The Supreme Court has dismissed a petition for the winding up of a consortium established by the Andhra Pradesh government as a special purpose vehicle (SPV) to provide broadband connectivity in the state to link all the offices at the district, mandal, block and panchayat level with capital Hyderabad.
The consortium was formed in 2003 to complete the ambitious Rs 395 crore project conceived by the state government to improve the quality of governance.
AP Akash Broadband Ltd, AP Technology Severice (APTS) and Incable Net (Andhra) Ltd were among the companies to form the consortium. But the project landed in trouble with the dispute among the consortium partners over the role of the “dominant” shareholder AP Akash Ltd.
Both the company law board (CLB) and the AP high court had earlier rejected the petition of Incable Ltd for winding up the consortium following allegations of “mismanagement and oppression” by the majority shareholder Akash Ltd, which held 57 per cent equity in the SVP arrangement.
As per the SVP agreement, the project was to be “completed and commissioned” within 65 weeks with December 31, 2006 set as the deadline for it.
Of the Rs 395 crore cost, the equity participation of three constituents of the consortium was Rs 175 crore and the balance Rs 220 crore was to be mobilised as loan by Akash and in the event of it failing to do so, the deficiency was to be met with further equity contribution by all the partners. Rejecting the special leave petition for winding up, the apex court bench of Justices Altamas Kabir and Cyric Joseph said “we are not inclined to interfere with the orders of the HC or the CLB, since we are not satisfied that any act of oppression or mismanagement within the meaning of section 397, 398, 402 and 403 of the Companies Act has been made out against the majority shareholder, which would justify making of a winding up order.”
The top court rejected the plea that the winding up order would be the only “equitable and just” course in the present situation considering the seriousness of the allegations against the majority stakeholder.
Besides, there were allegations against Akash Ltd. that the broadband project was used by it to enrich itself by “using the free right” granted by the state government.