Calcutta, Dec. 22: The Chatterjee Group (TCG) has moved Calcutta High Court to prevent fresh capital infusion into Haldia Petrochemicals Ltd that has never been in more need of cash than now during its more-than-decade-long existence.
Purnendu Chatterjee’s TCG sought the high court’s stay on the change in shareholding till it moves for arbitration under the aegis of the International Chamber of Commerce (ICC), Paris.
The application was moved by TCG, the principal promoter in HPL, on December 18, a day after the last board meeting of HPL. In the meeting, the board decided to explore the possibilities of fresh capital through equity and meet again on December 24.
There are two options before the company: making a rights issue or converting debt into equity. If the court accepts TCG’s request, HPL’s plan to bring in fresh non-interest bearing fund will run aground, rendering the firm sick.
The proposal of fresh equity has been driven by the new management under Uttam K. Basu with the firm backing of the Mamata Banerjee government, which is effectively in charge of Bengal’s showcase project.
TCG’s application flows from an order passed by a division bench of the Supreme Court on December 11.
In the order, Justice G.S. Singhvi and Justice V. Gopala Gowda extended the stay given by a single bench of Calcutta High Court on the sale of a crucial block of 15.5 crore shares till January 7, 2014. Earlier, the stay was up to December 16.
Meanwhile, justices Singhvi and Gowda came out with the judgment allowing TCG to move the ICC, Paris, for arbitration on the ownership of 15.5 crore shares.
The TCG counsel at the apex court said the high court stay on the sale should be extended so that it had protection before the arbitration started. Given the Christmas holidays, the Supreme Court extended the stay.
In the latest round of legal move, TCG is seeking an extension of the January 7 stay on the sale of 15.5 crore shares. At the same time, the group wants a stay on any alteration in the shareholding pattern of HPL.
“The fresh move is effectively to seek a stay on the rights issue and conversion of debt into equity as both entails change in the shareholding,” an HPL observer said.
However, HPL has never needed fresh equity more than now since the firm is sure to wipe out its entire net worth this month. If no cash comes in by March 31, 2014, HPL is sure to go to the Board For Industrial and Financial Reconstruction.
The plant will have to shut operation much before as the production level has been unsustainable. Compared with a capacity of 240 tonnes per day, the production has come down to 110 tonnes per day as the company has no cash to buy raw material naphtha used to make polymer, the building block of plastic products.
TCG’s latest move can also potentially put the state’s plans to sell its stake to Indian Oil Corporation (IOC) to a grinding halt. A section of the state government is toying with the idea to transfer 52 crores of its relatively undisputed shares to the PSU, which was the only valid bidder to buy the stake.
The government’s plan to transfer its entire share to IOC is stuck because of various court cases, mainly on the ownership dispute over the contentious 15.5 crore shares, which the state has offered to the PSU as well.
IOC’s induction could have solved problems for HPL with the PSU supplying the cash. TCG, too, had offered Rs 500 crore along with a demand for management control, which the state rejected.
IOC had sought a tripartite meeting of TCG, the state government and itself for an out-of-court settlement. The state has not paid heed to the proposal.