Canoro leaves new owner with Amguri mess

Vol 14, PW 6 (09 Sep 10) People & Policy

Canadian explorer Canoro Resources has bequeathed its new owner with an almighty legal mess.

Next month (November 5) the Delhi High Court will begin hearing arguments from Canoro’s majority shareholder Mass Financial, following its decision to challenge a government order scrapping the Amguri PSC, where Canoro has been operator since July 26, 2004, with a 60% stake. Mass, which today owns 52.9% of Canoro, filed its petition on August 31.

“The High Court heard arguments from both sides over two days,” a Mass source tells this report. “The ministry never sent us a notice before terminating the PSC! They sent us only a ‘show cause’ notice on June 1 to which we replied.

The ministry is now saying it was a termination notice.” Oil ministry director (exploration) Partha Sarathi Das sent Canoro a damning 16-page notice on August 27 detailing the government’s reasons for scrapping the Amguri PSC.

“Your contract under the PSC will stand terminated ninety (90) days from the date of our letter dated June 1, 2010, i.e.

, by August 29, 2010,” writes Das, who goes on to accuse Canoro of misleading the government about its deal with Mass. “Article 29.8 (iv) (of the PSC) stipulates that the prior consent of the list of potential lenders with whom a contractor can consider ‘hypothecation’ is required, which was not obtained by you.

You have clearly violated the provisions of the PSC.” Das adds that Canoro’s response to his June 1 notice is contradictory.

“You (Canoro) have failed to comply with the contractual obligations provided under the PSC.” In its order the government gives Canoro (Mass) until February 28 next year to continue its activities, “Till the right to continue is transferred to another entity.

” Leaving nothing to chance, we hear, Mass had anticipated this termination notice and on August 14 launched arbitration proceedings against the decision.