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Birla group denies charges

Says no legal wrong was done and no undue benefits received, will defend itself through court process

BS Reporter  |  Mumbai 

The Aditya Birla Group said on Wednesday it would study the trial court order of summons in the coal allocation scam to its chairman, Kumar Mangalam Birla, the group’s flagship Hindalco Industries’ managing director, Debu Bhattacharya, and Hindalco itself.

The group said it would “defend its case through the legal process”.

Corporate lawyers said a tough legal fight awaited the group and an option was to approach the high court in Delhi before April 8 and seek a stay on the summons. When asked, the Birla group was non-committal on the legal strategy, while reiterating none of its officials, including the chairman, had pursued any unlawful or inappropriate means for securing the allocation of a coal block.

In its order on Wednesday, the trial court said apart from dishonest inclusion of Hindalco in the Talabira-II & -III blocks, an excess amount of coal was also allotted to the company. “All these acts were done in violation of the well established procedure and guidelines, much less against the rule of law and in complete disregard to the public interest involved,” the order said.

The court said Birla and Hindalco’s top officials seem to have actively tapped their bureaucratic and political channels to secure allocation of Talabira-II. The 15 per cent stake allocation in the combined Talabira-II and III blocks to Hindalco resulted in negating the proposal of Neyveli Lignite Corporation (NLC) to establish a 2,000 Mw power plant in Odisha, thereby causing loss to a state-owned company and windfall profit to a private one, the order said.

After the order, Hindalco’s shares closed at Rs 130, down 5.5 per cent, and lost Rs 1,700 crore of market value when compared to Tuesday’s close. Analysts said the stock fell as investors feared the top management would be more involved in fighting the charges than focusing on operations.

The Birla statement said the company had represented its case to the authorities in a transparent and lawful manner, following which it was allocated a 15 per cent share in the combined Talabira-II and III blocks in November 2005, in a joint venture with Mahanadi Coalfields and NLC, both public sector undertakings (PSUs), with an 85 per cent stake. The block was de-allocated in 2014 (by Supreme Court order).

Aditya Aluminium, the project for which this allocation was made, has been implemented by the company at an investment of Rs 13,000 crore in Odisha. The plant is already operational, though Talabira-II & III could not become operational for want of clearances. So, “Hindalco is having to suffer irrecoverable financial stress,” the group said on Wednesday.

It added that Hindalco and its officials had cooperated with the investigating authorities completely during the course of investigation since October 2013. “The company’s management is confident that it will stand vindicated at the end of the ongoing legal process,” the company said.

According to the Central Bureau of Investigation, the block was first allocated only to a PSU in April 2005 but Hindalco got a 15 per cent share after Birla met the then coal secretary and another accused, P C Parakh, and then Prime Minister Manmohan Singh.

Birla officials said to get the coal block for a major project, Birla had made several representations to the government, as any corporation would normally do in such circumstances. The first application for the Talabira-II mine was made by Indal back in 1996. After the company was acquired by Hindalco in 2000, it was allocated the mine in November 2005. However, no production could start at the site for want of environment clearances. The Birlas had argued this in itself suggested the industrialist did not get any undue benefits.

The group made the investment decision in Odisha after it was promised low-cost coal and bauxite by the government. However, without access to a coal mine, the project costs have shot up substantially. Hindalco’s operations were hit after the Supreme Court on August 25, 2014, and later on September 24, 2014, declared illegal all allocations of coal blocks made through the screening committee route since 1993. Quashed were the allocations of Mahan, Tubed and Talabira-II & -III, in which the company held equity of 50 per cent, 60 per cent and 15 per cent, respectively. Mahan was allotted to Hindalco and the Essar group.

Hindalco is one of the front-runners in the ongoing coal auctions and has bagged the Dumri and Kathautia mines in Jharkhand, and two mines at Gare Palma in Chhattisgarh.

First Published: Wed, March 11 2015. 23:35 IST