Ex-promoters of Pipavav Defence face legal trouble

R-Inf ra initiates arbitration for ~54.4 bn indemnity claims

Reliance Infrastructure’s ambitious defence segment acquisition is facing rough waters, with the Anil Ambani-promoted company initiating an arbitration process against the former owners of erstwhile Pipavav Defence and Engineering.

R-Infra said it had issued an arbitration notice for indemnity claims aggregating to ~54.4 billion— much higher than the ~20.8 billion it spent for acquiring management control in the defence company.

The notice has been issued against Pipavav Defence founder-promoters Nikhil Gandhi and Bhavesh Gandhi, and their companies (SKIL Infrastructure, SKIL Shipyard Holdings and Grevek Investments and Finance), RInfra said. Nikhil Gandhi could not be reached for comment. R-Infra did not share details on the reason for arbitration. However, in its statement to the BSE, it said: “Notice has been issued for breach of warranties under purchase agreement by founder promote rs for acquisition of Pip av av Defence shares .” The purchase agreement was signed in March 2015. “The company is convinced of the breaches discovered and is, therefore, compelled to enforce its rights. There is no impact on the execution of existing orders and upcoming financial liabilities of the company,” a legal source said, adding warranties are assurances of the state of affairs and governance standards of the company.

In March 2015, R-Infra together with its wholly-owned subsidiary Reliance Defence Systems had agreed to acquire from the promoters of Pipavav Defence 13,00,00,000 equity shares representing 18 per cent shareholding in the company at a price of ~63 per share, aggregating ~8.19 billion. Following this, R-Infra acquired another 17 per cent through a mandatory open offer valued at ~12.63 billion and achieved sole management control of the company.