THE Ruias of Essar Group are in no mood to part with BPL Mobile, the
Mumbai-based operator they had acquired on behalf of Hutchison Essar
(HEL) last year. In a fresh twist, they have slapped a claim of Rs
1,300 crore on HEL on account of losses suffered by BPL Mobile
shareholders because of an injunction on the sale or transfer of its
â€œWhile the loss suffered by BPLâ€™s shareholders is Rs 970 crore, the company has made an additional claim of Rs 320 crore for the loss of reputation,â€ a person familiar with the development said. Their contention is that as a result of the court injunction, BPL Mobile shareholders were unable to deal in shares. They could neither pledge their shares nor raise money because investors wanted free shares. â€œThis is hurting the company, which is in a capital-intensive business,â€ said a person close to the development.
This latest move comes at a time when HEL is all set to be renamed as Vodafone Essar. It was expected that after the Essar Group and Vodafone buried the hatchet over the sale of Hutchisonâ€™s stake in HEL in May, it would bring an end to the ongoing dispute between Vodafone and Essar over the ownership of BPL Mobileâ€™s Mumbai circle. But industry experts say the Ruiasâ€™ latest salvo could signal their resolve to hold on to BPL Mobile and perhaps even sell it at a higher price.
But first, a quick recap. HEL had paid Rs 1,617 crore to Essar for the purchase of BPL Mobile last year. Since under the current mobile telephony norms, an existing operator cannot hold more than 10% in another entity in the same circle, Essar had made sure that its telecom arm, Essar Teleholdings, limited its direct stake in BPL Mobile to 9.9%. Mauritius-based investment company Capital Global holds 16.1% while BPL Communications has the balance 74%. Although the exact ownership has never been publicly acknowledged, it is widely believed that these two companies are controlled by friends and associates of the Essar Group.
Essar, however, terminated the sale of BPL Mumbai, citing non-receipt of clearance from the Department of Telecom for the merger of BPL Mobile with HEL, after its share purchase agreement expired on July 31, â€˜06.
Subsequently, HEL filed a petition in the Bombay High Court, acting on which the court restrained Essar from selling the BPL Mumbai circle to any third party. It also ordered the setting up of an arbitration tribunal for the settlement of the dispute. The Rs 1,300-crore claim was made around 10 days ago before the arbitration panel set up by the two sides in February this year. The three member tribunal, headed by former Supreme Court chief justice RS Pathak, was scheduled to meet on July 16 to give its verdict. However, the meeting has been indefinitely adjourned following the ill-health of Justice Pathak, said persons close to the development.
HEL MD Asim Ghosh refused to comment. A BPL spokesperson said, â€œSince the matter is sub-judice, we cannot comment.â€ The whole issue is whether the termination of the share purchase agreement by Essar is valid or not. HEL had alleged that termination of the agreement allowing Hutch to buy BPL by July 31, â€˜06, was illegal.
In order to complete the deal on time, Hutch also waived certain pre-conditions, including a DoT approval. But Essar contends that DoT approval was a legally binding condition that needed to be fulfilled prior to the merger. Vodafone bought a 67% controlling stake in HEL in May this year. However, the BPL Mobile case is between BPL and HEL. After the integration of HEL with Vodafone is completed, HEL will be renamed Vodafone Essar. Vodafone CEO Arun Sarin has already said Vodafone was not factoring in Mumbai while making assumptions about the potential of the Indian market. Vodafone will â€œhave to resolve it (BPL Mobile) with Essarâ€, he said earlier this year. Yet last year, when BPL Mobile had announced an investment of Rs 200 crore to revamp its network and roll out new services, industry sources had speculated that it could be a move by the Ruias to build value ahead of a possible sale at a better valuation.
India has grown to be a highly regarded destination for international trade in recent years, and the pandemic has only caused greater interest in India in this aspect. According to figu More
Helplinelaw can set up your session with quality and experienced lawyers to discuss and resolve your legal matters. You can avail consultation in form of sending questions, phone call or webchat discussion More