The Hindu Business Line : DoT wants VSNL's land hived off as per Cos Act

THE four-year-old spat between the Government and Tata Group over hiving off Videsh Sanchar Nigam Ltd's surplus land into a separate company is far from over with the Department of Telecom rejecting the latter's proposal to commercially develop and share the proceeds from the to-be formed realty company.

DoT has insisted that the 773 acres of surplus land must be hived off as per the rules under the Companies Act, 1956. The Tatas have asked DoT to clarify the legal standing based on which it was taking such a decision.

In its proposal, the Tatas had expressed reservation against demerging the surplus land under the Companies Act 1956 and had instead proposed to form a new real estate company called Hemisphere, to be jointly owned and commercially developed with the Government's participation.

Responding to the Tatas proposal, DoT officials said: "The Government has considered this matter and is of the opinion that demerger is possible under the provisions of the Companies Act, 1956. We will modify the proposals made by the company and revert very soon." DoT has also sent a letter to VSNL earlier this month to this effect. When contacted Tata officials said they were working with DoT to resolve all issues. The company did not elaborate further.

While divesting its equity stake in VSNL in 2002, the Government decided to hive off 773 acres of surplus land owned by the company into a separate entity. As part of the agreement, the strategic partner (the Tatas) was supposed to facilitate the process. However, the process hit rough weather with Tatas raising a number of issues, including clarity on who will bear the cost of creating the new company.

The Tatas had refused to bear the cost since it will not receive any benefits from the sale of the surplus land. The Tatas have also raised concerns about the interests of the ADR holders since the proposed demerged realty company would not be eligible for listing at the NYSE. Only companies with commercial interest are allowed to list on the NYSE. Therefore, Tatas proposed to create a commercial realty company.

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