The joint venture between Malaysian low-cost carrier AirAsia and Tata Group has been challenged in the Supreme Court by Subramanian Swamy. In a public interest litigation Swamy has sought cancellation of Foreign Investment Promotional Board (FIPB) clearance to AirAsia.
In an interview with CNBC-TV18, Swamy said that much talked about AirAsia deal is fraught with illegalities. Swamy alleged that only because of the commerce ministries’ huge pressure the civil aviation have decided not to pressure its point relating to allowing foreign direct investment only in existing airlines and not in new joint ventures.
Swamy also raised issue on definitions of effective control and ownership. AirAsia India is a joint venture of Asia’s largest low-cost airline AirAsia Bhd, Tata Sons Ltd and Arun Bhatia of Telestra Tradeplace Pvt Ltd. Tata Sons has a 30% stake in Air Asia India, with Arun Bhatia of Telestra Tradeplace owning 21%.
“Bhatia has some business connections with Fernandes. So, they can collude. So, this is not effective control,” Swamy alleged.
Below is the verbatim transcript of the interview
Q: What are you basic concerns over this deal? You are also alleging that there are elements of corruption which has really gone into them getting this FIPB clearance, run us through that?
A: The challenge is not based on corruption because that is not an issue till I get the other things cleared out. Here is a writ petition pointing out that the deal has been done as everybody knows if any policy it’s the right of the government to make but if it is arbitrary, unreasonable or illegal then it can be challenged in the court. On that basis I am challenging it and saying that it is fraught with illegalities. Two major ones I can tell you just now. One is that FDI rules are very specific and the civil aviation ministry has given it in writing, it’s only because of the commerce ministries’ huge pressure on the civil aviation ministry that they have decided not to pressure their point but it is in writing that the FDI rules permit foreign investment for an existing Indian airline only. Where is the Indian existing airline? None are there.
Second is that the effective control should be obviously with Indian hands. Here there are two Indians and one foreigner namely Fernandes of Malaysia and amongst the Indians, one is an NRI namely Bhatia and Tata.
Q: The approval to AirAsia was given a while ago. The commerce ministry on its part has also clarified that it is possible to have these sorts of Greenfield ventures in the aviation space. Given the timeline why have you chosen to bring up these concerns of yours at this point?
A: I bought it at this point because the Foreign Investment Promotion Board (FIPB) clearance was only a month or two ago. I have to accumulate documents, I can't just go without documents and those are not easy to get from the government. So, it took me time to assemble the material and therefore there is no question of undue delay. Even in the case of the 2G spectrum the spectrum was given in January 2008 and I went to the court only in 2010 and the court didn’t ask me this question.
Q: As to your point where you are talking about ownership and control in Indian hands. It is ofcourse a reputed corporate group like the Tata Group which is involved in this. That is one the partners in the joint venture. Doesn’t this alley concerns to some extent the concerns that you are raising, doesn’t this allay some of those concerns and some of those questions that you are raising?
A: The question is, Tata has what share, do you know? What percentage of the equity does Tata have? He has a minority share. The whole presumption is that Bhatia who owns the remaining 20 percent or 30 percent and Tata I think has 30 percent. Its assumed that Tata and Bhatia will vote together in every issue. That cannot be assumed especially since Bhatia has some business connections with Fernandes. So, they can collude. So, this is not effective control. The word effective control is very clear – not only share ownership. Share ownership is division of dividend but when it comes to effective control you got to see that there is no collusive behaviour.