Kapil Sibal, Minister of Telecommunications and IT has said that the delay in demerging surplus land owned by Videsh Sanchar Nigam Limited was in violation of the shareholders agreement signed between the government and the Tata Group, say news reports.

Sibal, in a letter to the Department of Telecommunications (DoT), has stated that the Attorney General of India and the Comptroller and Auditor General of India (CAG) had expressed concern over the issue in 2005 and 2006 respectively.

He added that the CAG, in its report released in 2006 had noted that the delay in finalising the arrangement had the potential of conferring unquantifiable benefit from the sale of surplus land on the strategic partner (the Tata group) in proportion to its shareholding acquired from the secondary market on the date of the demerger.

Also, he said that the attorney general of India, Milon K Banerji had, in 2005, indicated that the strategic partner was not interested in demerging surplus land as, in the event of status quo, it retained the entire land by paying only 25 per cent of the value of the same to the government.

Meanwhile, DoT is to submit a report in this regard by March 31, 2011.

Tata Communications denied that they had benefited from the surplus land. A statement issued by the company said, ?Tata Communications welcomes any government process that hopefully will expedite the demerger of surplus land, which we have repeatedly requested in the best interests of the company and its shareholders.?

The issue relates to the 773 acres owned by VSNL, which was not part of the sale agreement the NDA government had signed with the Tata group in 2002. The land, spread across five cities, was supposed to have been demerged after the sale, which has not happened.

The delay has been on account of a disagreement between the government and the Tata group on who will fund the demerger. The Tata group wanted the government to take on the burden as they did not have any stake in the land.