HC directs Hutch Essar-BPL to approach arbitration tribunal

Mumbai, Aug 10M Bombay High Court today directed Hutchison Essar and BPL Mobile Communications (Mumbai circle) to approach the arbitration tribunal (AT) within 30 days in the case of their dispute over share-purchase agreement.

Justice Nishita Mhatre also directed the AT to take up the matter within four weeks, after the recent termination of the Hutchin Essar and BPL's joint venture. She also passed an injunction order restraining Essar from selling its stakes in BPL to any third party.

Hutchison Essar's lawyer Iqbal Chagla had earlier contended that Rs 1,616 crore (97.5 per cent) of the consideration for the share-purchase agreement (SPA) had already been paid to BPL and a sum of about Rs 50 crore remained to be paid.

The approval from the Department of Telecommunications (DOT) has already been applied for and if the application was not approved, it was Hutch's concern, Mr Chagla said. But, the transfer of shares was not subject to the DOT approval, he added.

However, BPL's lawyer Janak Dwarkadas argued that DOT's approval was a pre-requisite and had to be fulfilled before the transfer of shares, as per the agreement drawn for the joint venture.

The court was also told that the board of BPL had passed a resolution in May, stating that subject to approval from DOT, all the shares would be transferred in the name of Hutchison Essar.

Mr Dwarkadas further contended that according to the guidelines on mergers and transfers, one company in the same circle could not own a bandwith of over 15 mega-hz. If the two were merged without merging the licences, Hutch would own 20 mega-hz of bandwith in violation of the rules. Also, there was a requirement of DOT approval for intra-circle transfer.

According to the SPA, the proposed merger could not be completed (including transfer of shares) until all the precedent conditions were met, which included approval, and it could not be waived-off.

Mr Dwarkadas also submitted that BPL was ready to pay the deposited sum of money within five days, as per the conditions of termination of the agreement. However, Mr Chagla argued that he was not praying for waiving-off the condition, but just that an interim relief be granted and BPL be directed not to conduct any deal of its shares with another party, until the arbitration tribunal had dealt with the matter.

The BPL's counsel also told the court that Hutch was trying to handicap them, as according to the conditions of termination of the venture, BPL could not take any loans or declare dividends either.

If BPL does not end the agreement, members from Hutch would remain on their board and have access to their confidential information.

Subject to disapproval from DOT, they would remain competitors and have an unfair advantage due to the standing agreement, he contended.

Incidentally, Essar had decided not to sell the BPL cellular business in Mumbai, the most lucrative metro circle, to Hutchison Essar, a company in which it holds about 33 per cent stake.

Also, the latest turn of events has contributed in a big way to the already sour relationship between the partners over Hutchison's decision to bring Egyptian mobile operator ORASCOM into its board, after a global transaction with that company.

Essar had vehemently opposed the entry of the company into the board through an indirect 19 per cent stake, citing security reasons.

It had bought BPL Mobile at an enterprise value of USD 1.1 billion last year. The deal was later extended to Hutchison-Essar for the eventual merger into a joint venture.

The deal for three circles - Maharashtra and Goa, Tamil Nadu and Pondicherry and Kerala concluded in January, while the merger in Mumbai was pending for the last 10 months.

UNI