The union cabinet is likely to take up the call option issue of VSNL today, and it may discuss the legal validity of it in case Tatas decide to exercise the option.The finance ministry has moved the cabinet to discuss the legal validity of such a scenario if the Tata Group decides to raise its holding in VSNL.The government holds 26% stake in VSNL after its disinvestment, and Tatas have time to exercise the call option till February 12 2007, official sources said.The cabinet is looking at a scenario if the Tatas exercise their call option to buy out the government's remaining stake in VSNL. VSNL officials declined to comment on the issue.Earlier, the government had rejected Sterlite Industries' exercise of call option to buy residual equity, via call option, saying the Companies Act does not permit it as it is in conflict with shareholders' interest.The finance ministry's move comes as a pre-emptive measure to stand on legal ground if Tatas want to exercise the option.A call option is where the buyer has the right to buy the underlying security from the writer on the date of maturity at the set price called the exercise price or the strike price.
