The Hindu Business Line : Hutch-Vodafone deal may be delayed further

New Delhi April 4 The clearance of the Vodafone-Hutch deal could run into a further roadblock with the Law Ministry suggesting appointment of inspectors to investigate the actual ownership of mobile services company Hutchison Essar.

The Department of Legal Affairs has also sought the views of the Attorney General as the matter involved complex issues.

The Foreign Investment Promotion Board (FIPB) had earlier sought the views of Law Ministry about Vodafone's proposed acquisition of Hutchison Telecommunication International Ltd's stake in the Indian mobile company.

The Law Ministry said that it appears Vodafone will have sufficient control for getting a special resolution passed in the general meetings of Hutchison Essar in all important matters as provided in various provisions of the Companies Act.

Drawing attention to Section 247 of the Companies Act, 1956, which provides for investigation of ownership of a company where it appears to the Union Government that there is good reason to do so, the Law Ministry has suggested that such a course of action could be undertaken.

The inspectors could investigate and report on the membership of the company and other related matters for determining the true persons who are or have been financially interested in the success or failure of the company.

The inspectors could also find out who are or have been able to control or influence the policy of the company, the three-page note from the Department of Legal Affairs dated April 2 had said.

It further said that based on the provisions of the Companies Act it was up to the Government to get the matter further investigated to find out the extent and nature of control, financial interest and the power to influence the policy of Hutchison Essar Ltd by Vodafone.

The legal view puts the ball back in FIPB's court as it will now have to take a call on how to move ahead with the proposal.

While the Department of Telecom has given a clean chit, the Reserve Bank of India has raised concerns that the transactions could violate the Foreign Exchange Management Act. The RBI had also suggested further investigations.

The Law Ministry was asked to comment on whether Hutchison Essar has breached the 74 per cent FDI cap and whether the 12.26 per cent stake held by Mr Asim Ghosh and Mr Analjit Singh could be treated as Indian shareholding in view of the declaration filed by Vodafone before the US Securities Exchange Commission in the course of its announcement of acquiring HTIL's stake in Hutch Essar.

While Vodafone has maintained that it has acquired only 52 per cent stake in Hutch Essar to keep the FDI level at 74 per cent, a PIL filed by a consumer group alleged that the UK-based company had control of 67 per cent stake.