IDBI suffers setback in HPL issue

16-May-06

The Industrial Development Bank of India (IDBI) has suffered a setback due to rejection of its petition by the Delhi High Court. The petition sought a stay on a Company Law Board (CLB) order deferring allotment of shares by Haldia Petrochemicals (HPL) to IDBI and several other lending institutions. IDBI is the principal lender in a consortium of 52 financial institutions, which have lent around Rs 3,500 crore to the HPL. HPL, which was a loss making unit till the last financial year, decided to allot shares worth Rs 135 crore to IDBI under the Corporate Debt Restructuring (CDR) package, in an EGM. This move met with objection from The Chatterjee Group (TCG) on the grounds that after the share allotment, TCG would lose control over HPL. TCG then moved the CLB to restrain allotment of shares or ownership rights to the IDBI. On August 4, 2005, CLB stayed the allotment of shares and restrained HPL from assigning any further shares to the lenders until the petition was disposed. This prompted IDBI to move an application before the High Court contending that CLB acted beyond the scope of the complaint lodged by the TCG and the order has come in the way of implementation of CDR package approved by the company.