Kohinoor Mandal
Pratim Ranjan Bose

Kolkata, Aug. 24

WITHIN five years of Haldia Petrochemical's (HPL) existence, two friends, the West Bengal Government and The Chatterjee Group (TCG), have turned into foes.

Differences over the induction of the Indian Oil Corporation (IOC) into HPL have taken the fight to the Company Law Board. But the friction began some time ago and the board meetings were not always low-key affairs.

Only recently TCG had accused the West Bengal Industrial Development Corporation (WBIDC) of breach of trust on the allotment of a 7.5 per cent stake to IOC. The West Bengal Government, for its part, has always doubted TCG's intentions regarding HPL.

The chronology of events, Government sources feel, makes it clear that IOC has always been a non-issue. The main point is whether TCG has an interest in just restructuring the company or taking full control of it.

The TCG complaint is that neither WBIDC nor IOC told the company or TCG that the oil major was not interested in a mere portfolio investment but was keen on buying out the entire stake of the State Government, once the initial public offering was over.

According to a letter dated November 10, 2004, to IOC (a copy of which is with Business Line), WBIDC proposed that if TCG refused to buy out the State Government's stake, it would be offered to IOC.

The State Government confirmed the agreement but disagreed with TCG's allegation, as it had always respected TCG's first right of refusal.

According to a Government source, "In June 2005, TCG requested to buy our stake and it was duly approved by the Cabinet within a week. We also accepted TCG's request for a negotiated valuation instead of an independent valuer's opinion. On July 13, we set July 25 for TCG to pay up. On that day, TCG wanted to postpone the deadline further but the request was turned down."

A TCG official said that in three different letters dated July 6, 15 and 22, Dr Chatterjee had clarified that he was ready with the payment for the WBIDC stake.

The Government's stand is that if TCG had bought the stake, IOC would not have been inducted. Even today, if TCG buys the stake, the Government is bound to buy back the shares worth Rs 150 crore allotted to IOC.

The State Government also cited the terms of corporate debt restructuring/CDR (dated January 12, 2005) where it was agreed that TCG would rope in a strategic partner and if needed, WBIDC would offload a part of its holding in favour of TCG to ensure Dr Chatterjee's 51 per cent share in HPL.

It was also decided that if TCG failed to rope in a partner, the entire restructuring of HPL would be carried out by the West Bengal Government. "We never exercised that option," the Government source said. The TCG official, however, said that there was no such stipulation for the CDR.

(This article was published in the Business Line print edition dated August 25, 2005)
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