HPL sale: Supreme Court order trips stake sale process

Bengal's appeal to stop co-promoter TCG from going to Paris court rejected

The Haldia Petrochemicals Ltd (HPL) story seems to have returned to square one. On Tuesday, the Supreme Court in Delhi rejected the West Bengal government's appeal to restrain HPL's private promoter, The Chatterjee Group (TCG), from approaching the International Court of Arbitration (ICA) in Paris on a dispute over 155 million shares or close to nine per cent stake in the company.

The order is a big blow to the HPL stake sale process being led by the state government. The latter holds close to 40 per cent in eastern India's biggest petrochemical company. Indian Oil Corporation (IOC) had been selected as a valid bidder for this stake by the government, which is in a hurry to divest from the entity. But, the disputed 155 mn shares are part of the 40 per cent stake put on sale.

COURT TROUBLE

• SC order comes as a setback to HPL stake sale, as future of HPL remains uncertain
• International Court of Arbitration in Paris could give new direction to the whole process
• The disputed 155 million shares remain key to management control of HPL
• IOC sources indicate PSU not interested in buying partial stake and wants full 40%
• IOC already has close to nine per cent stake in HPL, and another 40% would give it control over HPL
• The eight-year-old battle over disputed shares has also resulted in company's poor financial health

The SC has said the ICA is the right forum to decide on the disputed shares, said one of the legal counsels for the West Bengal Industrial Development Corporation (the state government agency which formally owns the stake in question). Adding that it was certainly a setback and what lay ahead was unclear.

 

Legal opinion
HPL chairman and state industries minister Partha Chatterjee told Business Standard he would seek legal opinion on the next step. When asked, IOC would not comment on the matter.

TCG is involved in a protracted legal battle with the West Bengal government for these 155 mn shares. The tussle has been on for eight years. The nine per cent of disputed shares are key to management control in HPL. TCG has close to 41 per cent stake and would gain management control if the disputed shares go in favour of TCG's Purnendu Chatterjee.

On the other hand, IOC, which already has close to nine per cent stake in HPL, would be reaching close to the magic figure of 50 per cent, leading to management control. A source in IOC once reiterated the public sector major's intent to acquire full stake remained intact. "We submitted a bid for 40 per cent. WBIDC has to look into it to arrive at a solution," the person said.