Vodafone-Essar case adjourned till April 1

Vodafone, majority shareholder in joint venture with Essar, has filed another application in Madras High Court, asking to make SEBI a party in a case against Essar's proposal to merge two subsidiaries.

Essar has proposed to merge Essar Telecommunications Holdings Private Limited, which has 11 per cent stake in Vodafone-Essar, with India Securities Limited in order to find out Fair Market Value of its stake in the joint venture.

The case will now come up for hearing on April 1, 2011.

The Income Tax department has also raised an objection before the Madras High Court for the Scheme of Amalgamation of ETHPL with ISL, saying the company has arrears of around Rs. 487.76 crores (Rs. 4.877 billion) for the year 2008-09.

These are huge arrears and in the event of merger, the recovery may be problem for the department.

This is, however, countered by Ruias-led Essar group, which claims that the said arrears are on the holding company and it cannot impact the merger.

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

Vodafone filed three applications yesterday, of which two applications sought to implead 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 petition, Justice Vinod K Sharma adjourned the matter for next Friday.

Essar had earlier said: "Its (Vodafone's) objections to the merger are motivated and factually incorrect. The purpose behind raising these objections is to prevent the discovery of the fair market value of Vodafone-Essar, as envisaged in the agreements between Vodafone and Essar."

Last year when the Essar group wanted to list Vodafone Essar by offering its shares through an Initial Public Offer, Vodafone ensured that the IPO did not go through and no market value could be established, Essar said.

Vodafone, Ruias said, is attempting to force Essar out of joint venture (JV) and own 100 per cent of the Vodafone-Essar at an artificially depressed value. The court process is being sought to be abused through the attempt to intervene and file objections, it said.

The fair market value under agreements with Vodafone has to be determined by three international investment banks.

If the market value being discovered by the merger were to be manipulated and artificial, as Vodafone claims, the investment banks would naturally ignore that value when making their determination, Essar had said.