According to documents of the Internal Security Division of the Home Ministry, Vodafone Group Plc is alleged to have given the UK-based Government Communication Headquarters (GCHQ) "secret unlimited access to their network of under sea cables, which carry much of world's phone calls and Internet traffic".
"GCHQ's mass tapping operations has been built up over the past five years by attaching intercept probes to the transatlantic cables where they land on British shores," the home ministry documents claimed.
"Intercept partners are paid for logistical assistance," it said.
Though the note had asked the Department of Economic Affairs not to proceed with realignment of Vodafone, which is involved in a Rs 11,200-crore tax dispute over purchase of Hutch's stake in 2007, the Foreign Investment Promotion Board (FIPB) went ahead and gave clearance for increasing the foreign equity in Vodafone India Limited.
The Union Home Ministry had alleged that Vodafone and a US-based company Verizon "are learnt to be secretly collaborating with UK's GCHQ and passing on details of their customer phone calls, email messages and other communication and are intercept partners".
When asked for comments, Vodafone said in its reaction that "no such concern has been raised with us by the Indian Government. The Government of Indias approval of our FDI application states that it was cleared by the FIPB and CCEA after all necessary due diligence".
The telecom operator also denied that it was disclosing "any customer data in any jurisdiction unless like any other operator it is legally required to do so".
Vodafone said it complies with the law in all countries of its operations, including in the case of its European businesses-- the EU Privacy Directive and EU Data Retention Directive.
It also rejected the Union Home Ministry's charge of being a tax evader and said "Vodafone has never been accused of tax evasion. Vodafones businesses around the world paid more than 4.2 billion pound in direct taxes to governments in our countries of operation last year, plus more than 3.2 billion pound in other non-taxation-based fees and levies".
"Our businesses also made a total indirect tax contribution to national governments of 6.1 billion pounds," it said.
In its reaction, GCHQ said: "It is a long-standing policy that we do not comment on intelligence matters."
It said the work is carried out in accordance with a strict legal and policy framework ensuring that the activities are authorised, necessary and proportionate, and that there is rigorous oversight.
"All our operational processes rigorously support this position," the spokesperson of GCHQ said.