Merger with Spice derails as HC imposes Rs 1-cr penalty on Idea

In a big setback to Aditya Birla Group firm Idea Cellular, the Delhi High Court today said the six licences of Spice Communications would not be transferred to Idea, since the company did not comply with the licence and merger guidelines. The court also slapped a fine of Rs 1 crore for hiding information.

Idea Cellular had acquired Spice Communications in 2008. The high court's order came over an application filed by the Department of Telecommunications (DoT), requesting it to recall and stay its earlier order allowing the amalgamation of the two companies.

The high court said Idea had not put the rejection letters by DoT on licence merger and did not place on record the relevant documents. "It is directed that notwithstanding anything stated in the sanctioned scheme and in the order dated February 5, 2010, the six overlapping licences of Spice would not stand transferred or vested with Idea till prior permission of DoT is obtained," Justice Manmohan said.

The court said it was "of the view that costs should be imposed on Idea for not bringing to the court’s notice the rejection letters of January 7, and January 18, 2010, issued by DoT and for not placing on record documents such as licence, merger guidelines and correspondence exchanged between the parties".

Directing Idea to pay Rs 1 crore to DoT within six weeks, the court said till DoT allowed to Idea to use the licences of Spice Communication, the "overlapping licences of Spice shall forthwith stand transferred with DoT".

The court also directed DoT to ensure that customers of the two circles — Punjab and Karnataka — where the licences of Spice were operational, do not suffer.

DoT had earlier sought opinion of additional solicitor general on merger. The ASG had stated that Idea had violated DoT norms by holding 10 per cent stake in two mobile firms in the same circle and recommended cancelling of overlapping licences.

IDEA MAY APPEAL
Idea Cellular hinted it would appeal against the order. In a late evening statement, CEO Himanshu Kapania said the company would "appeal for what it believes is right" and denied the company had suppressed anything.

The company had approached DoT regarding merger of overlapping licences, or their surrender, both processes yielding the same outcome, the spectrum returns to the government and no benefit to Idea, he said. This was because the overlapping licenses were non-operational and had no attached subscribers. Idea followed process as advised by the DoT.