BS reported that the high court has issued notices to state owned miner Coal India Limited and its largest shareholder, the central government, after admitting a petition filed by the UK based hedge fund, The Children's Investment Fund. While the Union government owns 90% of CIL, TCI owns a little over 1% in the company.
The TCI writ has challenged the legality of the Presidential directive issued to CIL in April 2012, after the company refused to toe the government line on fuel supply agreements with power companies.
The fund said in a statement that "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 petition also seeks to quash the letter dated January 25th 2012 by the then coal secretary Mr Alok Perti to CIL, instructing it to revise the price increase made in December 2011.
Separately, in a fresh letter dated July 31st 2012 addressed to CIL chairman Mr 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 realization of value in CIL (and who should) be properly and fully held to account for their actions. He added that "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, CIL had decided to adopt a new pricing mechanism based on the gross calorific value of coal with effect from January 1st 2012. Earlier, it had based prices on the useful heat value of coal, which deducted ash and moisture content from the standard formula.
On January 25th 2012, Mr Perti wrote to Mr NC Jha, then chairman of CIL, 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 with effect from January 1st 2012, consequent to the migration from UHV based grading to GCV based coal grading bands. He said that "As discussed in the meeting and also during sitting of the standing committee on coal and steel on December 20th 2012, you are requested to review revise the above stated CIL's price notification latest by January 31st 2012."
On January 31st 2012, CIL announced the roll back. The reduction was with retrospective effect from January 1st 2012, with a declaration that it would be reviewed after March 31st 2012.
In December 2011, CIL had decided to adopt a new pricing mechanism based on the gross calorific value of coal with effect from January 1st 2012. Earlier, it had based prices on the useful heat value of coal, which deducted ash and moisture content from the standard formula.
Source - Business Standard
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