The Hindu Business Line : Bharti may have to cough up Rs 500 cr on JT Mobile row

IN what could be a major setback to the Bharti group, it may have to part with over Rs 500 crore to the Department of Telecommunications (DoT) as outstanding dues (following its acquisition of JT Mobile's Punjab cellular licence) which was under dispute.

According to industry sources, the independent arbitrator who had been appointed to decide on the dispute, following a Union Cabinet decision in September 2001, has decided that DoT is entitled to claim the amount from Bharti.

While the arbitrator is said to have backed DoT's claims, the matter will now have to be referred to the Telecom Commission, before a formal note is sent to Bharti and the modalities of the payment worked out. As such the company is still hopeful of a positive outcome from the arbitration proceedings.

The sources added that since the decision to appoint an arbitrator was taken by the Cabinet and supported by both DoT and Bharti, there is little likelihood of any appeal against this decision.

It may be recalled that over a year ago, the Cabinet had decided that fresh licences for cellular, basic and long-distance services could be issued to Bharti only after it pays up a sum of Rs 450 crore which will be kept with the DoT pending the arbitrator's decision.

As per the Cabinet decision, "the amount paid by Bharti in respect of dispute is to be kept as a security deposit. Depending upon the verdict of the arbitrator, if any refund is due to the company, it will be paid from the security deposit. The interest on the amount of refund made will also become payable to DoT". In other words, while Bharti would forgo the Rs 450 crore that it had paid-up, it would also have to pay interest on the amount for the one-year intervening period.

The dispute dates back to March 2001, when DoT had asked the company to cough up the dues as licence fee for the Punjab circle, after it acquired JT Mobile (JTM). This was the amount of outstanding of JTM in respect of the terminated licence for cellular services in the Punjab circle.

Bharti, however, disputed the DoT order, claiming that the Punjab circle was not part of JTM when it was acquired. It noted that before its acquisition, JTM had already transferred the licence to Evergrowth, its subsidiary managed by Essar. Evergrowth defaulted on its licence fee for Punjab and DoT encashed the bank guarantee of Rs 35 crore and cancelled the licence in July 1999.

Since DoT had already encashed the bank guarantee, there was no reason for paying the dues, it argued.

The matter was referred to Attorney-General Soli J. Sorabjee, who was reportedly in favour of Bharti.

The department also sought the views of the finance and law Ministries on this matter, following which the Cabinet was approached.

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