Haldia management issue back to CLB

Dispute over the control of Haldia Petrochemicals (HPL) has intensified with the West Bengal government submitting that the Purnendu Chatterjee-led The Chatterjee Group (TCG) had no right over the 15.5 crore shares that were agreed for sale, as the group had failed to keep its commitments.

The dispute has come back to the Company Law Board (CLB) after the state government and TCG failed to resolve the issue amicably.

At the hearing on Friday, the counsel representing the government argued that TCG had no right to demand equity shares in HPL as it had failed to bring in the promised investment of Rs 500 crore. TCG group had brought in Rs 107 crore, which came after two years.

Counsel argued: "We are ready to refund TCG's money. The government, as the majority shareholder, had special responsibility for the transfer of its shares for 10 years without any consideration, hoping that TCG would invest funds and revive the company. That has not happened".

Hearing for the case will continue in March. "The government, as the largest shareholder, agreed to transfer management control and shareholding to TCG for no consideration, based on their 'letter of comfort'. They have failed to bring in the funds as on date, so there is no question of transferring shares or control," the counsel said.

The dispute over the control of HPL came to the fore in August 2005 when the TCG moved the CLB over West Bengal Industrial Development Corporation's (WBIDC) decision to allot 7.5 per cent stake in Haldia Petrochemicals to Indian Oil Corporation (IOC).

TCG, which claims it has about 53 per cent stake even after the allotment, has alleged that they had the first right of refusal to the shares.

According to the government, the transfer of 15.5 crore shares, agreed upon in 2002, has not been registered in the company's books and that TCG did not have majority control.

At present, the company is being board managed as both government and TCG have four directors each on its 16-member board. Financial institutions have five directors and then there are two independent directors and the managing director.

The corporate debt restructuring (CDR) exercise at HPL has hit a stalemate due to the legal wrangle, and the company is losing 1.75 per cent on its existing debt.

This is because IDBI, the main lender, decided to keep the on hold the refinancing of HPL's existing debt till the ownership issue was resolved.

As a result, HPL has to pay interest at 10.5 per cent instead of 8.75 per cent, effective July 1. HPL and the West Bengal government have sought dismissal of TCG's petition in their counter affidavit filed before the CLB.