The high court here has issued notices to state-owned miner Coal India Ltd (CIL) and its largest shareholder, the central government, after admitting a petition filed by the UK-based hedge fund, The Children’s Investment Fund (TCI). While the Union government owns 90 per cent of CIL, TCI owns a little over one per cent in the company.
The TCI writ has challenged the legality of the Presidential directive issued to CIL in April, after the company refused to toe the government line on fuel supply agreements (FSAs) with power companies.
“Whilst, under the Articles of Association, this power has been conferred on the President to be exercised either in the interest of national security or substantial public interest¸ TCI believes that there has been no application of mind by the ministry to assess if any public interest, let alone a substantial public interest, would be served by issuing such a directive,” the fund said in a statement.
The petition also seeks to quash the letter dated January 25 by the then coal secretary, Alok Perti, to CIL, instructing it to revise the price increase made in December 2011.
Separately, in a fresh letter dated July 31 addressed to CIL chairman Narsing Rao, TCI partner Oscar Veldhuijzen indicated its efforts were not over and it would push for legal action against “those who have either destroyed or frustrated the full realisation of value in CIL (and who should) be properly and fully held to account for their actions.” Adding: “We continue to regard the directors of CIL as in breach of their fiduciary, statutory and common law obligations to the shareholders of CIL.”
According to the letter,“We regard the failure of the directors to raise FSA coal prices to anything like market rates as a total failure to fulfill their duties properly. Aside from depriving the minority shareholders of the value of the investments, such action only serves to encourage corruption.”
In December 2011, Coal India had decided to adopt a new pricing mechanism based on the 'gross calorific value' (GCV) of coal with effect from January 1, 2012. Earlier, it had based prices on the 'useful heat value' (UHV) of coal, which deducted ash and moisture content from the standard formula.
On January 25, Perti wrote to N C Jha, then chairman of Coal India, referring to complaints received from ministers, members of Parliament, secretaries of user ministries and various coal consumer associations, “pertaining to unreasonable price increase by CIL w.e.f 01.01.2012, consequent to the migration from UHV based grading to GCV-based coal grading bands...As discussed in the meeting and also during sitting of the standing committee on coal and steel on 20.12.2012, you are requested to review/revise the above stated CIL’s price notification latest by 31st January,” Perti said in the letter.
On January 31, CIL announced the roll back. The reduction was with retrospective effect from January 1, with a declaration that it would be reviewed after March 31.
In December 2011, Coal India had decided to adopt a new pricing mechanism based on the ‘gross calorific value’ (GCV) of coal with effect from January 1, 2012. Earlier, it had based prices on the ‘useful heat value’ (UHV) of coal, which deducted ash and moisture content from the standard formula.
On January 25, Perti wrote to N C Jha, then chairman of Coal India, referring to complaints received from ministers, members of Parliament, secretaries of user ministries and various coal consumer associations, “pertaining to unreasonable price increase by CIL w.e.f 01.01.2012, consequent to the migration from UHV based grading to GCV-based coal grading bands...As discussed in the meeting and also during sitting of the standing committee on coal and steel on 20.12.2012, you are requested to review/revise the above stated CIL’s price notification latest by 31st January,” Perti said in the letter.
On January 31, CIL announced the roll back. The reduction was with retrospective effect from January 1, with a declaration that it would be reviewed after March 31.
