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Hutch-Essar row heads for arbitration

Mumbai, Aug. 10: Hutch today won one of its battles with the Essar group when Bombay High Court accepted its prayer for an injunction on the sale of BPL Mobile Communications shares.

The court also directed that an arbitration tribunal be set up to resolve the tangle.

However, the court rejected an appeal by Hutchison Essar for a stay on the termination of the sale of the BPL (Mumbai) circle by the Ruias.

In July 2005, the Essar group had acquired BPL Mobile Communications and sister concern BPL Mobile Cellular, which provides services in Maharashtra, Goa, Tamil Nadu and Kerala, from Rajeev Chandrashekhar and the Nambiar family for about $1 billion. In January this year, the two companies were formally merged into Hutchison Essar, but this was subject to regulatory approvals.

While BPL Mobile Cellular has since been merged with Hutchison Essar, the Ruias called off the sale of BPL Mobile Communications after the government failed to clear the deal by the July 31 deadline.

In its plea, Hutchison Essar had asked the court to restrain the Essar group from selling BPL Mobile to a third party. In the order, Justice Nishita Mhatre today directed that an arbitration tribunal be set up within 30 days for the settlement of disputes between the Essar group and Hutch.

The court today said both the parties can apply to the arbitration tribunal within four weeks to continue, modify or vacate the order. This tribunal should be set up within 30 days from now and, in the next four weeks, it should consider and verify whether the injunction order restraining Essar from selling BPL Mumbai to a third party is valid.

Essar had offered to return the Rs 1,617 crore that it took as a deposit while selling a 97.5 per cent stake in BPL Mobile Communications. However, the court ruled that the repayment could be made only after a five-day period that would commence from the date on which the arbitration tribunal vacates the order that restrains Essar from selling the shares to a third party.

Justice Mhatre added that during the period of four weeks when the arbitration tribunal will be set up, the two parties could confer outside the court and settle the case.

Sources said the share purchase agreement had contained a provision for setting up an arbitration tribunal within 30 days from the date of any dispute.

Hutchison Essar had invoked the arbitration clause to resolve the dispute after which the court restrained BPL Mobile Communications and its shareholders from selling the shares.

“The court has ordered that the Essar group shall not sell or transfer any of the BPL shares until the matter is decided by arbitration. Hutchison Essar had, on August 1, appointed its representative in an effort to amicably negotiate the dispute and had called on Essar to do likewise. But to date, no such appointment has been made,” the statement added.

Although officials from the Essar group did not comment on the ruling, sources said the group would abide by the high court ruling on arbitration.

Although the jurisdiction of such a tribunal could not be ascertained, sources said it could be a three-member body.

Sources said the Ruias plan to pump in Rs 100 crore to beef up BPL Mobile’s network in Mumbai.

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