Bpl Mobile Arbitration Panel To Resume Hearings On Aug 5

[Honest 836]

BPL Mobile arbitration panel to resume hearings on Aug 5

1 Aug, 2008, 0327 hrs IST, ET Bureau

MUMBAI: The prolonged battle for ownership of BPL Mobile, which offers cellular services in Mumbai, seems to be nearing an end. The case is entering the final stages of hearing before a three-member arbitration panel, which was reconstituted earlier this year after the death of former chief justice RS Pathak.

“The panel will meet on August 5 when the two sides will present evidence and begin arguments in the case,” sources told ET. While it is not known when the matter will be finally settled, the meeting of the arbitration panel is considered significant as it is the first step towards resolution of the conflict. The panel, which was constituted in March 2007, has met only four times till now. It could not meet for scheduled hearing in March this year after the death of Justice Pathak in November 2007 as he was heading the panel. The other two arbitrators are former chief justices.

Pending arbitration, BPL Mobile is being managed by the Ruias of Essar group. The Ruias acquired BPL on behalf of Hutchison Essar (HEL, now Vodafone Essar) in 2006, but have not transferred the shares. Neither the Ruias nor Vodafone is ready to give up BPL Mobile, which has 13.7 lakh subscribers in the Mumbai circle.

BPL Mobile has claimed Rs 1,300-crore damages from Vodafone Essar, saying that an injunction on the sale of its shares had hurt its shareholders. Vodafone Essar is disputing the claim and has contended that shares of BPL Mobile must be transferred to them and that “the termination of the agreement was illegal.”

“Till now, only procedural hearings were taking place. Both the sides will now present witnesses before the arbitration panel to argue that they are the rightful owner of BPL. On August 5, Vodafone Essar will lead evidence and present its witness. Now, the case is expected to be put on the fast track as the panel is back to full strength,” sources said. They said Justice BP Jeevan Reddy, a retired judge of the Supreme Court, has come on the panel in place of Justice Pathak.

Vodafone Essar MD Asim Ghosh and Essar group spokesperson declined to comment.

The dispute kicked off in August 2006 when the Ruias terminated the share purchase agreement with HEL. HEL had paid Rs 1,617 crore to Essar for the purchase of BPL Mobile in 2006. HEL contends that they have paid 97.5% (Rs 1,617 crore) of the purchase consideration and now Essar should move out as they have become the owner of BPL by paying the consideration.

However, Essar terminated the sale of BPL Mobile citing non-receipt of department of telecom (DoT) clearance for the merger of BPL with HEL after its share purchase agreement expired on July 31, 2006. Since an existing operator cannot hold more than 10% in another entity in the same circle, Essar had made sure that its telecom arm, Essar Teleholdings, had limited its direct stake in BPL Mobile to 9.9%.

Mauritius-based investment company CapitalGlobal holds 16.1% while BPL Communications has the balance 74% stake. Although, the exact ownership has never been made public, it is believed that these two companies are controlled by friends and associates of the Essar group.

[Honest 836]

‘BPL Mobile stake structure won’t be altered’

22 Sep, 2008, 0154 hrs IST, ET

MUMBAI: The legal battle between the Ruias of the Essar Group and the British telecom giant, Vodafone, has taken an interesting turn with the Ruias giving an undertaking to the Bombay High Court saying they will not alter the shareholding of the disputed BPL Mobile Communications or of its subsidiary, Loop Telecom, in any way in future.

This assumes significance as Gypsy Rover, a Mauritius-based company which picked up a 17.6% stake in BPL Mobile Communications, was to increase its stake to 30% by August-end through conversion of compulsory convertible preference shares at Rs 145 apiece.

Vodafone Essar, the joint venture between Vodafone and the Ruias, sought an injunction from the Bombay High Court after BPL Communications sold stakes in BPL Mobile Communications to Gypsy Rover without keeping either the arbitration panel or Vodafone in the loop.

This has led to a legal battle in the Bombay HC. Incidentally, Gypsy Rover shares the same address with Capital Global, owner of 13.36% stake in BPL Mobile Communications.

In its undertaking to the court, the Ruias have also agreed to abide by the arbitration panel’s judgment on the dispute as the final verdict in the case. Any future deviation from the panel’s order would now be considered as a contempt of court.

Interestingly, the undertaking by the Ruias to the high court came after an out-of-court settlement agreed between both the parties over the Gypsy Rover issue.

In an order dated September 2, 2008, Justice VM Kanade said as the parties, Vodafone Essar and BPL Communications, have settled the matter, the petition filed by Vodafone Essar against BPL Communications and other respondents is disposed of.

The court said the undertaking given by BPL Communications and other respondents, Essar Teleholdings and Capital Global, has been accepted.

The Ruias had sold off BPL Mobile’s shares in two tranches on July 4 and July 25 this year for Rs 600 crore in spite of the arbitration panel asking them not to do so, according to the Vodafone petition. “After this order by the Bombay HC, it would be difficult for the Ruias to do anything behind the back of Vodafone.

Besides, the arbitration panel's order now gets more teeth,” a legal source advising one of the parties told ET. “This also shows that both parties are now keen to resolve the issue.”

Vodafone had taken over Hong Kong-based Hutchison’s 67% stake in the company for $11 bn last year. The British company also inherited a legal battle between Hutchison and the Ruias over the merger of BPL Mobile Communications with Hutchison Essar.

Vodafone Essar claims that it had paid the Ruias for merging BPL Mobile Communications with itself. Both the Essar Group and Vodafone refused to comment on the issue.

In its petition to the Bombay High Court, Vodafone had sought restoration of shareholding in BPL Mobile Communication to the situation dated September 26, 2005.

“The alleged sale of equity shares and convertible preference shares to Gypsy is clearly an attempt to frustrate the very purpose of the arbitration and to impede the process of merger between VEL and BPL Mobile Communications.

It is clear that the alleged acts of the BPL Communications are not in acts in good faith, but a malafide and brazen attempt to frustrate the arbitration,” the VEL said in its petition.

The Bombay HC order came three days before the arbitration panel asked the Essar Group not to sell any shares in BPL Mobile Communications. While Vodafone owns 67% stake in Vodafone Essar, the Ruias own the rest.