Tn Govt Lost Rs 29 Crore In Essar-Sisco Deal
The Tamil Nadu government has made a loss of Rs 29 crore in the sale of shares of South India Shipping Corporation (Sisco) to Essar Shipping in 1993.
In an affidavit filed before the Madras High Court recently, in response to a public interest litigation filed against the sale of Sisco shares held by Tamil Nadu Industrial Investment Corporation (TIIC), the state government has stated that Essar Shipping was allowed to purchase 23.5 per cent in Sisco at Rs 375 per share when the prevailing market price was Rs 585 per share. This resulted in a loss of Rs 29.62 crore to TIIC which sold the shares.
The affidavit has been filed by C V Harinath Gupta, deputy secretary, small industries department of the Tamil Nadu government.
The disclosures were made after investigations launched in 1996 by the state directorate of vigilance and anti-corruption. The report found that the pricing formula was changed through a government order and this benefitted Essar Shipping. It also sought permission for filing a first information report. The government has promised follow-up action in this regard.
After the acquisition of 23.5 per cent stake in Sisco, it became a group company of Essar group. Before the acquisition, Essar group held 39.5 per cent in the company.
In its defence, the Essar group has denied allegations that the pricing formula was revised to favour it. It says that under the earlier order dated June 19, 1991, there were five methods for valuing the shares to be disinvested by government undertakings. Of these, four methods had been retained and only one regarding calculation of the average price of the shares prevailing in the market had been altered.
The Essar group has denied all wrong-doings on this issue. In their affidavit filed before the court, the group has stated that there were no malafide motives in buying the shares. The price was arrived taking into account the highest average price using all the five methods prescribed by the government.
The issue comes at a time when the Madras high court is set to hear the case regarding the Essar-Sisco merger. The case is coming up for hearing next month. The public interest litigation challenging the acquisition of Sisco shares by Essar was filed by R Jebamani, editor of a Tamil fortnightly in August, soon after the merger announcement. The petition has sought that the sale of Sisco shares to Essar Shipping be declared illegal and to restore the shares to TIIC.
The state government enquiry into the acquisition launched in 1996 found that the pricing formula was changed through government order Ms No 410, Finance (BPE), department dated June 7, 1993. The final disinvestment in favour of Essar Shipping was approved by GO Ms. No 470, Industries dated December 8, 1993
The said detailed enquiry discloses that the earlier pricing formula as laid down in GO Ms No 448, Finance (BPE), Department, dated June 19, 1991 was deliberately revised without any necessity or justifiaction whatsoever in order to favour the third respondent (Essar Shipping).
It was found during the detailed enquiry that the third respondent was not the original promoter and as such, was not entitled to any preferential claim for the purchase of the shares disinvested or for the concessional price as a promoter.The ruling market price was fixed Rs 585 per share as on December 8, 1993 when the aforesaid Government Order No 470, Industries dated December 8, 1993 came to be issued, the counter affidavit states.