The Hindu Business Line : SC sends Tata-Birla row over Idea for arbitration

New Delhi, July 9 The two year-old dispute between the Tata Industries and the A.V. Birla Group over Idea Cellular took a fresh turn on Wednesday with the Supreme Court deciding to set up an arbitrator to resolve the issue.

The apex court’s decision is in favour of the Tatas’ plea seeking arbitration on the dispute, wherein it had alleged that the Birla Group had violated the shareholders’ agreement.

If the arbitration is settled in Tata Group’s favour, it will have the right to buy out Birla’s stake in Idea Cellular.

Govt rules

The dispute dates back to 2006 when the Tata Group was holding 48.14 per cent stake in Idea Cellular.

However since the Tatas were also having another mobile venture under Tata Teleservices, the Birla Group sought the Government intervention in getting the Tatas to exit from Idea Cellular.

The Birlas claimed that the Tata Group was not allowing Idea Cellular to grow and was more focused on Tata Teleservices.

The Tatas had to finally exit Idea Cellular because the Government rules do not allow a company to hold more than 10 per cent stake in two different telecom companies offering services in the same area.

The Aditya Birla Group acquired the entire 48.14 per cent stake of the Tata group in Idea Cellular for Rs 4,406 crore.

Two notices

However, the confrontation between the two companies did not end; before selling its stake in Idea Cellular, the Tatas served two termination notices to the Birla Group citing violation of the shareholders agreement.

In the first case, the Tatas took the Birlas to court claiming that the latter had violated the shareholders’ agreement by disclosing sensitive information relating to Idea Cellular on the A.V. Birla Group Web site.

Tata Industries served another notice to the Birla Group for applying for a telecom licence for offering mobile services in Mumbai.

The Tatas claimed that as per the shareholders agreement between the two companies, any new licences should be taken through Idea Cellular, and in case the Birla Group wanted to apply for a licence on its own, it should have taken the clearance from the Tatas.

The Tatas have claimed that as per the shareholders’ agreement, they can buy out Birla’s stake in Idea Cellular for the alleged violation.

Tatas’ plea

While the Tatas had sought arbitration on the issue, the Birlas had taken a stance that there was no offence committed that needs an arbitrator.

Based on the Tatas’ plea, the Supreme Court has now appointed former Chief Justice, Mr A. S. Anand, former Supreme Court judges Mr Arun Kumar and Mr P. K. Balasubramanian as arbitrators.