2014

Business law Assignment

Anish Avinash Sahu

UM14072

BUSINESS LAW ASSIGNMENT

CASE

NRI businessman, C Sivasankaran defaulted $212 million to his bellicose partner Batelco, as ordered by an English court. Batelco swiftly announced it was selling its stake in STel back to Siva, but when Siva failed to pay by an October 2012 deadline, the Bahraini firm launched legal proceedings.

CASE DETAILS

Britain's Commercial Court heard the Batelco's case against former Indian partner Siva and its chairman Chinnakannan Sivasankaran on May 7.

The Bahraini firm claimed the $174.5 million it paid Chennai-based Siva for a 43 percent stake in Indian operator STel in 2009, plus $10.3 million and a further $30,000 a day.

Batelco and Etisalat, which in 2008 bought 45 percent of Swan Telecom, later renamed Etisalat DB, had hoped the Gulf's large Indian expatriate communities would help them prosper in India, but both were late entrants and struggled to gain a foothold.

Between them, the two units accounted for only 5.2 million of India's 894 million subscribers at the end of 2011 and in February 2012 the two affiliates were ordered to be stripped of their licences as part of a corruption probe that pre-dated the Gulf operators' investments.

Batelco swiftly announced it was selling its stake in STel back to Siva, but when Siva failed to pay by an October 2012 deadline, the Bahraini firm launched legal proceedings.

CHARGES ON SIVASANKARAN

Batelco had announced it was selling its stake in S Tel back to Siva, in exercise of its `put` option. In October 2011, both Batelco and Siva agreed on the buy-back, on the condition that Siva would transfer nearly 79 million Tata Tele shares that he owned to Batelco, valuing them at $174.50 million. The deadline to conclude the transaction of transfer of shares was October 31, 2012.

But when Siva failed to transfer the shares before the October 2012 deadline, the Bahraini telecom firm launched legal proceedings.

However neither Sivasankaran nor Siva Ltd has complied with the court's order as no payment has yet been made. BMIC (a Batelco unit) approached the English High Court on July 16, and successfully obtained a worldwide freezing order against the defendants' assets globally and requiring Sivasankaran to give disclosure of his assets.

PROVISIONS OF THE LAW RELEVANT TO THE CASE

The claimant sought to enforce a settlement agreement. The defendants argued that there had been a collateral re-assurance that they would not be pursued for the sum claimed.

An Option Agreement executed on 8 May 2009 ("the Option Agreement") granted BMIC a conditional put option to require Siva (that is to say both Defendants jointly and severally) to purchase BMIC's 42.7% shareholding in S Tel for the same amount as BMIC had subscribed for those shares. BMIC was entitled to exercise the put option in the event that a "Liquidity Event" occurred and was not cured within 90 days after BMIC had notified Siva of its occurrence by serving a "Liquidity Event Notice". Liquidity Events included:

(1) A failure by S Tel to secure debt finance on terms acceptable to BMIC in the sum of $103,000,000.(2) An event that threatened the licences granted to S Tel by the Indian Government for any reason whatsoever

Meanwhile, in about June 2011, the parties commenced negotiations to settle the put option dispute. These continued in parallel to the formal notices and correspondence in relation to the Option Agreement, culminating in the execution of the Settlement Agreement and two share purchase agreements (SPAs) on 30 November 2011.

CONCLUSION

The claim by the claimant BMIC sought to enforce a settlement agreement succeeded.