The decks are being cleared for the acquisition of Hutch-Essar by Vodafone, with the department of legal affairs of the view that the 12.26 per cent stake held in Hutch-Essar by Asim Ghosh and Analjit Singh was in conformity with norms.
Last week, a senior official had told Business Standard that the complications surrounding the deal would get 'resolved' soon.
Legal opinion, sources said, had cleared Ghosh and Singh's stake of violating the Benami Transaction (Prohibition) Act, 1988, the Foreign Exchange Management Act, 1999, as well as certain sections of the Companies Act. No anomaly has also been found in the different reporting standards used in announcing the deal with stock exchanges and regulators in Hong Kong, United States and elsewhere.
The legal department's clearance would pave the way for the finance ministry to give a green signal to Vodafone's proposed acquisition of a 52 per cent stake in Hutch-Essar for $11.1 bn, the sources added.
However, it is not yet clear how the various ministries involved with the Foreign Investment Promotion Board would respond to this legal opinion. It is also learnt that the Ministry of Home Affairs has called for a further probe into some aspects of the deal by defence intelligence agencies.
A crucial meeting of the FIPB is scheduled for Monday. The meeting is expected to focus on the law ministry's examination of Hutchison Telecommunications International Ltd's various arguments, including the rationale for the put and call options on Ghosh and Singh's 12.26 per cent shareholding, as well as the 2.77 per cent held by IDFC Private Equity Ltd and its private equity arm.
Last week, Law Minister HR Bharadwaj told reporters that his department would send a reply to the board before the April 23 meeting.
At its last meeting on March 29, the FIPB had been of the view that Hutch Essar, HTIL and Vodafone had not satisfactorily answered some queries and dispelled suspicion over various aspects of their transactions.
Consequently on April 9, HTIL responded to the FIPB's demand for further details and submitted 33 documents for its perusal.
In its replies, HTIL had disclosed the fair market value of the 12.26 per cent stake at around $431 million, assuming a future equity valuation of $25 billion for Hutch-Essar.
It had also given details on the different clauses in the subscription option of the framework agreements signed with Asim Ghosh and Analjit Singh's companies.
The race for Hutch-Essar
