The differences between British telecommunications group Vodafone and Essar Group in their joint venture-Vodafone Essar- escalated further on Friday with Vodafone seeking to bring market regulator Sebi into the case as a party.

 

 That's not all. The income tax department has also entered the fray raising a demand of Rs 487.6 crore demand on India Securities Limited (ISL), an Essar group subsidiary, as arrears.

Vodafone has filed an application in the Madras High Court asking to make Sebi a party in a case against its joint venture partner Essar's proposal to merge two of its subsidiaries. The issue relates to the proposal by the Essar Group to merge Essar Telecommunications Holdings Private Limited (ETHPL), which has 11% stake in Vodafone-Essar, with another subsidiary, ISL. Vodafone has objected to the merger as it is concerned that such a move could distort the valuation of the JV and that the value of ISL could be misinterpreted as a fair market value of Vodafone Essar.

Essar, which holds 33% in the JV, has a put option to sell its entire stake for $5 billion, or to sell a part of it at a discovered price, to Vodafone which can be exercised by May 8. The I-T department has raised an objection before the Madras high court for the Scheme of Amalgamation of ETHPL with ISL, saying the company has arrears of Rs 487.76 crore for FY09.These are huge arrears and in the event of merger, the recovery may porve to be troublesome for the department. But the Essar group claims the arrears are on the holding company and it cannot impact the merger. The Madras High Court adjourned the hearing to April 1.

It further said that said that Vodafone's fresh application is nothing but tactics to delay the proposed merger of the two entities.

Vodafone filed three applications yesterday, of which two applications sought to get market regulator SEBI as a party and hearing on the case, while another was on valuation. After hearing the matter, as the Income Tax counsel sought time to file a petition, Justice Vinod K Sharma adjourned the matter for next Friday.

The row between the partners erupted when Essar embarked on the reverse merger of ETHL into its listed group firm, India Securities. Essar started the process as a price discovery move with the put option date approaching. Vodafone had filed an appeal against Essar's move in the Madras High Court where the latter has initiated the merger proposal of the two group firms. Essar reacted stating Vodafone had no locus standi to oppose the move as it was neither a shareholder nor a creditor in these companies.
TNN