The telecom ministry is likely to impose a penalty of Rs 300 crore on Aditya Birla group firm Idea Cellular for owning double licences in six circles but the company denied breach of any licence condition.
Idea Cellular in 2008 picked up 41.09% stake in Spice resulting in an overlapping situation in which both the companies held licences in six circles.
Additional solicitor general of India Amarjit Singh Chandhiok in his legal opinion has suggested that the 12 licences (of Idea Cellular and Spice Telecom) be terminated as the merger has violated the lock-in period clause.
The clause stipulates that a company cannot enter into an agreement for merger before three years from the effective date of licence.
The additional solicitor general also said a penalty of Rs 50 crore each may be imposed for the six service areas of Punjab, Karnataka, Haryana, Maharashtra, Andhra Pradesh and Delhi.
Reacting sharply to the news shares of Idea Cellular plunged 7.14% in intraday trading to touch a low of Rs 58.50 on the Bombay Stock Exchange.
The stock later made a marginal recovery and closed at Rs 60.10 a piece down 4.60% from its previous close.
Idea in its clarification asserted that it has not breached any condition of the licence agreement and said it has written 20 letters to the department of telecom (DoT) over the past 30 months but failed to get any response from the government.
Saying that it has has paid Rs 843 crore for overlapping business Idea in a statement said "The court merger was consummated with the full knowledge and support of the DoT over a year ago. For reasons incomprehensible the DoT has so far not issued merger letter in consonance with the court-approved merger."
"The Idea-Spice merger since approved by the courts happened to involve six overlapping licenses. Despite being issued spectrum for five of these it is Idea which advised the DoT that it was not using such spectrum in effect placing overlapping licences in a de facto escrow pending receipt of the DoT's formal letter of merger including surrender if at all that was attracted " it said.
The additional solicitor general has also blamed the company for flouting the substantial equity clause according to which a single company cannot hold more than 10% equity stake in two different telecom entities operating in the same circles.
He has suggested cancelling the new licences in these six circles - Delhi, Maharashtra, Andhra Pradesh, Haryana, Punjab and Karnataka.
Also since Idea has won 3G spectrum in four out of the six circles the ASG has advised DoT to withdraw the 3G spectrum since the licence itself is being cancelled.