RIL starts arbitration against RCOM

MUMBAI, JULY 17: The Ambani feud, which is in the eye of the ongoing political storm, has hot up again. Reliance Industries, controlled by Mukesh Ambani, has initiated arbitration proceedings against Reliance Communications (RCOM) owned by his younger brother Anil Ambani on the issue of first right of refusal if RCOM strikes a merger/takeover deal with South African Telecom giant MTN. RCOM slammed the move saying, “It’s legally and factually unwarranted”.

“RIL has commenced arbitration proceedings by nominating Justice B P Jeevan Reddy, a former judge of the Supreme Court of India as an arbitrator for resolution of the disputes,” an RIL spokesperson said. RCOM has refused to participate in the conciliation meetings under the alternate dispute resolution provisions contained in the non-competition agreement, the RIL official said .

Condemning the RIL move, an RCOM official said, “RIL has issued 4th letter today threatening legal action on MTN discussions. RIL’s malafide design to derail MTN discussions is clearly exposed. RIL has successfully destroyed India's image in foreign eyes. RIL’s notice for arbitration proceedings is legally and factually unwarranted.” Significantly, the RIL move has come after Samajwadi Party (SP) leader Amar Singh sought Prime Minister’s intervention to settle the dispute and the Prime Minister’s Office denied any such plan.

Arbitration is a legal technique for the resolution of disputes outside the courts, wherein the parties to a dispute refer it to one or more persons — arbitrators — by whose decision, they agree to be bound. “But going by the RCOM response to the RIL move, it’s clear that RCOM is not going to participate in the proceedings,” said an analyst tracking the dispute.

RIL had offered to talk with RCom on July 7 for a “mutual reconciliation”. RCOM, however, did not turn up for the talks. Later RCOM offered to meet RIL in the week of July 14 but maintained that this was not intended towards any “dispute” or occasion for “conciliation” process but “to clarify any doubts”. This was not acceptable to RIL.

In the meantime, RCOM and MTN extended the 45-day exclusivity period by another two weeks till July 21. According to media reports, MTN, sub-Saharan Africa’s top mobile operator, was nervous about entering a deal with a legal cloud over it and has looked at ways to restructure a transaction. RIL’s contention is that it has the first right of refusal whenever RCOM decides to sell the equity stake. However, this was countered by RCOM which says that the contentious non-competition agreement was signed by RIL and RCOM when the latter was controlled by RIL chief Mukesh Ambani in a one-sided deal. “RIL's claim is simply an excuse to try and disrupt the creation of one of the world's most valuable telecom combinations, with a unique footprint covering the emerging growth markets of India, Africa and the Middle East,” RCOM had earlier said.

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