Dabhol lenders for legal option

IDBI, SBI & ICICI Bank consult finance ministry officials.

The domestic lenders to the Dabhol Power Company (DPC), led by Industrial Development Bank of India, State Bank of India and ICICI Bank, are readying for another round of legal battles in order to protect their rights in the 2184-Mw, $3 billion project in the wake of General Electric and Bechtel raising their stakes in the company from 20 per cent to 52 per cent. These two companies acquired nearly half of Enron's 65 per cent stake in DPC last week.

"We will pursue every possible way, including legal options, to protect our interest. The US bankruptcy court's permission to GE and Bechtel to acquire Enron's 65 per cent equity in DPC is a violation of a Bombay High Court order. At the same time, we will also look for an overall settlement by buying out the foreign lenders' exposure to DPC," said an institutional source.

The lenders held a meeting with finance ministry officials today to take stock of the situation.

The meeting was attended by IDBI Chairman M Damodaran, SBI Managing Director Chandan Bhattacharya and ICICI Deputy Managing Director Kalpana Morparia among others.

"The government is in touch with the Overseas Private Investment Corporation (OPIC) to find a solution to the imbroglio," sources who attended the meeting said.

Institutional sources said they were advised by legal experts to stay away from the US bankruptcy court proceedings as this court did not have any locus standi in awarding the Enron stake to GE and Bechtel.

"We follow the law of the land. The DPC shares are pledged with us and cannot be transferred without our consent," the sources said.

Last Thursday, a US bankruptcy court allowed GE and Bechtel to acquire Enron's 65 per cent equity in DPC for around $ 20 million in a two-stage process. In the first step, the two companies would buy out 32 per cent and in the second stage buy out the balance 33 per cent stake in DPC.

The US bankruptcy court has given the nod to GE and Bechtel to pick up a 49 per cent stake in the Enron-controlled Atlantic Commercial Finance.

Atlantic controls another company called Offshore Power Production, which has an equity of around 65 per cent in Enron Mauritius, which in turn holds the shares in DPC.

The strongest point in favour of the domestic lenders is that the Enron Mauritius shares in DPC are pledged with them. Consequently, GE and Bechtel are not in a position to find a new buyer for DPC without the concurrence of the lenders.