Bidvest moves Delhi HC against GVK, investors in airports holding firm

Bidvest, which is trying to sell its 13.5 per cent stake in MIAL since January last year, said litigation by the GVK group had delayed its exit.
Bidvest of South Africa, a key shareholder in Mumbai International Airport Ltd (MIAL), has moved the Delhi High Court against the National Investment and Infrastructure Fund (NIIF), the Public Sector Pension Investment Board (PSP Investments) of Canada, and the Abu Dhabi Investment Authority (ADIA), as well as the GVK group, saying the agreement signed between GVK and the new investors in October last year would lead to a change in the shareholding of MIAL, which violates its right of first refusal.

The lawsuit, filed on Monday, comes at a time when the Union government is seeking foreign direct investment in India, promising ease of doing business to overseas investors.

Bidvest, which is trying to sell its 13.5 per cent stake in MIAL since January last year, said litigation by the GVK group had delayed its exit. GVK's stake sale in the airport holding company to the NIIF and other investors had led to expensive litigation in India, increasing its cost, it added. This is the first time the NIIF, a government of India entity, is being sued by a foreign investor for hampering its investment.

When contacted, an NIIF spokesperson said: “We do not have any comments as the matter is sub judice”. A GVK official declined to comment on the issue. However, the official had earlier said: “They (Bidvest) are trying to scuttle our ROFR (right of first refusal) and instead must agree to conclude the transaction in line with the shareholders’ agreement.” An arbitration panel had in January ruled against Bidvest on the airport stake sale, GVK said.

In its petition, Bidvest argued that the new investors were making unjust gains at the cost of MIAL shareholders. 

They were also entering into a transaction by which they were seeking to appropriate unto themselves 79.10 per cent shareholding of GVK Airport Holdings by purchasing new shares being issued by the GVK group.

As GVK Airport Holdings owns 50.5 per cent in MIAL, any change in the holding company will reduce GVK’s stake and give substantial indirect stake to new investors, it said. This will result in the new investors gaining a substantial foothold, indirectly, in the affairs of Mumbai airport, it said. Bidvest further argued that MIAL, in turn, owned 74 per cent in the Navi Mumbai airport project, and due to the litigation and lack of funds, the GVK group was unable to start the project, impacting the valuation of MIAL.

City and Industrial Development Corporation (Cidco), the Maharashtra government body and shareholder in Navi Mumbai airport, has expressed concerns over the delay in the project and lack of progress in construction. 

“In any event, any breach by GVK or other investors which results in breach of the shareholder agreement will also pose the danger of termination of the Navi Mumbai airport concession agreement, and thus substantially eroding the valuation of Bidvest’s shareholding in MIAL and causing serious harm to us,” the company said.

“It is a matter of fact the new investors (NIIF, PSP, ADIA) in normal circumstances were under no legal obligation to transfer funds into an escrow account towards the proposed acquisition of shares of GVK until the satisfaction of closing conditions under the proposed transaction. However, they still decided to do so, leading to an inescapable conclusion that their objective while depositing funds into escrow accounts was to enable GVK to prevent Bidvest from disposing of its shares in MIAL and thereby ensuring that they were able to acquire a bigger shareholding in MIAL by adopting unlawful and unfair means as also to induce GVK to enter into the transaction in breach of its contractual rights,” Bidvest said.

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