Unitech gets CLB stay on auction of Uninor assets

Board says manner of auction process 'very clever' next hearing on August 8

In a major setback to Unitech Wireless, in which Norwegian telco Telenor holds 67 per cent stake, the Company Law Board (CLB) on Friday stayed a move by the company to sell its assets at a base price of Rs 4,000 crore though an open auction.

Unitech Wireless operates in the country under the Uninor brand name.

Hearing a petition filed by Telenor’s estranged Indian partner, Unitech group, CLB Chairman Justice D R Deshmukh stayed the August 1 auction notice and said the board would hear both the parties at length. The CLB observed the manner in which the auction process was being carried out was “very clever”, before directing Uninor and other respondents to file their replies by Monday. The next hearing was fixed for August 8.

 

Unitech had yesterday filed a petition with the CLB, seeking an order restraining a possible auction of Unitech Wireless assets, or any other sale or transfer.

In a public notice after a board meeting, Unitech Wireless had set a deadline of August 6 for interested parties to express interest in bidding. The deal, it said, would include customers and all other movable and immovable assets. Telenor had said it would be interested in bidding and that it would do so through a new Indian partner.

In its petition, Unitech had claimed the “transfer by way of auction is only a feeble attempt to malafidely colour the process of transfer of assets of Uninor as fair, though the fact remains that it is unfair, malafide and oppressive”.

Responding to the stay order, a Uninor spokesperson said, “When Uninor faces a certain destruction of value when the licences will be cancelled, the only chance its employees have for sustained employment and for the customers to continue is being blocked by the minority shareholder. It is unfortunate that the stay has been granted.”

The company added it would pursue every legal measure available to secure the interests of its creditors, customers and employees. “Meanwhile, the company’s operations continue as before as this process has no impact on them,” it pointed out.

Unitech has argued its three nominees on the board had opposed the move to auction and invoked “veto rights” enshrined in the shareholders' agreement between the two partners, under which it could reject any resolution critical to the company’s future. The telco whose licences were cancelled in 13 circles by a Supreme Court order can continue to run operations only till September 7.

Telenor and Unitech have been involved in a bitter battle for many months. The real estate company wrote to the Foreign Investment Promotion Board (FIPB) last week, opposing a Uninor application to raise Rs 1,200 crore through a rights issue it said was a matter under arbitration. The FIPB deferred the proposal at its last meeting.

The company’s valuation also has been a major bone of contention between the two partners. While earlier Telenor had contended the enterprise value of the entity was Rs 400 crore, Unitech had contested that and said it was worth Rs 12,000 crore. However, the new valuation of the business undertaken by Deloitte and KPMG is Rs 4,190 crore.

Challenging the invocation of the veto rights by its estranged partner, Telenor had earlier said, “Unitech's veto rights, we believe, are automatically forfeited once it is established that the shareholders’ agreement and all rights enshrined in it were based on fraud. We are willing to establish this in court, should the need arise.”