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Govt may move CLB on VSNL investment

BS Economy Bureau

The dispute between the ministry of communications and information technology and the Tata-controlled VSNL deepened today. Top officials in the ministry said the government could approach the Company Law Board if the Tatas did not reconsider their decision to invest Rs 12 billion in Tata Teleservices Ltd.

Officials told Business Standard that the VSNL board's decision to pick up 20-26 per cent equity in the fixed-phone operator did not have the approval of Rakesh Kumar, the government nominee on the board.

Kumar, senior deputy director-general in the department of telecommunications, had written to VSNL stating that the decision did not have his approval and was, therefore, not unanimous, they said.

"Hence, Rakesh Kumar's suspension order has been put on hold," a senior ministry official said.

Kumar was not available for any comment. The ministry's stand was at odds with that of the ministry of divestment which had overseen the sale of the 25 per cent government equity in VSNL.

A senior divestment ministry official said: "As per the shareholders' agreement, VSNL's board is free to take any investment decision as long as it is made in good faith."

The divestment ministry felt even in the case of asset-stripping where the company's fixed assets were involved, it only required an affirmative vote by the government nominee.

The ministry believed that in this case, the government nominee on the board had okayed the decision.

"Once the government gives up management control in a company, it cannot interfere in the day-to-day matters. The company's board has to be allowed to take decisions and the government nominees are there to take care of public interest," the divestment ministry official said.

The divestment ministry reviewed the shareholders' agreement in the light of the recent developments and would give its opinion if solicited, he added.

A VSNL spokesperson reiterated that the decision to invest in Tata Teleservices was unanimous and did not violate any norm. He said VSNL had not yet received any letter from Rakesh Kumar.

Sources in the ministry of communications claimed the agenda for the board meeting at VSNL did not specifically mention any investment plans in Tata Teleservices.

They said that during the meeting on Wednesday, the board did not discuss any options other than Tata Teleservices for investment.

VSNL officials said that the board had discussed a number of investment options in other telecommunication companies as well.

Sources said the VSNL management had circulated the agenda for the board meeting less than seven days before it took place. The rule is that it should be done at least seven days before a meeting.

The government had left close to Rs 10 billion as reserves for VSNL to pay for the licence and not to be used for investment, sources added. They added that the Rs 12-billion investment made by VSNL is high.

Tata Teleservices has operations only in the Andhra Pradesh circle with 150,000 subscribers. The company has licences for operating in four other circles. But they are yet to become operational.

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