BPL Communications, the holding company for BPL's cellular businesses, moved the Bangalore High Court a few weeks ago. The court feud could worsen BPL Comm's relationship with foreign private equity investors who are already waging a legal battle with the Indian company in London courts.

Among the foreign investors, AIG owns 16.46% in the company, followed by Actis, which has a 6.87% equity stake. The foreign investors have put in around $214m in BPL Comm. BPL Comm, AIG and Actis refused to comment since it is sub-judice in nature.

This is an unusual instance of an Indian company suing its foreign equity investors and their nominee directors for obstruction and damages. BPL Comm is alleging that the private equity investors had periodically opposed business proposals like a merger, public issue and other plans to raise funds through a private placement and rights issue. The company says all this deprived it of the opportunity to bid for the fourth operator licences. In '01, BPL was the first cellular company to propose an initial public offer (IPO).

The present case is understood to have been filed in Bangalore due to a jurisdiction issue. The foreign investors had earlier dragged BPL Comm to court over the issue of BPL's merger with the then Birla-AT&T-Tata combine, now called Idea Cellular. They had alleged that their approval was not sought before finalising the deal. Actis had also alleged that BPL Comm had defaulted in dividend payments due on the preferential shares for 24 months.

Actis had approached the Mumbai High Court seeking conversion of its preference shares into voting shares under Section 87 of the Companies Act, 1956. BPL had opposed this on the ground that it would take foreign equity in the company beyond the sectoral cap of 49%. This argument was upheld by the court.