Unresolved $452.36m legal battles haunt GSPC

Vol 13, PW 21 (08 Apr 10) People & Policy
     

Over a century ago American writer and journalist Ambrose Bierce humorously defined litigation as a machine you enter as a pig and exit as a sausage.

GSPC must be familiar with that feeling as it prepares for its forthcoming stock market launch to offer 16.7% of the company to the public. PETROWATCH learns GSPC is embroiled in no less than 26 legal cases involving a total $452.36m - full details of which are in its Draft Red Herring Prospectus (DRHP) submitted to stock market regulator SEBI on March 25.

GSPC’s bulky 551-page prospectus contains 17 pages devoted entirely to litigation over R-LNG pool pricing, incorrect land titles, land acquisition through coercion and misrepresentation, defaults on ‘take or pay’ gas contracts, employee dismissals, and income tax. Eighteen cases relate to disputes with income tax authorities: seven filed by the income tax department and 11 filed by GSPC.

Seven other pending cases are civil, five filed against GSPC and two filed by GSPC. There is also an arbitration case brought by Saipem, which involves the largest amount in any single case: $143.5m.

Saipem alleges that GSPC forced it to work beyond the scope of its contract for Perro-Negro 3 signed on April 1, 2004. Arbitration is still pending and the next hearing is on July 19.

More humorous is a case involving GSPC managing director Tapan Ray, listed on page 356 under the sub-heading “Litigation Involving the Directors.” One Jankiraman N.

Iyer, it seems, has filed a complaint against Ray in the Ahmedabad Consumer Court demanding Rs1012 ($22.51) as a refund for his Gujarat Petronet share application! “It’s not a large amount but it features as one of the ‘risk factors’,” explains a source. Click here to download a full copy of the prospectus.

Go straight to Section II: Risk Factors to read a minefield of previously unpublished information on GSPC!