TCI drags CIL, govt to court for breach of fiduciary duties

New Delhi: The Children’s Investment Fund Management of the UK, which owns less than 2 percent stake in Coal India, said today it has filed a law suit in the Kolkata High Court against the directors of CIL for breach of their fiduciary duties and for failing to perform their functions with adequate care and skill.

The suit also names the Government of India as a party, for abusing its powers as a majority shareholder and for improperly exerting pressure on CIL directors.

[caption id=“attachment_488903” align=“alignleft” width=“380”]  CIL is majority owned by the Government.Reuters[/caption]

Oscar Veldhuijzen, a partner TCI, said in a statement that as per its estimates, CIL would have lost over Rs 8,700 crore in pre-tax profits by end of this fiscal “simply by reversing the price increase of 31 December 2011. Further, by failing to raise FSA coal prices to market levels, the directors have cost CIL a staggering Rs 215,250 crore in pre-tax profits since the IPO. 90% of such profits could have flowed to the Indian People in dividends, and such sums could easily have funded free electricity for all Indian households.”

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The suit by TCI makes several allegations against CIL: reversing a price increase of December 2011, failing to raise coal prices to market levels, not taking adequate steps to streamline production, vacillation in the face of proposals for a highly damaging price pooling system.

Legal action by TCI follows a meeting that its official held with Coal Ministry officials this May where the fund had threatened international arbitration under relevant bilateral treaties unless the Government succeeded in protecting interests of CIL’s minority shareholders. CIL is majority owned by the Government.

At that time, the ministry alleged TCI was unable to pinpoint the exact clause that the Indian Government has violated in the Indo-Cyprus bilateral treaty. Ministry officials had also reiterated that TCI was fully aware of Government’s role in various functions at CIL before investing in the company and all its allegations against the Indian government were baseless.

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But TCI had alleged that the coal ministry officials admitted to interfering in FSA negotiations between CIL and power producers and that the ministry had agreed to free coal pricing. In the past, TCI has also made allegations of corruption against the ministry, saying that by keeping coal prices “artificially” low, it was helping power producers in getting cheap coal.

The coal ministry has taken a very aggressive stand on TCI’s allegations all along, routinely dismissing allegations over interfering in coal pricing, allowing CIL to put in a penalty clauses in case of supply defaults, allocating coal blocks to private parties below market prices etc.