Foreign telcos, investors gear up to walk the talk on 2G litigation

Dubai-based Khaitan Holdings is among the first foreign investors in telecom that are considering moving TDSAT

Dubai-based Khaitan Holdings, which had a substantial stake in Loop Telecom, is among the first foreign investors in telecom that are considering moving the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) as well as going in for international arbitration against the government on account of their licences getting cancelled.

The move comes just a few days after a special court acquitted its promoters, I P and Kiran Khaitan, of criminal charges in the 2G scam.

The Ruias of the Essar group were minority stakeholders in the telco. The Supreme Court had in 2012 cancelled the telecom licences of Loop in 21 circles.

When contacted by Business Standard, Nalin Khaitan, who manages Khaitan Holdings and is the son of I P Khaitan, said: “We are open to considering both the options of going back to the TDSAT as well as seeking international arbitration. We will sit with our lawyers after New Year on this.”

Loop Telecom had approached the TDSAT in 2012, seeking a refund of the Rs 1,454 crore that it had paid for the licence in 21 circles and sought Rs 1,000 crore as damages for loss of reputation after the cancellation. However, the TDSAT quashed the appeal, saying that there were pending criminal trials against the petitioners and, therefore, their claims could not be considered valid. With the Khaitans now cleared by the court, the road to the TDSAT is again open.

Other foreign investors, too, are preparing strategies. Russian telco Sistema, whose licences were cancelled in 22 circles but which came back in fewer circles after a round of auction, reiterated that it had the right to resort to the Bilateral International Treaty to protect its investments.

In a statement a Sistema spokesperson in Moscow said: “Sistema has always tried to find an amicable solution with the Government of India with regard to the spectrum issue and has never resorted to the BIT mechanism to resolve problems related to its telecom business in India. Indian courts are currently reviewing two legal cases related to SSTL: On spectrum contiguity and on one-time spectrum charge for the period from the cancellation of SSTL licences in 2012 till auction. We have the right to resort to the BIT mechanism, but our final decision will depend on the outcome of the above proceedings.”

Sistema, which invested more than $4 billion, was forced to call it a day in India by selling its business to Reliance Communications in lieu of a 10 per cent stake.

A spokesperson for Norwegian telco Telenor, which had also gone in for international arbitration owing to the cancellation of its pan-Indian licence but backed off later, said: “We are aware of the verdict by the special court and UWTN will now review the detailed judgment. We have no further comments.”

Telenor, after a second start, was also forced to sell its business to Bharti Airtel this year. The move of the international investors comes just a few days after Videocon Telecommunications stated it was seeking Rs 10,000 crore as compensation.

Khaitan Holdings in 2013 had taken the government to international arbitration, seeking around $1 billion as damages for its cancelled licences. These included the Rs 1,454 crore it paid for the licence, financial guarantees, and the money it had invested.

Even Telenor had served notice to the government, threatening international arbitration under the Comprehensive Economic Cooperation Agreement with Singapore, as it failed to protect its investment. However, it withdrew the notice after the government agreed to set off the payment that it had made for the cancelled spectrum after it again came back and won licences, though in fewer circles.

However, Telenor sold its business to Bharti Airtel and wrote off more than Rs 10,000 crore. 

Sistema had invoked its rights under the Bilateral Investment Treaty between Russia and India for protecting its investment of $3.1 billion as a result of the cancellation of its 21 licences by the Supreme Court.