Norway-based Telenor Group has sent a notice to its Indian partner Unitech seeking compensation following the cancellation of licences of their joint venture, Uninor, by the Supreme Court on February 2.
The order was the final blow to the relationship between the partners which has been strained for some time. The latest development has forced Telenor to look for a new partner. “Telenor's partnership with Unitech does not have a future. Hence, it would start looking for a new partner,” the company said in a statement.
Telenor Group General Counsel Pal Wien Espen said, “The legality and validity of the licenses was a fundamental term of the share subscription agreement between the Telenor Group and Unitech Ltd. We believe the Supreme Court’s cancellation of the Unified Access Service Licences (UASL) conclusively demonstrates a clear breach of Unitech’s warranties.”
“Unitech had irrevocably and unconditionally agreed to indemnify and hold harmless the Telenor Group from all damages, which it may have suffered as a result of breach of any of the agreed warranties. The fact is, Uninor, as a consequence of the judgment, will no longer hold any UASLs. Telenor will, therefore, exercise its entitled right under the share-subscription agreement to hold Unitech liable to indemnify and compensate Telenor Group for its investment in India,” he said.
Unitech’s nominee on the Uninor board, Nirjhar Goel, said, “The Supreme Court has cancelled all UAS licenses issued on and after January 10, 2008. Questioning the government policy cannot be considered a breach of warranties on our part. The court also has not 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.”
Telenor said it would consider every option available to secure the continued successful development of its mobile services in the country. It has sought compensation for all investment, guarantees and damages caused by the SC order and made an indemnity claim against Unitech for the failure to obtain spectrum in the strategically critical Delhi circle.
The company said the SC decision refers to actions that took place prior to Telenor Group’s entrance into India. Telenor had entered India in 2009 and currently holds 67.25 per cent stake in the JV, while Unitech holds the rest. It has already invested Rs 6,100 crore in the venture.
Problem between the two firms started with Telenor’s proposal of going for a rights issue to raise the funds. Unitech, while opposing the proposal, had also gone to the court. It is insisting on debt funding for raising funds.
Unitech had recently also moved the Company Law Board, complaining against Telenor for mismanagement of operations. The companies are also facing arbitration in a Singapore court.
