The Hindu Business Line : HC stays BPL Mobile shares sale

The Bombay High Court on Thursday restrained the Essar group from selling shares or creating any third party interest in BPL Mobile Communications till the dispute between Hutchison Essar Ltd and the Essar group over the Mumbai circle mobile licencee is settled by an arbitration tribunal.

The Essar group had last week terminated the deal for sale of BPL Mobile to Hutchison Essar Ltd (HEL).

HEL, stating it would invoke the arbitration clause in the share purchase agreement (SPA) with Essar, had approached the Court seeking a stay on the termination of the SPA as well as a stay on the sale of BPL Mobile shares to third parties, pending arbitration.

However the Court, according to an Essar spokesperson, has not stayed the termination of the SPA.

Thursday's Court injunction staying the sale of BPL Mobile will operate for a period of four weeks after the constitution of the arbitration tribunal. During that period the parties can apply to the tribunal for continuation, modification or vacation of the injunction.

According to the SPA, Essar group must return the Rs 1,617 crore deposited by HEL towards the purchase of BPL Mobile within five days from the termination. The five-day period will now be operational only after the injunction on the sale of shares is vacated.

HEL and BPL Mobile are both cellular licensees in the Mumbai circle. For a same circle merger, clearance from the Department of Telecommunication is required as no entity can hold more than 10 per cent stake in more than one licensee company in one cellular circle.

DoT clearance

Essar had terminated the sale citing non-receipt of DoT clearance for the merger of BPL Mobile with HEL as on July 31, 2006, the date of expiry of the SPA.

HEL had argued in Court that acquisition of a company was governed by the Companies' Act and Contracts Act and not by DoT, whose permission would be required only when BPL Mobile is subsequently merged with HEL after the acquisition; getting that approval would be HEL's risk, and not the Essar group's.

The Essar group owns 9.9 per cent stake in BPL Mobile through Essar Teleholdings as well as 67 per cent stake in BPL Communications which, in turn, owns around 67 per cent stake in BPL Mobile.

HEL is a 68:34 joint venture between Hutchison Telecommunication International Ltd and the Essar Group.

The tribunal will consist of two arbitrators, one each appointed by the disputing parties, and a third presiding arbitrator. The tribunal itself must be set up within 30 days from the date of dispute between the parties.