Hughes not allowed to float two subsidiaries

NEW DELHI, MAY 21: The Department of Telecommunications will not allow the floating of two independent subsidiaries by Hughes Ispat Limited...

NEW DELHI, MAY 21: The Department of Telecommunications will not allow the floating of two independent subsidiaries by Hughes Ispat Limited for operating basic services in Maharashtra and Karnataka. The DoT note on the subject has concluded that the issue of floating two subsidiaries has to be totally delinked from the signing of the licence.

The proposal is being turned down 8220;it involves a number of legal implications including the replacement of foreign partners and Indian partners8221;The note was discussed at the Telecom Commission at its two sittings last fortnight.

The Commission, say highly placed sources, in the Ministry of Communications will soon convey its decision to the licensee company. The Commission has cited a number of objections to over rule the Hughe Ispat plea. 8220;In case Hughes Ispat Limited is not able to sign the licence in the name of present bidder company, it will be very difficult to agree to transfer the same at this stage to another entity about whose constitution and liabilities, sufficient inputs are not available at present8221;, the note said. Permission for the floating of two seperate companies, the note said , is ruled out also because in such situation the net worth of the new partners and experience which were taken into consideration while finalising the award of licence to the original companies will become infructuous.Hughes Ispat in its proposal had said that the floating of two entities will make it easier to finance the projects.

The DoT believes, therefore this issue has to be delinked from the signing of the licence agreement. , the matter could be considered on merits at the appropriate stage keeping in view the legal angle. quot;It may not be possible or appropriate to do anything at this stagequot;, the note contended. The licence conditions specifically stipulate that licences are not transferable to a third party directly or indirectly. Any changes in the composition of the licenses have to have the prior approval of DoT. companies which has been licensed to provide the service.Any changes in the equity structure of the licensee has to be duly intimated to the licenser. o consideration for determining the eligibility of the bidder company. Ispat is a Mittal Group company and Hughes is of Hughes Corporation of USA. Hughes Ispat plea that it is only a change of name and the promoters will remain the same has not convinced the DoT.