Cloud Over Air­cel-RCom Deal as Kr­ish­nan’s Ab­sence Irks SC

Court warns merger may suf­fer if Air­cel par­ent Maxis’ founder fails to hon­our sum­mons

The Economic Times - - Front Page - Sa­man­waya.Rau­tray @times­group.com

New Delhi: The Supreme Court re­fused to let Air­cel off the hook over the fail­ure of Malaysian busi­ness­man T Ananda Kr­ish­nan and par­ent com­pany Maxis to ap­pear in a cor­rup­tion trial, putting a planned merger with Reliance Com­mu­ni­ca­tions un­der fur­ther threat.

This fol­lowed the main ac­cused in the case, for­mer tele­com min­is­ter Dayanidhi Maran and his brother and me­dia ty­coon Kalanithi Maran, be­ing ac­quit­ted by the lower court on Thurs­day. Maxis and its owner Kr­ish­nan, who haven’t been dis­charged in the case, haven’t ap­peared in court, de­spite a stern mes­sage call­ing on them to do so at the Jan­uary 6 hear­ing by the Supreme Court bench headed by chief jus­tice JS Khe­har. “You are run­ning away from the law. You can come here, but you don’t want to,” he said on Fri­day.

it may not al­low Air­cel-RCom deal; may or­der auc­tion of Air­cel spec­trum if par­ent Maxis’ founder T Ananda Kr­ish­nan doesn’t ap­pear in court

case against Kr­ish­nan & three oth­ers still stands, de­spite other ac­cused in CBI-Maxis case get­ting dis­charged Thurs­day court may pun­ish telco, but Kr­ish­nan, who is only an in­di­rect share­holder in the com­pany, may still not come “Where is he (Kr­ish­nan)? He has been sum­moned by a court. If he doesn’t come here, there will be con­se­quences. Is any­one deny­ing him his rights? He doesn’t care. Who is he? And you peo­ple stand up to de­fend him?”

There were harsh words di­rected at oth­ers as well by the bench, which in­cluded jus­tices NV Ra- mana and DY Chan­drachud.

“One after the other peo­ple are run­ning away from this coun­try, yet you are do­ing noth­ing,” Khe­har told top lawyers, in­clud­ing the at­tor­ney gen­eral, who was ap­pear­ing for lenders to Air­cel. “All of you on this side are fight­ing by proxy… to pro­tect him,” he said. The bench has said it would or­der Air­cel’s spec­trum to be auc­tioned off if Kr­ish­nan and Maxis rep­re­sen­ta­tives didn’t ap­pear in the trial court.

A group of lenders led by State Bank of In­dia had filed a plea to be heard in the case, say­ing they would be “se­verely” af­fected if the com­pany was re­strained from earn­ing rev­enue us­ing its 2G air­waves, which would im­pact re­pay­ment to cred­i­tors. The banks are op­posed to an auc­tion. Air­cel coun­sel Ab­hishek Manu Singhvi ini­tially tried to ar­gue that Thurs­day’s trial court or­der meant the case was vir­tu­ally over.

“The case is of con­spir­acy. The main case is gone, the key ac­cused dis­charged. There is no of­fence as of to­day,” he pointed out.

The bench shrugged off the ar­gu­ment. “The case against them still stands. The sum­mons still ex­ist,” the chief jus­tice ob­served. “You have not been re­spond­ing to the due process. So can you be al­lowed to con­tinue to earn rev­enue?”

THREAT TO MERGER

At one point the bench threat­ened to stall the planned merger between Air­cel and Reliance Com­mu­ni­ca­tions (RCom). “We will not al­low this trans­fer to Reliance. We will ask the gov­ern­ment to auc­tion it off. We will adopt any means so that no one runs away with a debt to the coun­try or tries to avoid sum­mons of an In­dian court. You are hand in glove with him.”

De­spite Fri­day’s rul­ing, RCom stayed buoy­ant on the strength of Thurs­day’s ac­quit­tals, ris­ing 8.75% to ₹ 36.65. Khe­har wanted to know who would ben­e­fit from the AircelRCom deal. “We may not hin­der the deal. We will only take it as the thresh­old deal (for any auc­tion),” he hinted, adding that the Maxis boss ap­peared to have strong back­ing. “Every­one seems to be fight­ing for him (Kr­ish­nan) by proxy to de­fend him. This is the strange thing in this coun­try.”

IN­DI­RECT SHARE­HOLDER

Even­tu­ally, Singhvi tried to dis­tance him­self from Maxis and Kr­ish­nan by say­ing that Air­cel was in no po­si­tion to get them to ap­pear in court. “The court can pun­ish us, but he still may not come,” Singhvi said. He also sought to show the court that Kr­ish­nan was only an in­di­rect share­holder in the com­pany and not a di­rect share­holder.

He also ar­gued that there was no sale or pur­chase in­volved in the merger deal with Reliance. There was no money chang­ing hands, no profit be­ing repa­tri­ated, he con­tended. The bench de­manded more clar­ity on Air­cel’s hold­ing com­pa­nies and its own­er­ship pat­terns be­fore pass­ing any or­ders.

Air­cel told the Supreme Court pre­vi­ously that it has not re­ceived any sum­mons in the case and the com­pany had no con­trol over the ac­cused. It has also said that al­le­ga­tions of profits or funds be­ing repa­tri­ated were un­true be­cause Air­cel has been a loss-mak­ing en­tity since it was ac­quired by Maxis in 2006.

The case will now be taken up after Air­cel of­fers clar­i­fi­ca­tions on the points raised by the court by way of an af­fi­davit, most pos­si­bly on Wed­nes­day. Air­cel, RCom and State Bank of In­dia didn’t re­spond to emails seek­ing com­ment. RCom is in the process of de­merg­ing its wire­less busi­ness and merg­ing it with Air­cel’s wire­less busi­ness to cre­ate a new en­tity in a non-cash deal. The trans­ac­tion will al­low RCom to pare its debt sig­nif­i­cantly, it has said.

“To­day’s ob­ser­va­tions have come as quite a shock to us,” said a se­nior ex­ec­u­tive at one of the tel­cos in­volved. “We had ex­pected that after Thurs­day’s ac­quit­tals, this case will fall through as well.”

On Thurs­day, the spe­cial court ac­quit­ted the Marans of charges that they forced to sell pro­moter C Si­vasankaran’s stake in Air­cel to Malaysia’s Maxis in 2006, as part of a quid pro quo in the form of bribes.

Telco says no money chang­ing hands and no profit be­ing repa­tri­ated in deal with RCom

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