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HC reserves order on Hutch plea

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HEL wanted the court to pass an order restraining the respondents from terminating the SPA or acting on their termination letters issued on Wednesday.
The matter of purchase of shares of a company are governed by the Companies Law, the Contracts Law and by other laws, not by DoT, said counsel for HEL.

Mumbai , Aug. 3

Is permission from the Department of Telecom mandatory before the acquisition of shares of a company holding the same mobile circle licence as its acquirer, or it is it required only before the actual merger of the licences and operations?

This was the fulcrum of argument between Hutchison-Essar Ltd (HEL) and the Essar group in the Bombay High Court today over their dispute regarding the sale of BPL Mobile Communications, licensee in the prized Mumbai telecom circle.

Ms Justice Nishita Mhatre, who heard the case, has reserved orders for next week.

The five-day period allowed for return by Essar of HEL's Rs 1,617 crore deposited towards consideration for the purchase, will also be applicable from the day of issue of the court order.

HEL, on Wednesday, filed an arbitration petition in Bombay High Court over Essar terminating the share purchase agreement (SPA) between the two for acquisition of BPL Mobile.

HEL's plea was that it was in the process of invoking arbitration on the matter, as provided for in the SPA. Pending arbitration, it wanted the court to pass an order restraining the respondents (Essar Teleholdings, BPL Communications, Capital Global and BPL Mobile) from selling shares (sale shares) in BPL Mobile to any third party.

HEL also wanted the court to pass an order restraining the respondents from terminating the SPA or acting on their termination letters issued on Wednesday.

If the respondents were allowed to terminate the SPA and thereafter be free to create any third party rights over `Sale Shares', the rights of petitioner under the SPA would be defeated, said HEL. Any arbitration proceedings would be rendered fruitless and infructuous if the subject matter of the agreement, the `Sale Shares' are not duly protected prior to and during the continuance of the arbitration proceedings, said HEL.

Essar Teleholdings and the other respondents had terminated the SPA on August 1 saying that the conditions necessary for transfer of shares, centrally, permission from DoT for same circle merger, were not obtained even as on July 31, the deadline for the SPA.

HEL said that the under Clause 4 of the SPA (referring to approvals including that of DoT) were essentially the obligations of the respondents collectively and were to be performed by the respondents as per Clause 4.2.1 of the SPA to the satisfaction of petitioner by March 31, 2006.

And that on July 31, 2006, HEL had, in good faith, waived all conditions precedent to the completion of the transaction that were not completed and those that were to be otherwise performed by the respondents for the purpose of completion.

The matter of purchase of shares of a company are governed by the Companies Law, the Contracts Law and by other laws, not by DoT, said counsel for HEL. After the acquisition of BPL shares , it would be HEL's responsibility to get necessary permissions from DoT for the merger of the operations or licences. If DoT permission was not forthcoming, it would be HEL's own risk, and nothing to do with Essar, which would get its money, was the argument.

"The petitioners say and submit that the purported unilateral termination of the SPA is not bona fide in as much as it is only with a view to exit from the present transaction and sell the sale shares to a third party at a higher price," said the petition.

The petitioner had said that it had already paid Rs 1,617 crore towards the consideration for the purchase and that on July 31, 2006 it had expressed willingness to pay the remaining Rs 49.25 crore on completion of the SPA. "The petitioner had thus taken all the steps it was required to take in order to complete the sale," said HEL.

Essar argued that that if DoT permission was not necessary for sale of shares of the licensee company, then the SPA would have been consummated even without the necessary approvals, the SPA having been made in December of 2005.

DoT guidelines do not allow the same company to hold substantial (more than 10 per cent) equity in two licensee companies of the same circle, said counsel for Essar.

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