Khaitan Holdings Mauritius' 2G case against govt to be heard at The Hague

Loop Telecom promoters demanding damages of $1.3 billion from the Centre

The spectre of the government having to fork out large amount of money as compensation to companies for the cancellation of 2G telecom licences in 2012 has surfaced again. One of the companies affected by the cancellation was Khaitan Holdings Mauritius which owned a 26.9 per cent stake in Loop Telecom. The company is demanding damages of $1.3 billion from the Indian government for ‘impairment of their investments’ and the case is expected to be heard at the International Court of Arbitration in The Hague from January 28.

In 2012, the Supreme Court cancelled Loop Telecom’s licence along with 12 other companies as part of the so-called 2G scandal in which the method used to allocate  2G spectrum had allegedly been marred by irregularities. Later, in 2017, a trial court acquitted all those accused of graft and money laundering charges.

Loop Telecom had licences to operate in 21 circles across the country, with the exception of Mumbai. While Khaitan Holdings Mauritus owned a 26.9 per cent stake in the company, 73 per cent was owned by entities of the Khaitan group while a minority stake was held by the Ruias of the Essar group. The move could see other telecom companies who also had their licences cancelled following suit and invoking international trade treaties to claim damages from the government for the losses they incurred. 

These include Norway telecom major Telenor, which eventually sold off its business to Bharti Airtel, Etisalat of the UAE, and Russia’s Sistema, which merged with Reliance Communications.

Lawyers say that these companies could open up the cases if they want to.

Confirming that the hearing at the International Arbitration Court will start some time from January 28 onwards, following failed attempts at an amicable settlement with the government, Nalin Khaitan of the Khaitan group said:  “As part of the arbitration procedure, we did try to come to an amicable settlement with the government but that did not fructify so proceedings will decide the issue.” 

He said that three arbitrators — one from each side and the other through agreement between the government and Khaitan — have already been appointed. In 2013, the Khaitan group had filed an arbitration claim under the Bilateral International Promotion and Protection Agreement which is part of the treaty between India and Mauritius.  

The Khaitan demand for damages is based on the fact that it paid a cash entry of over Rs 14.59 billion as well as financial guarantees to the government worth Rs 8.12 billion. It had also invested over $120 million in Loop. 

The company will be claiming the interest of the money foregone. It had calculated earlier that the loss of the market value of the licences stood at over $300 million in 2013. 

Khaitan was among those cleared of any wrongdoing by the Supreme Court-appointed CBI court. In fact, all the accused were cleared, including Ravi Ruia of Essar, the then telecom minister A Raja, former DMK leader Kanimozhi, former telecom secretary Siddharth Behura, and Unitech managing director Sanjay Chandra, among others.

What’s the fight

2012: SC cancels 122 2G licences, including 21 of Loop Telecom
2013: Khaitans, the Loop Telecom promoters, file for international arbitration under the bilateral promotion and protection agreement, seeking damages from the Centre
2017: CBI court acquits all accused in the 2G scam case, which included Loop promoters I P Khaitan and Kiran Khaitan
2018: With attempts for an amicable settlement of the dispute failing, both sides appoint arbitrators