The concerns expressed by SEBI over the CCA have been taken into account
The government, on Monday, gave a conditional go-ahead to Jet Airways to sell 24 per cent stake to Abu Dhabi-based Etihad Airways for Rs. 2,058 crore after Etihad submitted an amended shareholders’ agreement (SHA) and commercial co-operation agreement (CCA).
“We have approved the Jet-Etihad deal with some conditions,” Economic Affairs Secretary Arvind Mayaram told reporters after a meeting of the Foreign Investment Promotion Board (FIPB) here.
As part of the conditional clearance, Jet Airways has been asked to seek prior approval of the government for any changes to be made in the SHA with Etihad, and also for any change in shareholding pattern of the company.
The FIPB clearance also came with a rider that all shareholder disputes and disputes under the SHA would have to be adjudicated under Indian law as opposed to English law that was proposed in the revised SHA submitted just before the FIPB meeting. Any other arbitration can happen under English law. In addition to this, Jet-Etihad will have to submit new articles of association before the deal is put before Finance Minister P. Chidambaram for approval and then brought before the Cabinet Committee on Economic Affairs (CCEA).
SEBI, in its legal opinion, had stated that Jet Airways and Etihad should enter into a CCA only after culmination of the SHA as the CCA seems to give an upper hand to Etihad on commercial matters .
In a 24-point clarification submitted before the FIPB, the stock market regulator highlighted some clauses of the CCA that might give an upper hand to Etihad. The sticking points indicated by SEBI included choosing candidates for senior management positions, consolidation of sales office and general sales arrangements to support sales for Jet in the UAE, and Etihad taking a lead role in negotiations with suppliers, besides others. It has also said that the right of Etihad to appoint a vice-chairman will not have any significant impact on the issue of control.
Following this, both companies changed the controversial clause relating to the appointment of independent director and CEO, such that the board will have the final say now.
Etihad will now take two seats on the 12-member board instead of three previously proposed. The Indian partner, Naresh Goyal, besides appointing four board members, will have the right to nominate the chairman, whereas Etihad will appoint a vice-chairman. Jet also dropped a clause from its earlier application of shifting revenue management to Abu Dhabi. Etihad agreed to vest Mr. Goyal, the founder chairman of Jet, with the right to deliver a casting vote on any matter.
Meanwhile, Civil Aviation Minister Ajit Singh said the issues raised against the deal were politically motivated. “The deal has been cleared by the FIPB with minor changes to the language. All issues raised by the Civil Aviation Ministry have been resolved. Now the deal is expected to go to the CCEA, but that will happen after a Cabinet note is circulated by the Finance Ministry,” he added.
Mr. Singh claimed that SEBI had already cleared the deal. Even the Corporate Affairs Ministry was looking into the deal. “We have followed all proper procedures. The deal is good for the passengers and the civil aviation sector,” he said.