The Telegraph
Since 1st March, 1999
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VSNL upset, govt mum
- Telecom major moves court seeking compensation

Mumbai/New Delhi, Jan. 29: The Tata-owned Videsh Sanchar Nigam (VSNL) has filed a suit in Mumbai High Court against the government seeking a compensation of Rs 2,650.72 crore for the premature loss of its monopoly over international long distance telephony.

Legal circles say this is the largest compensation claim ever lodged by an Indian company against the Union government. The VSNL move is an expression of its frustration over the way the government has dithered over the payout.

The government had ended VSNL's monopoly over ILD services on March 31, 2002 ' two years ahead of schedule. The government took the step in public interest when it realised that the continuation of VSNL's monopoly would seriously hamper the development of telecom infrastructure in the country.

The government had, however, promised to recompense VSNL for the loss of its monopoly.

VSNL officials declined to comment on the sudden move saying that the case was sub judice. Observers say the move comes as a last resort after the VSNL management exhausted practically all avenues for an amicable settlement.

In Delhi, Nipendra Misra, secretary in the department of telecommunications (DoT), said: 'I am not aware of any legal case. I am yet to receive any communication and cannot comment on the subject.' When it was pointed out that DoT's legal department has acknowledged the receipt of the communication, Misra said, 'I am not aware. Hence, I do not wish to comment on it.'

A senior DoT official said: 'The issue has been taken up at various meetings with the Tata executives but the legal option was never discussed. Since the company has now moved the courts, we will deal with the issue legally. It has become sub judice and we cannot comment on it.'

VSNL was a state-owned telephony major till February 2002 when the government sold a 25 per cent stake to the Tatas, who had emerged as the highest bidders for the stake. The Tatas had formed a special purpose vehicle ' Panatone Finvest ' which bought the shares from the government. Later, the Tatas raised their stake to 45 per cent through an open offer.

The government continues to hold a 26.12 per cent stake in VSNL and has two nominee directors on its board.

With no word from the government on the compensation, VSNL requisitioned the services of SBI Capital Markets to assess how much the government should pay.

SBI Caps submitted its report in June 2004 and estimated the loss at Rs 2,560.72 crore. VSNL asked SBI Caps to review its report. SBI Caps determined the additional compensation at Rs 2,980 crore in the latest report submitted in January.

In September last year, Ratan Tata told shareholders at the annual general meeting that the government was treating VSNL as a 'stepchild'. He accused the government of protecting incumbents like Bharat Sanchar Nigam (BSNL) and not providing a level playing field to VSNL.

Interestingly, much of the correspondence exchanged by VSNL were with the NDA government. In its plaint before Mumbai High Court, VSNL said the Union of India had committed on numerous occasions starting from February 23, 1994 that the company would retain its monopoly status in international long distance telecommunications till March 31, 2004.

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