India's Company Law Board refers Unitech, Uninor dispute to arbitration

New Delhi, Apr 12 (PTI) In a set back to Norwegian firm Telenor, India's Company Law Board (CLB) today allowed its estranged Indian realty partner Unitech's plea for settling dispute over control and transfer of assets of their joint venture Uninor through arbitration at Singapore. Observing that Telenor had gone "berserk" in filing its petition seeking ouster of its partner Unitech after Supreme Court cancelled telecom licences of their JV, CLB Chairman D R Deshmukh held that an arbitrator alone can decide if 'Share Subscription Agreement' and 'Share Holders Agreement' had been vitiated or not due to fraud. CLB is an independent quasi-judicial body with powers to overlook the behaviour of companies within India'sCompany Law. The Supreme Court had in February held that the process of allocating 122 2G licenses including those to Uninor was 'arbitrary and unconstitutional' and cancelled all of them. Telenor, which bought stake in Uninor that was allocated 16 of those licences, sued Unitech for breach of warranties. The order drew sharp reactions with Telenor saying it will challenge the CLB judgement in higher courts while realty firm Unitech said the order upholds the right of minority shareholder. Telenor owns 67.25 per cent in Uninor which has over 440 million subscribers. Unitech holds the remaining 32.75 per cent in the JV. "Telenor by claiming relief identical to relief claimed ... in its counter claim before the Arbitral Tribunal has left no room for any doubt that adjudication of the dispute arising ... must be left to the forum for resolution of dispute agreed by the parties i.e foreign arbitration," CLB said in its 38-page long order. "Parties (Telenor and Unitech) are referred to arbitration in accordance with the arbitration rules of Singapore International Arbitration Centre as contemplated under article 13 of the Share Subscription Agreement entered into between the parties," it added. Over the question of violation of Shareholders Agreement (SHA) and Share Subscription Agreement (SSA), the CLB said it should be decided by arbitration only. "The question whether SSA and SHA are vitiated by fraud is a complicated question of law and fact and ought not to be tried by the CLB in a summary jurisdiction under section 397 and 398 of the Companies Act and must be left to be adjudicated by the Arbitral Tribunal especially when the contracting parties have not only agreed to a dispute resolution and have taken steps in furtherance," said CLB. The CLB order came over cross petitions filed by Unitech and Telenor against each other. Reacting to the order, Telenor said it will challenge it in a higher court. Unitech said the shareholders' agreement clearly defines the dispute resolution mechanism for settlement of the issues relating to the shareholders' agreement. PTI