London-based hedge fund The Children’s Investment Fund (TCI) has initiated legal action against the Union government under the provisions of two bilateral investment treaties over its investment in Coal India (CIL).
TCI, which holds over one per cent in Coal India, through two vehicles domiciled in the UK and Cyprus, sent a notification to this effect to the finance minister on Tuesday. The notification invokes two bilateral agreements, between India and the United Kingdom in 1994, and India and Cyprus in 2002.
“The Republic of India’s recent conduct with respect to CIL has seriously impaired business activities and operations of CIL and has contravened each of the treaties,” the fund said in the notice. If a settlement is not reached within six months, the fund said under the terms of the treaties, international arbitration would begin.
TCI’s grievances include pricing of coal up to 70 per cent below international market prices, allocation of coal blocks to the private sector below market prices, those blocks remaining undeveloped, loss-making underground mines continuing to be operated and the government generally controlling and issuing directions to the company in a manner abusive to minority shareholders. TCI also cited interference by the ministry of environment and forests in delaying approvals to develop new coal mines.
The move comes after two weeks of public posturing by the $8-billion fund, which made a name for itself by taking on companies around the world on governance and minority investor issues.
Meanwhile, the CIL board met in New Delhi on Wednesday to approve the new draft fuel supply agreement. However, the discussions remained inconclusive and the board will again meet tomorrow.
