FIPB to take up Vodafone's case tomorrow

New Delhi, Apr 22 (UNI) The Foreign Investment Promotion Board (FIPB) would meet tomorrow for the third time to discuss the acquisition of Hong Kong-based Hutchison Whampoa's Indian operations by British telecom giant Vodafone and decide if the deal has breached FDI norms.

The controversial deal, pitted to be the biggest foreign direct investment in India, was announced in February when Vodafone acquired a 52 per cent controlling stake in Hutch-Essar, India's fourth largest mobile operator, for 11.1 billion dollars.

At its last meeting on March 29, attended by representatives of these companies, the FIPB took the view that the companies could not give ''a satisfactory reply'' on the unfettered right of disposal of the 15 per cent shareholding held by Asim Ghosh, Analjit Singh and IDFC in Hutch-Essar.

In a move that could lead to further delay in Vodafone's takeover of Hutch-Essar (HEL), the National Security Council (NSC) has called for ''special'' scrutiny of the multi-billion-dollar deal.

Urging the FIPB not to clear the deal without considering the views of the ministry of home affairs and intelligence agencies, the NSC Secretariat has emphasised that routine vetting of the deal is not adequate.

NSC's view is that change in ownership of a big company in a strategic sector needs detailed examination and FIPB should examine if the deal has any defence-related considerations. Screening for 'strategic' reasons is also necessary.

Meanwhile, the Department of Telecom (DoT) has urged the finance ministry to investigate the financing arrangements that have enabled HEL CEO Asim Ghosh and Max India Chairman Analjit Singh to acquire 12.26 per cent stake in HEL.

According to official sources, the companies ''could not also repel the suspicion raised by the Board'' that the agreements entered between the foreign collaborators (which are also the guarantors), lending institutions and the Indian companies are of a nature that provide independence to the Indian shareholders.

The FIPB also felt the companies could not ''satisfactorily clarify'' as to how in all media pronouncements as well as findings made before the Hong Kong and US regulators, the transaction between Vodafone and HTIL was shown for 67 per cent equity value of Hutch Essar Ltd while the application before the FIPB is about the transfer of 52 per cent stake in Hutch-Essar.

During the meeting, in which Vodafone told the FIPB that ''speed was of essence in the Hutch Essar deal'', HTIL's legal representative quoted two Supreme Court judgments and argued that 'providing loan' or 'guarantee' cannot be taken to imply 'benami transaction'.

Department of Industrial Policy and Promotion (DIPP)'s response will also be with FIPB tomorrow to enable the Board take a decision on the matter.

There have been allegations that Ghosh and Singh are merely acting as 'front' companies of Vodafone (earlier Hutch-Essar).

However, sources in the communications and IT ministry said that the FIPB is likely to give a clean chit to the deal tomorrow.

UNI