Tata-Birla Idea spat turns bitter

Tatas serve termination notice to AV Birla group; No iota of substance in notice - Birla group.

The Tatas have served a termination notice on their partner in Idea Cellular, the Aditya Birla group, for "breach of shareholders' agreement". Due to the breach of agreement, the Tatas said they would now buy out the Aditya Birla group's stake in Idea.

"We shall proceed to purchase the shareholding of the group within 90 days of this notice, at the default price," the Tatas said in their notice to Grasim Industries, the flagship of the Aditya Birla group.

"We hereby put you on notice that by disclosing the financial data of Idea Cellular to Aditya Birla Nuvo Ltd's investors, you have caused a material breach of the Idea shareholders' agreement," the notice said.

In response, the Aditya Birla group told the department of telecommunications that that there was not an "iota of substance" in the termination notice served by the Tatas, and added that it was "an attempt to divert attention" from the real issues.

The notice also said Aditya Birla Nuvo had, on its website, disclosed information such as Idea Cellular's revenue, profit before dividend interest and tax, operating margins, net profit, loss, annualised return on capital employed and projections.

The publication of such confidential information, which had clearly been approved and authorised by the company's management, was a clear violation of the Idea Cellular's shareholders' agreement as Idea Cellular was a closely held company which did not disclose its quarterly financial data to the public or make any public disclosures or statutory filings in respect of such quarterly financial data, Tata sources said.

The Tatas have also sent copies of the notice to both Idea Cellular and the DoT. When contacted, DoT officials said they were looking into the issue.

The notice adds that the Tatas will "immediately take steps to facilitate access (in Idea Cellular) to an international firm of auditors appointed (by them) for computing the fair market value," of the service provider.

In an earlier letter to the DoT, Tata Sons Director Kishore Chaukar had said, "The Tata group reserves its right to take appropriate legal action. By raising issues which were settled when we signed the waiver agreement, the Birlas gave up all claims with regard to Tata Teleservices' unified access licences."

According to Tata sources, the Aditya Birla group, acting through Grasim Industries, had executed a waiver agreement on December 11, 2004 with Tata Industries, under which the very issues raised by the Birlas regarding compliance were settled, and that the claims in relation to Tata Teleservices and Tata Teleservices (Maharashtra) Ltd were specifically given up by the Birlas.