Foreign investors can claim damage under certain condition: AG

Foreign investors having stake in telecom companies whose licences were quashed by Supreme Court in the 2G case can seek claim for damages if the promoters are being prosecuted, according to a legal view given to the government.

Attorney General G E Vahanvati, who is learnt to have written to the government expressing this view, however, said that foreign investors cannot claim damages for cancellation of their 2G licences by an order of the Apex Court.

"AG is of view that it(claim) depends on whether the foreign investors did a proper due-diligence before investing in the domestic companies. This will be a matter of evidence," sources said.

According to sources, AG further said "the fact that the promoters are being prosecuted under criminal law is certainly a relevant factor with regard to the maintainability of the claim for the damages by foreign investors."

Foreign investors in Sistema Shyam Teleservices, Uninor and Loop Telecom have served notice to government under provisions of international trade agreements seeking damages claim from it for failing to protect their investments.

The legal opinion from Vahanvati came in response to Department of Telecommunications (DoT) query on whether foreign investors can claim damages from the government under international agreements.

"AG has opined that compensation for losses is also limited to certain factors beyond the control of other contracting parties. Further, in his opinion, the alleged loss that emanates out of orders passed by the court does not constitute a cause of action against the government," the sources said.

Explaining this opinion, AG has said that claim of damages from the government is based on a complete misunderstaning of the constitutional position prevailing in this country.

According to the legal opinion, companies that are still exercising legal rights under Indian law do not have any reason to claim damages till they are disposed of.

"Since legal remedies are being resorted to , no cause of action can, in any case, arise till they are disposed of," sources said quoting AG's opinion.

On April 4, the court dismissed review petitions of Videocon Telecommunications, S Tel , SSTL, Tata Teleservices, Unitech Wireless (Uninor), Etisalat DB and Idea Cellular.

Later, a curtaive petition was filed by SSTL before the apex court seeking re-examination of its verdict cancelling its liceneces for the 2G spectrum allocated during the tenure of former Telecom Minister A Raja.

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