SC to hear $8bn Cairn-Vedanta deal issue on Fri

Written by Indu Bhan | Indu Bhan | New Delhi | Updated: Feb 28 2012, 09:27am hrs
A public interest litigation (PIL) has been filed in the Supreme Court seeking to declare the $8.48-billion Cairn-Vedanta deal as illegal.

A bench headed by Justice HL Dattu is likely to hear the matter on March 2.

The Cabinet Committee on Economic Affairs, headed by Prime Minister Manmohan Singh, had on January 24 granted final approval to the deal.

The deal for acquisition of 40% stake of oil explorer Cairn India Ltd by London-based mining group Vedanta Resources Plc got delayed earlier due to a disagreement over royalty payments. There were allegations of human rights violations, default of payment and environmental damage in relation to the deal.

Seeking a CBI investigation in the deal, Bangalore resident Arun Kumar Agrawal, a financial expert and a lawyer, has alleged that the Centre's approval for transfer of oil resources worth lakhs of crores of rupees to the foreign private firm "is based on extraneous considerations" and need to be probed.

The move to file a PIL comes on the heels of Vedanta on Feburay 5 declaring that the group's 58.9% holding in Cairn India will be transferred to Sesa Sterlite, a company that will be formed by combining units Sesa Goa and Sterlite (India).

The petition, filed by lawyer Prashant Bhushan, has also sought a direction to ONGC to exercise its right of preemption over the sale of shares of Cairns India on the same terms without causing any loss or profit to Cairns Energy.

It sought the CBI investigation into the circumstances under which ONGC and the government relinquished their rights under the Right of First Refusal (RoFR) to acquire 41% of the shares in the Rajasthan oil block, one of the largest onland oil fields in the world.

The petition also sought a CBI probe into why ONGC, the Cairn India's partner, was made to pay royalty at the rate of 20% for the entire output instead of only on its 30% share of production on oil resources in the Rajasthan block.

It has also sought a direction to CAG/Government to calculate the losses from the payment of 100% of royalty and cess by ONGC before the Cairn -Vedanta deal and direct the ONGC/Government to recover the excess royalty paid by ONGC from Cairn India.

According to the petition, the difference in the payment of the royalty by Vedanta and ONGC amounted to around Rs 47,000 crore which alone should have been sufficient reason to force Cairn to offer the shares to ONGC.

The amount is more than the amount at which the deal was struck ... On the other hand, Cairn Energy UK would not have been prejudiced and had got the same amount if it offered the shares to ONGC under ROFR and yet mysteriously did not do so. This raises a strong presumption that the entire deal is based on extraneous considerations, Agrawal stated in its petition.

Besides, he also wants the CBI investigations into the considerations for grant of arbitrary and illegal extensions of time by the Petroleum ministry to Cairns for oil exploration.