Battle for MIAL: Arbitration tribunal restrains Adanis 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 per cent 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 but asked GVK, which owns 50.5 per cent 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 per cent) equity shares in Mumbai international airport and that the escrow documents submitted to the tribunal by GVK to show its compliance of the September 15, 2019 order will not be altered till the end of the arbitral proceedings," the tribunal said in a 55-page order dated January 19.

The case was sent for arbitration on July 2, 2019, by the Delhi High Court.

The tribunal comprising retired justices KPS Radhakrishnan, AK Patnaik 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 November 7, 2019, in the 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 September 30 which was later extended by consent twice to November 7.

On September 15, an arbitral tribunal, which heard the case between GVK and Bidvest, gave GVK time till October 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 per cent stake in the airport for a consideration of Rs 1,248 crore. But later GVK made the counteroffer, forcing the Adanis to move the Bombay High Court on September 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 per cent owned by GVK Group, 26 per cent by the national airports operator AAI, 13.5 per cent by Bidvest and remaining 10 per cent 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 November 7 deadline, the debt-laden GVK Group had on October 28 entered into an agreement to sell 79 per cent 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. Adani's are also ready to buy out ACSA's 10 per cent but is stuck on valuation.