New Delhi: Emirates Telecommunications Corp., better known as Etisalat, is suing its local partners in the company’s ill-fated India joint venture—Shahid Balwa and Vinod Goenka—following the cancellation of its licences by the apex court on 2 February.
The announcement came a day after the Dubai, United Arab Emirates, company said it was shutting operations in India. On 2 February, the Supreme Court cancelled 122 telecom licences and spectrum allocated to nine companies, among them the Etisalat DB Telecom Pvt. Ltd (EDB) venture.
“Etisalat has issued proceedings in the Indian courts against Mr Balwa, Mr Goenka and Majestic Infracon Pvt. Ltd for fraud and misrepresentation,” the company said in an email statement on Thursday. “Etisalat’s case is that it was induced into its investment in the company that was then Swan, without any disclosure of the matters that are now alleged by the CBI (Central Bureau of Investigation) and Supreme Court to have occurred in connection with the obtaining of 2G licences by EDB.”
Last week, Norway-based Telenor ASA served notice on its India joint venture partner Unitech Ltd seeking indemnity and compensation for the cancellation of the licences.
In spotlight: Swan Telecom promoter Shahid Balwa. Photo: HT
On Tuesday, Telenor said it was planning to dump its partner and form a new company to which all the assets of the existing joint venture (Uninor) would be transferred. Unitech has protested against this.
Etisalat said the events that led to the licence cancellation occurred a year before its investment.
In September 2009, Etisalat paid about $900 million to acquire a 45% stake in Balwa- and Goenka-promoted Swan Telecom. The company, later renamed EDB, saw all its 15 licences cancelled by the Supreme Court earlier this month. Majestic holds another 45% in the joint venture telecom services provider.
On 9 February, the UAE firm wrote off $827 million relating to the EDB investment.
“Etisalat is facing very significant financial losses on its investment in EDB despite its having no involvement in the 2G licence application or award process and being entirely innocent of any allegations relating to it,” the company said. “Mr Balwa, Mr Goenka and Majestic Infracon Pvt. Ltd were responsible for Swan at that time and for subsequently marketing the investment opportunity to Etisalat.”
Meanwhile, the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) served notice on EDB regarding a plea from Reliance Infratel, the tower arm of telecom service provider Reliance Communications Ltd, to recover Rs1,200 crore.
The TDSAT bench headed by chairman justice S.B. Sinha asked the company to file a short reply within two weeks and said the matter would be heard on 5 March.
Reliance Infratel signed EDB as a customer for its towers in 2009 for a 10-year period. Reliance Infratel disconnected EDB because of non payment of dues in January this year.
The tower company has asked TDSAT to attach EDB’s property and freeze its accounts in order to secure the dues owed.
Meanwhile, another company affected by the verdict, Loop Mobile, has written to Prime Minister Manmohan Singh as well as a number of other senior officials regarding the cancelled licences.
The Mumbai-based telco has suggested a barter of sorts where Loop will not file a review, take up any other proceedings challenging the judgement, not seek compensation for the Rs2,000 crore invested already, or seek damages from the government for wrongful actions.
In return, the telco has asked that the government refund the Rs1,454 crore given as licence fee, release performance and bank guarantees, drop all charges and file a petition to close any criminal proceedings. The company has also suggested that this proposal be used as a basis for evolving an exit policy that the telecom regulator is working on.