HC admits VEGL's appeal against rejection of demerger

Gujarat High Court (HC) on Friday admitted Vodafone Essar Gujarat Ltd's (VEGL) appeal challenging the order passed by a single judge bench dismissing the demerger scheme for transferring the passive assets of VEGL to Vodafone Essar Infrastructure Ltd(VEIL).

A division bench comprising of Justice DH Waghela and Justice JC Upadhayay admitted the appeal against the order disallowing the demerger scheme and posted the matter for further hearing on January 18. However, the court rejected Vodafone's application to extend the stay granted earlier by the single judge.

Earlier this month, a single judge bench of Justice KA Puj had dismissed VEGL's petition before HC seeking to allow the company to go ahead with the demerger and transfer its passive assets to VEIL. Justice Puj had suspended the order following Vodafone's request for a suspension of two weeks before the order became effective.

The company also urged the court to extend the stay. The division bench today rejected the company's plea to extend the stay. Nitin Mehta, Income-Tax counsel, informed, "The High Court has not granted the stay on the order and hence Vodafone has withdrawn its stay application." An e-mailed query to Vodafone remained unanswered.

It may be mentioned here, that the Gujarat High Court had pronounced a judgement on December 9 dismissing the demerger scheme of the passive assets of VEGL to VEIL. The transaction was designed by the company in the form of gift of the passive infrastructure that included all the communication towers of VEGL into another Vodafone group company VEIL without any consideration.

"After the sanction of this scheme it was further contemplated that these assets would be transferred in future to Indus Towers Ltd, a tower infrastructure company which is a joint venture between the Bharti, Vodafone and Idea Group of Companies, which may be done with or without consideration", the Income Tax Department had said in a statement issued earlier.

According to income tax department estimates, the combined value of the passive infrastructure across the seven circles can be around Rs 15,000 crore, and if transferred under the proposed scheme would entail an evasion of stamp duty worth Rs 900 crore.