New Delhi, Jan 30 (IANS): The Delhi High Court has rejected the Central Government plea seeking an interim stay on the arbitral proceedings commenced by Khaitan Holdings (Mauritius) Ltd against the Union of India in a matter related to the cancellation of 21 Unified Access Services Licences (UASL) in 2012, arising out of the 2G spectrum allocation case.

Justice Prathiba M. Singh on Tuesday rejected the government plea seeking an anti-arbitration injunction against the arbitral proceedings initiated by Khaitan Holdings in relation to the Bilateral Investment Treaty (BIT) between India and the Republic of Mauritius for the promotion and protection of investments.

Khaitan Holdings has moved the Arbitral Tribunal for seeking compensation for the cancellation of its Unified Access Services Licences in 2012.

The government has challenged the arbitration proceedings saying that the licenses was cancelled on the order of the Supreme Court. It also said that Khaitan Holdings is not a "genuine investor".

"...it is held that the question as to whether Khaitan Holdings is a genuine investor, based out of Mauritius, which can invoke the jurisdiction of the Arbitral Tribunal is a question to be determined by the Arbitral Tribunal constituted under the BIT Agreement," the court said.

The Supreme Court on February 2, 2012 cancelled all 21 UAS licenses granted to Loop Telecom taking account of the 2G spectrum case. Loop Telecom chose not to participate in the subsequent bidding process and sought a refund of the license fee paid by it from the government.

Later, the shareholding of Loop Telecom underwent changes from time to time. Kaif Investment, which held a substantial interest in Loop Telecom merged with Khaitan Holdings.

In the meantime, on December 21 2017, a special court acquitted all the accused including Loop Telecom and its promoters.

On September 30, 2013, a notice of arbitration under Article 8.2 of the BIT Agreement was issued by Khaitan Holdings on the ground that it held 26.95 per cent in Loop Telecom and being a company based in Mauritius, it is entitled to claim compensation.

"All the above grounds are those that can be dealt with and decided by the Arbitral Tribunal. The arbitration having been invoked in 2013 and the Tribunal having been constituted and being seized of the dispute, it is not for this court to adjudicate on these issues," Justice Singh said.

"The proceedings which are already underway cannot be termed as being oppressive, vexatious or an abuse of process at this stage. The prayer for ad-interim relief seeking stay of the arbitral proceedings commenced by Khaitan Holdings under the BIT, is accordingly rejected, at this stage."