Aircel Maxis case takes a new turn

Published: July 28, 2014 - 13:38

The permission granted by the new Attorney General Mukul Rohatgi to the CBI to file a chargesheet against the Maran brothers in the Aircel/Maxis case could trigger a legal storm
Hardnews Bureau Delhi

The decision by the new Attorney General Mukul Rohatgi to grant permission to the Central Bureau of Investigation ( CBI) to file chargesheet against Maran brothers for forcing businessman C Sivasankaran of Siva Ventures to sell his company, Aircel, to the Malaysian group, Maxis, is expected to trigger off a serious legal battle over the sustainability of this allegation.

CBI Director, Ranjit Sinha, found the evidence against the Maran's inadequate and he was therefore, not convinced about filing a chargesheet. His Director of Prosecution held an opposite view, which led to the agency seeking the opinion of the new Attorney General.  

Interestingly two former Chief Justices of the Supreme Court had found little merit in the allegations levelled by C Sivasankaran, formerly the owner of Aircel Televentures that he was coerced by former Telecom minister Dayanidhi Maran to sell 100 per cent shares of his telecom company to Malaysia’s Maxis. In the opinion of one Chief Justice this allegation “is untenable”. Both the judges also state that this is a civil dispute between the two business houses and does not need a criminal investigation.

The two ex CJI of Supreme Court were giving their opinion sought by the aggrieved party Maxis Communications Berhard. Their view is an endorsement of an order passed by the Singapore International Arbitration Council. Sivasankaran had gone in for arbitration before them where he claimed breach of trust against Maxis for not crystallising 26 percent upside payment. Maxis did not undertake an IPO within the stipulated period that was provided in the Share Purchase Agreement (SPA) due to which Siva was deprived of his upside sharing cost.

The legal opinion of the two ex CJI are part of the letter written by Maxis Chairman Raja Tan Sri Dato Seri Raja Arshad to CBI Director Ranjit Sinha on August 2, 2013.   

The entire CBI case rests on the complaint of Sivasankaran about being “coerced” to sell the company. The opinion of both the former Chief Justices and the interpretation of the order of Singapore International Arbitration Council clearly indicate that Sivasankaran does not give an impression that he was forced to sell his company. Legal opinion of the ex-CJI's shows that the complaint was an “after thought”. Here is why.

Siva was eager to sell his stake in Aircel to whom so ever would have given him the best deal. He made a presentation to Maxis on November 4, 2005. Initially, he was asking for more, but later he agreed to a valuation of $ 800 million, which is based on the valuation of a part of Bharati’s telecom business, which has a pan-India footprint. After one such meeting he wrote to Ralph Marshall of Maxis that it was a pleasure to meet with him and indicated how step-by step the takeover of the company could be facilitated. Surely, someone who had been under duress would not have engaged in such pleasantries.

The original owner of Aircel was given 4 options to choose from and as stipulated above he decided to go in for option B, which meant giving 100 percent equity and 26 percent upside payment. If indeed he was coerced to go for this option, as the ex-CJI legal opinion says, there would not have been further emails suggesting further negotiations. As an ex-CJI states, “ extensive negotiations between parties show that it’s a normal commercial transaction in which Siva got the valuation that he wanted.” The fact that he was eager to sell his stake at the earliest possible opportunity and give it at a reduced amount shows that it is “incorrect to suggest that he was forced to sell his stake. “ 

The letter by Maxis Chairman says that Sivasankaran had an opportunity to to investigate and advance the ‘coercion allegations, including Maxis ‘involvement’ from 2005-2005, but he chose not to. It is alleged that when it became apparent to the him that he would lose arbitration case in March 2011, he filed a complaint to CBI later in May 2011, that he sold the shares on account of pressure from the minister. It was then in July 2011 that he raised the issue of ‘pressure’ during arbitration cross-examination to lend credence to the “complaint before the CBI”.

The tribunal where the arbitration was taking place rejected Siva’s claim in entirety and made an award of costs against Siva of US $ 7.9 million. The Arbitral tribunal in its award determined that ‘ Maxis bought 100 percent of the shares in Aircel through “ commercial, arms length transaction”.  The findings of the arbitrators included that Siva had acknowledged that he had a taken a “punt” in choosing the option.

The arbitration award knocks the bottom of the complaint, which is being investigated by CBI. What really punctures more holes in it is that Siva has accepted the arbitration award and has begun the payment of penalty. As accepted by both parties, the ruling of the Arbitration is applicable in both, India as well as in Singapore. To reiterate, Siva has not disputed this ruling. The moot question is: if the tribunal ruling has taken into cognisance whatever was in the CBI complaint and finds no merit in it then what is left of the case.

Newspaper reports suggest that the CBI Director Ranjit Sinha has chosen to make light of this Maxis’s Chairman letter and the legal opinion of ex-CJI’s by stating that they would do their own investigation and complete it soon before the SC deadline.

Be that as it may, Siva’s complaint and the subsequent investigation by CBI has hurt Maxis’s operation that has already invested $ 10 billion in its telecom operations in India, which employs more than 7,000 people and paid more than Rs.10,000 crore to the Indian exchequer through taxes and revenue share payout.

It is strange how most of the foreign telecom companies that have invested in India whether it is Telenor, Etisalat or Sistema- besides Maxis- that have come to grief in some ways or the other.

The permission granted by the new Attorney General Mukul Rohatgi to the CBI to file a chargesheet against the Maran brothers in the Aircel/Maxis case could trigger a legal storm
Hardnews Bureau Delhi

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