Bombay HC admits Etisalat plea for winding up of telecom JV with DB group

Mumbai: The Bombay High Court hasadmitted a petition filed by Etisalat Mauritius Ltd forwinding up of its joint venture with India-based DB Group,observing that a deadlock exists between the main shareholdersof Etisalat DB Telecom Private Ltd.

Justice S J Kathawalla passed the order earlier thisweek while hearing a petition filed by UAE governmentcontrolled Etisalat Mauritius Ltd, seeking to wind up thejoint venture company on account of quashing of the 2Glicenses by the Supreme Court and a "dysfunctional" board ofdirectors.

Etisalat DB is embroiled in the 2G spectrum allotmentscam and its directors - Shahid Balwa and Vinod Goenka - arefacing criminal proceedings along with former telecom ministerA Raja.

According to the petitioner, Balwa and Goenkaapproached Etisalat through Deutsche bank to convince it toinvest in Swan Telecom Ltd. "Balwa and Goenka in the course ofnegotiations made false representations as to the lawfulmanner in which the licenses were acquired. The duorepresented that the licenses had no basis to be revoked asthey had fulfilled all legal obligations," the petitionercompany claimed.

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The high court after hearing the petition observedthat it deserved to be admitted.

"I am satisfied that the company (Etisalat DB) haslost its substratum. There exists a deadlock between the mainshareholders of the company. There is complete lack of faithand probity resulting in irretrievable breakdown between themajor shareholders of the company. The liabilities of thecompany have far exceeded its assets," Justice Kathawallasaid.

Etisalat Mauritius invested over Rs 3500 crore inSwan Telecom and the company was renamed Etisalat DB TelecomPrivate Ltd.

[caption id="attachment_222054" align="alignleft" width="380"] Etisalat Mauritius invested over Rs 3500 crore in Swan Telecom and the company was renamed Etisalat DB Telecom Private Ltd.

Reuters[/caption]

Among other grounds for seeking winding up of thecompany, the petitioner company mentioned lost reputation ofEtisalat DB following the CBI proceedings against it in the 2Gscam.

Opposing the winding up petition apart from the DB Groupwas another major shareholder - Majestic Infracon Pvt Ltd.According to this company's lawyers, there was scope forreviving the company and hence the petition seeking to wind itup should not be admitted.

The court, however, rejected the revival plansobserving that they were vague.

According to the HC order on admitting the winding uppetition, Majestic is said to be 100 per cent owned andcontrolled either directly or indirectly by Balwa and Goenka.

"Majestic was formerly known as Tiger Trustees Pvt Ltdwhich has been the subject of investigation in the 2G scam,"the court said in its 70-page order.The court has now posted the matter for hearing onDecember 18.

PTI