TCI threatens legal action against Coal India directors

In the first of its kind investor backlash, The Children’s Investment Fund (TCI), the second largest shareholder in Coal India Limited (CIL), has threatened to take legal action against individual directors for failing in their fiduciary duties to protect the interest of minority investors.

The move followed the company’s recent decision to reverse the hike in coal prices at the instance of the government.  According to TCI officials, Coal India did this on instruction from the government.

“Despite the fact that they had complete freedom to take their own decisions, the board members have simply responded to the instructions of the Coal ministry and reversed their earlier decision. We have documents received under the RTI (Right to Information) to prove that the board responded to instructions from the government. This is a clear breach of fiduciary duties,” Oscar Veldhuijzen, partner, TCI told Business Standard over phone.

In a letter to the directors and top officials of Coal India TCI threatened legal action “if no clear commitments are made public in the immediate future to provide parity of coal prices to import prices and rectifying the other breaches of fiduciary duties which we have outlined”

TCI said the board acted in similar manner in several other key issues and demanded public commitments on issues such as the mining bill, theft of coal, inefficiency in underground mining and under delivery of production targets despite having abundant reserves.

The Union government holds 90 per cent in Coal India. TCI owns 1.1 per cent. Coal India  officials were not immediately available for comment.

“The Indian government is one amongst several shareholders and has no legal right to directly instruct the Board in this manner. There was no push back at all from CIL’s board to the instructions from ministry of coal. In fact they simply implemented government’s instructions without any debate question or challenge,” the letter said.

It further added that, “contrary to the reputation India seeks to gain in the global market place as a fair ground for foreign investors, we find actions of CIL and its individual board members to be reckless and lacking integrity; we will hold each member personally liable. We will not be complacent in aligning our respective interests.”  The letter was addressed to 15 top officials  of the company including the chairman and the Chief financial officer.