Adani Properties Opposes Mumbai Airport’s Stake Sale To GVK

Adani Properties Pvt. Ltd. moved the Bombay High Court today seeking direction to restrain Bidvest Group Ltd. from selling its stake in Mumbai International Airport Ltd. to GVK Airport Holdings.

The real estate company sought a direction from the court directing Bidwest to issue notice to GVK for its compliance with the agreement governing MIAL’s shareholding. It also sought an injunction against the increase in the share capital of GVK Airport on the ground that the increase amounted to an indirect transfer of MIAL’s shareholding.

Adani Properties also informed court it was willing to make an upfront payment for immediate acquisition of the shares. The acquisition will be conditional on the fact that the long-stop date for purchase of shares must be extended to Feb. 7, 2020, and Bidvest must secure necessary approval from lenders and other interested parties.

Earlier this year, Bidvest had proposed the sale of its stake to Adani Properties after GVK Airport failed to acquire the stake in accordance with its right of first refusal under the consortium agreement.

GVK Airport, in response, moved to an arbitration tribunal challenging the proposed sale. In October, the arbitration tribunal granted an injunction against transfer of shares to Adani and had directed GVK to deposit money to show its intent to purchase the stake held by Bidvest.

Here are the key arguments and submissions made by the parties today:

Adani Property’s Arguments

Darius Khambata, counsel representing Adani Properties, made the following arguments:

Failure of GVK to make payment for acquiring shares: GVK Airports had failed to deposit or show evidence to substantiate its claim that an amount of Rs 1,248 crore had been deposited in a “no lien escrow account” within the time prescribed in the order of the Arbitral Tribunal.

GVK has failed to provide any detail of the deposited amount as it has only made certain arrangements with third parties which goes against the orders of the tribunal. The counsel for Adani properties argued that shares must instead be transferred in its favour as per the share purchase agreement.

Lack of action by Bidwest: Bidvest had maintained silence by failing to clarify about the transfer of shares to Adani Properties. Adani Properties’ counsel argued that Bidvest must now act in capacity of a “constructive trustee” as the shareholding agreement between the parties was already executed.

Indirect transfer of shares in MIAL: GVK group’s move to increase the share capital of the airport holding company before the proposed sale to Adani Properties amounts to an indirect transfer of shareholding in MIAL. As increase in share capital is a “contrivance”, this must be subjected to the “right of first” clause in the agreement.

Bidvest’s Counter

Janak Dwarkadas, counsel representing Bidvest made the following arguments:

Locus of Adani Properties: Rights under the consortium agreement governing the shareholding in MIAL were available only to the existing shareholders, as it was an inter se agreement between GVK, Bidvest and other investors. Thus, Adani Properties had no locus or rights under the agreement as the sale of shares by Bidvest was pending.

Loss of income: Bidvest is losing out on interest income to the tune of Rs 70 crore due to the delay in transfer of shareholding and would end up losing out on all potential buyers. Bidvest’s counsel argued that they have made all endeavors to effectuate the sale.

Difficulty in extending the long-stop date: An extension in the long-stop date could amount to breach of the Arbitration Tribunal’s orders and hence, Bidvest cannot extend the long-stop date.

GVK’s Rebuttal

Ravi Kadam, counsel representing GVK Airport, made the following arguments:

No cause of action for Adani Properties: GVK has already submitted an “affidavit of compliance” demonstrating that it has made the requisite deposit in an escrow account in accordance with the tribunal’s orders. The ambit to determine the sufficiency of funds lies with the Arbitral Tribunal, which is going to decide the matter on Nov. 24.

Binding nature of Arbitral Tribunal’s orders: The dispute over the share sale was under arbitration and hence, orders of the Arbitral Tribunal will be binding on GVK and Bidvest. In such a case, the high court would lack jurisdiction.

Mustafa Doctor, counsel for the GVK group companies, opposed the Adani Properties’ move to implead them on the ground that they had no connection with the ongoing matter and amounts to widening of the cause of action.