Unitech Group and Norway's Telenor may go to arbitration in Singapore to resolve their dispute over a rights issue of their joint venture, Unitech Wireless.
Unitech has already got a stay on the rights issue from the Gurgaon district court, while Telenor's appeal against this decision has been declined by the Punjab and Haryana high court.
A Telenor spokesperson said: "Telenor had earlier proposed to the Gurgaon local court that the parties submit their differences to arbitration in accordance with the shareholders' agreement. The case is ongoing and the next hearing is set for June 14."
Telenor has 67.25 per cent stake in the joint venture, while Unitech holds the rest. Under the shareholders' agreement, the two can go to arbitration in a neutral country, which in their case is Singapore, in case of any dispute over the agreement clauses.
Unitech has, however, offered Telenor a solution -- it is willing to raise money through a rights issue, as demanded by Telenor, provided it has first exhausted the option of raising funds through both short-term and long-term debt.
"If there is a gap in our requirement after we have raised debt, we can always look at a rights issue for the remaining portion," said a source close to the negotiations.
Replying to a query, Unitech said, "The high court has declined Telenor's appeal and recognised the merits in Unitech's arguments.
"However, we will continue to engage in constructive discussions with Telenor, while protecting our legal rights in this matter."
Sources say Telenor had floated the rights issue proposal to raise Rs 7,000 crore (Rs 70 billion) to Rs 8,000 crore (Rs 80 billion).
However, Unitech had rejected the proposal on the grounds that the company had a low debt to equity ratio -- for every Rs 100 of equity it had taken, only Rs 5 was debt.
Unitech, sources say, argued that since most telecom companies had geared their debt to equity ratio at around 3:1, there was enough scope for Unitech Wireless to do so.
Even after it borrowed the required cash through debt, the ratio would be at around 1:1, Unitech had contended.
Those close to the negotiations say the company was offered long-term debt at around 10 per cent last year, which was not acceptable to Telenor.
Unitech Wireless, which runs GSM mobile services in 13 circles under the Uninor brand name, has been under a cloud with its boss, Sanjay Chandra, being arrested over the 2G scam.