Monday, April 02, 2012

Betrayal of Democracy: Coal Ministry of India orders the board, to rob the shareholders of Coal India??!! What a shame!! It seems this UPA government will loot everyone.......
The Coal Ministry, Government of India
The Children’s Investment Fund (TCI) today said it had instructed its Indian lawyers, Luthra & Luthra, to begin the process of bringing legal action against Coal India Limited (CIL) and its directors.
“TCI has received advice that the conduct of CIL and its management over the past months constitutes serious breaches of key provisions of Indian corporate law, namely, breach of fiduciary duties and CIL’s affairs being run in a manner that is both prejudicial to the public interest and oppressive to shareholders,” the fund said in a statement on Sunday.
The move comes a day after the government took a tough stand that it may invoke a Presidential directive to force the Coal India board to sign fuel supply agreements (FSAs) with power companies. TCI said it believes “that a number of government directives are not in the public benefit and should not be followed by CIL, because they destroy the profitability and value of the people of India’s stake in CIL”.
TCI partner Oscar Veldhuijzen said, “It is a matter of great regret that the directors of CIL have left us with no option other than to pursue this course. All that we have sought is a constructive dialogue that will improve the value of CIL for all shareholders. Nobody would stand to benefit more from a well-run CIL than the people of India, who are the majority owners of this business. Every attempt we have made to improve governance at CIL and to help CIL realise its value has been met with cynical indifference at best and obstruction at worst.”
TCI has, over the course of recent months, attempted to engage with CIL’s directors to resolve what it calls “a number of grave concerns” about the management of the business. “Despite granting TCI a polite hearing at first, as the extent of mismanagement has become clear, CIL has backed away from any kind of meaningful or substantive dialogue with TCI or any other minority shareholder. It will not now discuss any kind of plan to improve management and governance,” TCI said.
The government's position has been that its involvment in the decision-making process and its preference of public interest over profitability was clearly cited as a risk factor in the prospectus of the company’s initial public offering. Media reports have even quoted a ministry official asking TCI “to sell and go, if they are unhappy”. But TCI is in no mood to give up, yet.
The fund’s public spat with the company started three weeks ago, when it wrote to the directors threatening legal action after it secured a document through the RTI Act, that established government involvement in the decision-making process of the Coal India board.
TCI has already invoked the UK and Cyprus bilateral investment treaties against the government of India.
Further, TCI has repeatedly urged the directors of CIL not to blindly follow government instructions but to act independently and recognise that selling undervalued coal and entering into prejudicial FSAs cannot be to the public benefit, the statement said. Taking on the government contention that the policies are in public interest, therefore, can override the minority investor concerns, TCI said. “Legally, it is for the board of CIL and, ultimately, the courts to determine what the public benefit is, not the government,” it said.
Indeed, the example of 2G telecom licenses being apparently sold at far below fair market value makes clear that public interest is best served by selling natural resources by public auction or by inviting tenders.
Moreover, short-term exploitation of CIL’s assets will cause untold damage to the Indian economy -- discouraging investments in new coal mines; and impairing the ability of the Indian government to raise capital through share sales, with inevitable greater fiscal deficits, less economic growth and higher unemployment rates that follow.
TCI managing partner Chris Hohn remarked, “Considerable damage is being caused to India’s hard won reputation as a place for global investment. If India is to realise its enormous potential and become one of the world’s great trading powers, its public companies must be willing to listen to, and redress, the legitimate grievances of international and domestic investors.”

News body, Courtesy: The Business Standard
Post a Comment