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Mittal-HPCL JV hits a legal block
Mittal Steel and HPCL joint venture agreement for the Bhatinda refinery in Punjab has run into problems with the union law ministry.
Updated : Sep 14, 2017, 04:27 PM IST
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NEW DELHI: Mittal Steel and Hindustan Petroleum Corporation Ltd’s (HPCL) joint venture agreement for the Bhatinda refinery in Punjab has run into problems with the union law ministry. The cabinet secretariat has directed the petroleum ministry to get the agreement vetted by the law ministry.
The petroleum ministry is piloting a Cabinet proposal to set up the joint venture. A major objection raised by the law ministry is with regard to Singapore being the seat of arbitration. Mittals are investing in the joint venture through Singapore-based subsidiary Mittal Energy Investment.
The objection is on the grounds that the agreement’s governing law was the Indian law and that the project was based in India. The joint venture agreement and the parent guarantee, executed by Mittal Investment Sarl for its subsidiary Mittal Energy Investment on May 8, 2007, provide the seat of arbitration as Singapore and dispute resolution in accordance with arbitration rules of International Chamber of Commerce. This the law ministry feels can lead to problems.
“While concurring with the joint venture proposal, the department of legal affairs under the law ministry has said that it was subject to final vetting by it,” said an official. When contacted, senior HPCL executives in charge of the project said they were “unaware of any such direction”.
Sources said the department of legal affairs has also said that various provisions of the joint venture make it a private limited company and, therefore, a provision needs to be added that the number of shareholders would not exceed 50 or the maximum permitted to a private limited company.
Besides, the department has also suggested that the clause relating to the freedom to compete should also provide that any technical know-how, business information or opportunities arising for the joint venture should be put to commercial use by the joint venture and none of the parent company should use it without the approval of the other partner.
It also said that the duty of maintaining joint venture-related record should primarily be of the joint venture company since it is an independent legal entity instead of just the joint venture’s parent companies.
