The law ministry wants the government to further examine the issue of ownership in Hutch Essar (proposed to be Vodafone Essar), it is learnt.
NEW DELHI: The law ministry wants the government to further examine the issue of ownership in Hutch Essar (proposed to be Vodafone Essar), it is learnt.
The objective is to identify the extent and nature of control, financial interest and the power to influence the policy of the company by the applicant (Vodafone).
The law ministry is also in favour of seeking the views of the attorney general, in this case involving “complexed issues”, according to a draft note of the ministry.
The Foreign Investment Promotion Board (FIPB) had sought the law ministry’s views in relation to Vodafone’s application to acquire a controlling stake in Hutch Essar, the fourth-largest mobile operator in the country.
It could not be confirmed whether FIPB has received the input of the law ministry on the matter. The Board is expected to meet next week to take up the Vodafone-Hutch Essar issue.
The law ministry has stated in its note on the Hutch Essar issue that “Section 247 of the Companies Act, 1956, provides for investigation of ownership of a company where it appears to the Central government that there is good reason to do so.”
The ministry is also of the opinion that the government may appoint one or more inspectors to investigate and report on the people “who are or have been financially interested in the success or failure, whether real or apparent, of the company”. The inspectors could also investigate to find out as to who have been able to control or materially influence the policy of the company.
The RBI has already submitted two reports to FIPB, stressing the need for a further scrutiny into the Hutch Essar shareholding structure. RBI suspects violation of government guidelines, mainly Foreign Exchange Management Act. At the centre of the controversy is the 15% minority shareholding of Asim Ghosh, Analjit Singh and IDFC in Hutch Essar.
Earlier this year, Vodafone, struck a deal with Hutch Telecom International Ltd to buy its 52% direct stake in Hutch Essar and economic interest in another 15% held by minority shareholders for $11.1 billion, at an enterprise value of $18.8 billion.
Essar, with 33% stake in Hutch Essar, out of which 22% is with a subsidiary incorporated in Mauritius, would partner Vodafone in the new venture. Subsequently, a PIL by an NGO, Telecom Watchdog, in the Delhi High Court alleged that the FDI level in Hutch Essar (now Vodafone Essar) was much beyond the permitted 74% in the telecom sector.
Shareholders of HTIL would on May 8, vote on a proposal to pay Essar group $415 million to ensure smooth transaction with UK's Vodafone for sale of majority equity in Hutch Essar. The settlement fee would not be paid until the deal is completed. HTIL had agreed to pay this money to Essar to ensure its smooth exit.
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