Telenor, Unitech brace for fresh legal battle

NEW DELHI: Norwegian telecom operator Telenor that holds a 67% stake in Unitech Wireless, issued a notice to its Indian partner seeking indemnity and compensation following the Supreme Court order canceling the joint venture’s 22 licences. The notice set the stage for a fresh legal battle as Unitech alleging violation of shareholder pact, while denying any wrong doing.
“Telenor Group holds Unitech Ltd liable for the breach of warranties related to the cancellation of the licences — seeking compensation for all investment, guarantees and damages caused by the Supreme Court Order. Telenor Group also makes an indemnity claim against Unitech for the failure to obtain spectrum in the strategically critical Delhi circle. Cancellation is a clear breach of Unitech’s warranties,” the Norwegian group said in a statement on Wednesday evening.
Unitech Wireless has 40 million mobile users and has invested over Rs 14,000 crore in the Indian operations, including the premium that Telenor had paid for buying stake in Unitech Wireless. Unitech promoter Sanjay Chandra is among key accused in the 2G scam and had spent several months in custody for allegedly swinging the deal in the company’s favour.
The real estate firm was surprised at Telenor’s move. When contacted, a Unitech executive Nirjhar Goel said: “The Supreme Court has cancelled all the UAS licences issued on and after 10 January 2008 by questioning the government policy, which in no manner can be considered as breach of warranties on our part. We therefore empathically deny that the cancellation of the UAS licences by the Supreme Court neither demonstrates a breach of any warranties on our part, nor has it concluded any wrong-doing on the part of the licensee companies. We are surprised to receive the indemnity claim from Telenor, taking a plea of the order passed by the SC and simultaneous release of press statement by Telenor, which is a clear violation of the confidentiality covenants of the shareholders’ agreement. At best, Telenor can claim damages from the government under the investment bilateral treaty. We reserve our right to take appropriate legal action against Telenor for damages caused to Unitech Group from breach of the confidentiality obligation by Telenor.”
The position taken by the partners point to further legal battle. “The legality and validity of the licences was a fundamental term of the share subscription agreement between Telenor Group and Unitech Ltd. We believe that the Supreme Court’s cancellation of the Unified Access Service Licenses (UASL) conclusively demonstrates a clear breach of Unitech’s warranties,” Telenor Group General Counsel Pål Wien Espen said in the statement.
Ties between Unitech and Telenor have been strained for the past few months with both fighting over how the telecom company should fund expansion. Telenor is keen on a rights issue, while Unitech is not. The real estate company’s financial position too is under strain due to a slowdown in the market, which had also prompted it to sell stake in non-core businesses.