UK-based The Children's Investment Fund (TCI) today warned Coal India Ltd (CIL) of legal recourse if the PSU failed to meet June-end deadline to set FSA coal price at market level.
"Unless we hear no later than 30 June that the board of CIL is willing to set a clear, unambiguous and verifiable path to price all FSA coal to market levels, we would be left with no options but to bring claims against both CIL and its directors for repeated breaches of company law, violation of fiduciary duties and obligations to shareholders," TCI said.
TCI is the biggest foreign investor in CIL and has a minority stake in it. It has been accusing the PSU of not protecting minority shareholders' interest and harming the company by not opposing fuel supply agreements (FSA).
In a letter to the CIL Chairman S Narsing Rao TCI said coal prices should be linked to market rates as it would increase Coal India's profitability.
Pointing out at irregularities in coal blocks allocation it said, "We regard the conduct of the Government of India in relation to the disposal of coal blocks as having very substantial parallels with its unlawful and improper interference in the affairs of CIL whereby it has compelled CIL to enter into FSAs for supply of coal at prices well below market."
TCI said in both cases (block allocation and FSA) "assets have been disposed of at undervalue for no good, commercial reason, in pursuance of corrupt objectives, thereby resulting in colossal losses of scarce public resources."
Earlier, it had estimated that if CIL sells its FSA coal at market price levels, its profits will increase by USD 19 billion and had alleged that large industrial companies had pushed the government to impose new FSAs on CIL at the cost of the company.
The government on April 3 had issued a directive to CIL to commit a minimum assured fuel supply to the power producers, failing which it would be subject to penalty.
TCI's investments in CIL are through TCI Cyprus Holding Ltd and Talos Capital Ltd.
