KOCHI: The million-dollar question is whether the Kerala Government can stop the proposed Adani-MSC share sale deal.
Exercising the power to stop the proposed Adani-MSC deal may not be as straightforward for the Kerala Government as the political debate suggests.
While the Kerala Government appears to have the contractual right to approve the proposed transfer of a 49 per cent stake in Adani Vizhinjam Port Pvt Ltd (AVPPL) to Mediterranean Shipping Company (MSC), turning that power into a legally sustainable ‘veto’ could prove far more difficult, according to legal experts.
Why SPA signed
The reason lies in the distinction between signing a Share Purchase Agreement (SPA) and actually transferring the shares.
APSEZ has informed stock exchanges that it has signed a binding SPA to sell a 49 per cent stake in AVPPL to MSC for $539 million, while MSC has separately committed $858 million towards the port's future expansion taking the total investment to $1.397 billion.
The company has also made it clear that completion of the transaction remains subject to customary and regulatory approvals, indicating that the transfer of shares has not yet taken place.
This also explains why APSEZ informed the stock exchanges before approaching the Kerala Government. As a listed company, it was under a statutory obligation to disclose the execution of a material agreement to investors under SEBI regulations.
And that disclosure requirement is independent of the company's contractual obligation to seek the State Government's approval under the Concession Agreement.
Legal question
The legal question, therefore, is not whether APSEZ informed SEBI before the Kerala Government, but whether the concession agreement prohibits the execution of an SPA itself or only the eventual transfer of shares without prior approval.
Since the agreement merely restricts the transfer of equity beyond the prescribed threshold, APSEZ can argue that no breach has occurred because ownership has not yet changed.
The SPA is only a conditional agreement, with the transaction to be completed only after all required approvals - including that of the Kerala Government - are obtained.
Kerala Govt stand
The State Government may contend that entering into a binding agreement before obtaining its consent defeats the purpose of the approval clause.
“However, even if the concession agreement gives the Government the authority to approve or reject the transfer, that authority may not be absolute. Any decision to withhold approval could require legally sustainable and contractually defensible reasons,” a corporate legal expert explained to businessbenchmark.news.
That could become particularly significant in this case. The proposed buyer is MSC, one of the world's largest container shipping companies and the principal customer expected to drive cargo volumes at Vizhinjam.
Moreover, the concessionaire remains AVPPL, meaning the obligations under the concession agreement continue unchanged; only its ownership pattern is proposed to change.
The legal debate comes even as the proposed transaction has triggered a political row in Kerala, with Chief Minister VD Satheesan and Leader of the Opposition Pinarayi Vijayan separately writing to the Adani Group over the proposed stake sale.
However, irrespective of the political positions taken, the eventual outcome is likely to hinge on the interpretation of the concession agreement and the extent of the State Government's approval rights.
Ultimately, the issue may turn less on the sequence in which APSEZ informed SEBI and the Kerala Government and more on the precise wording of the concession agreement and whether the State can justify refusing approval on legally sustainable grounds.
