2G fraud: Etisalat sues Swan Tele's Goenka, Balwa

Telecom major Etisalat has sued its Indian joint venture partners for fraud, the former monopoly said on Thursday, following thr Supreme Court’s recent order to cancel its affiliates licenses amid a corruption probe.

Etisalat in a statement said it has launched legal proceedings against Vinod Goenka and Shahid Balwa, top executives at its India partner DB Group, and Majestic Infracon Private Limited, a DB Group company, for fraud and misrepresentation.

The UAE-based firm in 2008 had paid $900 million for 45 percent stake in Balwa-promoted Swan Telecom, which was later renamed Etislat DB (EDB).

Etisalat DB officials were not immediately available for comment.

On Wednesday, Etisalat said it would shut down the operations of Etisalat DB (EDB)after the unit’s 15 licences were among 122 India’s Supreme Court ordered to be scrapped.

Etisalat paid $900 million in 2008 for its stake in Swan Telecom, later renamed Etisalat DB, with Majestic owning 45.7 percent.

“Etisalat’s case is that it was induced into its investment in the company without any disclosure of the matters that are now alleged to have occurred in connection with the obtaining of 2G licences by EDB,” Etisalat said in an emailed statement.

“Those events occurred a year before Etisalat’s investment. Etisalat is facing very significant financial losses on its investment in EDB despite its having no involvement in the 2G license application or award process and being entirely innocent of any allegations relating to it.”

On Feb 9, the UAE firm wrote off $827 million relating to Etisalat DB. Relations between Etisalat and its joint venture partner have been tense for some time. Last July, the Abu Dhabi-based telecom operator said Majestic had brought undisclosed proceedings against it, which it called “wholly baseless”, and the case was later withdrawn. Shahid Balwa, Vinod Goenka and Majestic Infracon issued a joint statement in response to Etisalat’s statement.

The trio in statement denied having received any notice of demand or suit papers or any wrong doing on their part. “We had filed a case for mismanagement in the CLB (Company Law Board) against Etisalat who were in management control of the JV company,” the statement said.

It added that the case was later withdrawn because in discussions they said Etisalat would run the joint venture , Etisalat DB, properly. “… which was not done. Unlike other similar JV’s who built a business and revenue, our JV went nowhere under Etisalat management,” the statement from trio said.

PTI