Coal India dispute has wider corporate governance issues: TCI

The Children's Investment Fund Management, TCI, which has commenced legal action against the Government of India over its investment in Coal India, has struck a confident note, arguing that the matter had far wider corporate governance implications for India.

“We have a strong record of activism in many countries and just because no one has done this in India before doesn't mean it's not going to work,” Mr Oscar Veldhuijzen, partner at TCI, told Business Line.

He said the fund had launched the action, after repeated attempts to engage with Coal India and the Government had failed. “We are not asking for anything unreasonable.”

TCI, which holds nearly two per cent of CIL and is the largest shareholder after the Government, has been vocal in its criticism, particularly over Government involvement in the pricing of coal, which it said had “seriously impaired the business activities and operations of CIL”.

On Tuesday, TCI sent a written notification to the Ministry of Finance claiming it had contravened two international agreements for the “promotion and protection of investments”, one with Britain and one with Cyprus, (where the fund which holds the CIL shares is domiciled). Previously, it accused the CIL board of breaching its fiduciary duties by failing to stand up for the interests of the company.

TCI hoped to resolve matters during a “grace period” over the next six months, but should that not happen, the next step would be a tribunal mediated by an independent expert, Mr Veldhuijzen said.

“The implications are huge and potentially very detrimental to India if they don't follow through in a sensible fashion,” he said.

If that does not succeed, the final option would be the involvement of the UN trade commission, though he added that this was unlikely to be necessary.

While coal pricing is at the heart of TCI's concerns as “it sells much of its coal under Fuel Supply Agreements at up to a 70 per cent discount to market rates”, Mr Veldhuijzen expressed his concern over a failure to engage with the fund on issues such as the introduction of coal washing infrastructure and a “lack of leadership” at CIL since the IPO.

“If they choose to list a company they have to treat minority shareholders with respect,” he said.

“They were committed to running the business in a professional fashion. That is what we invested in. We did not invest in weak leadership.”