HPL vs TCG : A recap

26-Aug-05

Within 5 five years of Haldia Petrochemical's (HPL) existence, the West Bengal Government and The Chatterjee Group (TCG) are at loggerheads, due to differences over the induction of the Indian Oil Corporation (IOC) into HPL. TCG has accused the West Bengal Industrial Development Corporation (WBIDC) of breach of trust on the allotment of a 7.5% stake to IOC. These differences have turned bitter and the two have taken the fight to the Company Law Board. But was it this instance alone that has turned the partnership into a bitter battle between the two? Observers opine to the contrary, stating that the friction began some time ago. The chronology of events indicates that the West Bengal Government seems to doubt TCG's intentions of whether TCG had an interest in just restructuring the company or taking full control of it. As per a letter dated November 10, 2004 to IOC, WBIDC proposed that if TCG refused to buy out the State Government's stake, it would be offered to IOC. The TCG complains of not being informed of IOC's interest in buying out the entire stake of the State Government, and not in a mere portfolio investment. The State Government confirmed the agreement but disagreed with TCG's allegation, as it had always respected TCG's first right of refusal. In June 2005, TCG requested to buy the Government stake, which was duly approved by the Cabinet within a week. TCG's request for a negotiated valuation instead of an independent valuer's opinion was also accepted. The deadline of July 25 was set for TCG to pay up, which TCG wanted to postpone, but was turned down by the State Government. The other side indicates 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, 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% share in HPL. If TCG failed to rope in a partner, the entire restructuring of HPL would be carried out by the West Bengal Government