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An investor in Loop Telecom has initiated arbitration proceedings against the Indian Government for cancelling the company’s 2G licences.
Khaitan Holdings (Mauritius) Ltd has claimed damages of nearly $1.5 billion for the losses it faced after the Supreme Court order to scrap all licences given on January 10, 2008.
“Khaitan Holdings made a request to settle at the latest on February 19, 2013 and no settlement has been reached either in the following six months or at all, despite several meetings and exchanges of correspondence on the subject. Thus all effort for amicable resolution has failed to date,” the arbitration notice sent by Khaitan’s legal counsel stated.
Protection treaty
The company has sought arbitration proceedings in either London or Dubai under the bilateral investment protection treaty agreement between Mauritius and India.
KHML holds 26.95 percent stake in Loop Telecom and paid cash entry of Rs 1,454.94 crore besides providing financial guarantees worth Rs 812 crore.
This is the first investor that has filed for arbitration after 122 licences were cancelled by the Government post the 2G spectrum scam.
Russian major Sistema JSFC had issued a threat of dragging the Government to international arbitration but this has been put on the back burner after the company’s Indian venture managed to buy some part of the spectrum in an auction. Loop did not participate in the auction and wanted a refund of the entry fee it paid in 2008.
This was rejected by the Department of Telecom on grounds that the company was given a chance to protect its investments by participating in the spectrum auction.
Written to PM
“If we can establish that the investment was not made in accordance with the laws and regulations of India, the bilateral treaty will not apply,” said a DoT official.
Loop had also written to Prime Minister Manmohan Singh and other government officials proposing a settlement under which it would not challenge the court’s ruling or seek compensation if the Government refunded the Rs 1,454 crore paid as licence fee, released performance and bank guarantees, dropped all charges involving the company and its associates.
> thomas.thomas@thehindu.co.in
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