Mumbai Airport Case: Arbitration Tribunal Restrains Adani Group From Buying Bidvest Stake
In a major setback to the Adani Group's bid to get a hold on Mumbai airport, an arbitration tribunal has restrained it from going ahead with buying out the 13.5 percent stake of South African partner Bidvest Services in the country's the second largest airport.
The tribunal has also asked Bidvest to maintain status quo on its stake and asked GVK Power & Infrastructure Ltd., which owns 50.5 percent in the airport, to compensate it for the delay by way of paying interest on the agreed share purchase agreement (Rs 1,248 crore) till the pendency of the case.
"It is directed that pending the final disposal of the arbitration proceedings, Bid Services or anyone acting for and on behalf of it is restrained from alienating in any manner its 16.20 crore (13.5 percent) equity shares in Mumbai international airport and that the escrow documents submitted to the tribunal by GVK to show its compliance of the Sept. 15, 2019 order will not be altered till the end of the arbitral proceedings," the tribunal said in a 55-page order dated Jan. 19.
The case was sent for arbitration on July 2, 2019 by the Delhi High Court.
The tribunal comprising retired justices KPS Radhakrishnan, AK Patanaik and Madan B Lokur, also asked GVK to pay interest to Bidvest Services on the agreed share purchase amount till the pendency of the issue.
The tribunal has based its order on the fact that GVK has been able to satisfy all the parameters required for granting the interim order even though it could not deposit on its own the purchase amount into the escrow account because GVK made the fund transfer by two companies-Green Rock B 2015 of Jersey and Indo-Infra Inc of Canada.
The Bombay High Court had late October asked GVK to close the deal by Nov. 7, 2019 in third extension to arrange the Rs 1,248-crore or Rs 77 a share for the deal, valuing MIAL at Rs 9,500 crore.
The Adanis', which already has won the bids to run six Airport Authority-built non-metro airports in Lucknow, Jaipur, Guwahati, Ahmedabad, Thiruvananthapuram and Mangalore, bid to enter the country's second busiest airport by buying out Bid Services Division Mauritius (Bidvest) from MIAL was stalled after GVK chose to exercise its first right of refusal, and matched the Rs 1,248-crore offer that the Adanis made to the Bidvest in March.
The GVK Group exercised its right under clause 3.7 of the shareholders agreement (rights of first refusal) to purchase the shares. But the group failed to purchase the same within the time prescribed in the agreement, the plea said.
According to the agreement, the date to make the payment and to transfer the shares was Sept. 30 which was later extended by consent twice to Nov. 7.
On Sept. 15, an arbitral tribunal, which heard the case between GVK and Bidvest, gave GVK time till Oct. 31 to deposit the money. According to the arbitral order, if GVK failed to deposit the money, Bidvest was free to sell its stake to anyone else.
On March 5, 2019, Bidvest had entered into an agreement with the Adanis to sell its entire 13.5 percent stake in the airport for a consideration of Rs 1,248 crore. But later GVK made the counter offer, forcing the Adanis to move the Bombay High Court on Sept. 4 claiming that the March pact with Bidvest was valid, subsisting and binding.
According to the petition, GVK had exercised its right of first refusal before the 30-day mandated time frame on April 4.
MIAL is 50.5 percent owned by GVK Group, 26 percent by the national airports operator AAI, 13.5 percent by Bidevest and remaining 10 percent by ACSA Global (Airports Company of South Africa).
In the meanwhile, late June GVK had also moved the Delhi High Court seeking an injunction against Bidvest from offering or selling its shares to any person other than GVK, the Adanis said in their suit.
Though the Delhi HC had on July 2 dismissed the petition noting that the company had not shown its willingness to complete the deal, a division bench later sent the dispute for arbitration.
In the run-up to the Nov. 7 deadline, the debt-laden GVK Group had on Oct. 28 entered into an agreement to sell 79 percent of its stake in GVK Airport Holdings for Rs 7,614 crore to the Abu Dhabi Investment Authority, PSP Investments of Canada, and the state-owned National Investment and Infrastructure Fund.
The move was aimed at preventing the Adanis, who have taken over five AAI-run airports earlier this year.
The GVK Group also owns the upcoming Navi Mumbai international airport and a stake in MIAL will give an equal stake in the new airport as well. Adanis are also ready to buy out ACSA's 10 percent but is stuck on valuation.