. Chidambaram said: “We have just accepted a proposal for a non-binding conciliation. If the outcome is acceptable to the government then it will go to Cabinet and thereafter to Parliament for approval.”

No time frame

Mr. Chidambaram said there was no time frame for the conciliation and the government would communicate it to Vodafone in a day or two. He made it clear that the proposal was for conciliation under the Arbitration and Conciliation Act and said it was not arbitration.

“Two conciliators will sit together and they would come out with an outcome. It is not arbitration. They will suggest an outcome, a modified outcome and it is a step-by-step approach. Everything is in the public domain,” he added.

The Minister said it was in India's interest to resolve the case through conciliation and not in an arbitrary manner. “Ultimately, the final word will be that of Parliament. It is a non-binding conciliation. Let's see what the outcome is,” he said when asked would happen if one of the sides did not agree to it.

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