The Supreme Court on Monday issued notices on a public interest suit challenging the role of the central government and state-owned Oil and Natural Gas Corporation in the deal between Cairn India and Vedanta Resources.
A bench chaired by judge D K Jain issued notices to ONGC, Cairn and Vedanta after counsel for the petitioner, Prashant Bhushan, argued ONGC deliberately did not exercise a legitimate right of first refusal (ROFR) and the government, he charged, took a “political decision” to allow the Cairn-Vedanta deal.
The government, he contended, asked Cairn to take a no-objection certificate (NOC) from ONGC. Cairn wrote to ONGC on September 26 last year and was granted the NOC the very next day, without ONGC calculating the huge profit it could have made if it had exercised its ROFR and bought the shares of Cairn India.
He also raised the issue of royalty and of the extensions given to Cairn as highlighted in a report of the Comptroller and Auditor General. The court has issued notice on the interim application for stay of the deal. The main petition seeks investigation into the whole affair.
The petition, moved by a Bangalore-based financial consultant, Arun Kumar Agrawal, prays for a declaration that the agreement and government’s approval are void. Apart from a Central Bureau of Investigation inquiry, it also wants ONGC to exercise its right of pre-emption over the sale of shares of Cairn India. It has asked the court to direct the ONGC/government to recover excess royalty paid by ONGC from Cairn India.
Cairn India entered into an agreement with the Vedanta group on June 16, 2010, to sell 51-60 per cent of its shares in Cairn India, for $ 8.5 billion, without offering the shares to its partner in the joint venture, ONGC, under the ROFR clause.
According to the petition, the Rajasthan block operated by Cairn has 6.5 billion barrels of oil and is capable of producing 1.4 billion barrels, according to the latest balance sheet. The operating cost of extraction is a mere $3.5/barrel, while the sale price is $100/barrel. This vast oil reserve would represent 30 per cent of the total crude oil production of the country. A similar quantity purchased by the oil marketing companies in the international market would cost Rs 120 crore per day or Rs 44,000 crore per annum, with additional transport costs.
It is argued that ONGC, in its joint operation agreement with the Cairn group, had a clause that in case the latter wanted to sell its shares in Cairn India, it would first offer these to ONGC. Only if ONGC refused to buy could it sell to another party. Hence, ONGC had a ROFR. However, Cairn Energy signed a deal with Vedantato sell 51-60 per cent of its shares in Cairn India without making an offer to the ONGC. In fact, it denied any such ROFR.
When Cairn India wrote to the ministry of petroleum for approval of the deal, goes the argument, ONGC objected but the government did not take up the ROFR issue.
Tt is further stated in the petition that before the government completed the formalities to approve the deal, Vedanta made an open offer announcement to the shareholders of Cairn India in terms of the takeover code of the Securities and Exchange Board of India on August 16, 2010.
TCS chief N Chandrasekaran today took over as Nasscom Chairman for 2012-2013, the software industry body.