Videocon gets termination notice on oil project

Videocon, which holds 25 per cent equity in Ravva, issued debentures worth Rs 990 crore to financial institutions with revenue receivables from the oil field as security.

This security is being held in trust with Industrial Development Bank of India (IDBI) through a Debenture Trust Deed (DTD) ensuring the rights of the debenture holders.

The ministry says that Videocon should have pledged only its 25 per cent equity in Ravva field, or part thereof, while raising the loan. ‘‘It appears that Videocon, in the DTD, has not disclosed its participating interest under the Ravva PSC. As such, the description of the property given in the first schedule appears to be misleading,’’ the ministry says in its termination notice dated April 16.

Moreover, the debenture holders can recover their loan from the revenue earned from the oil field, thereby shifting liability on all four Ravva partners instead of Videocon alone. In fact, Petroleum Secretary B K Chaturvedi wrote to IDBI chairman last October advising him to correct this anomaly in the deed so that ‘‘no liabilities would attach to either the government or any other party to the Ravva PSC.’’

Ravva oil field, which produces 50,000 barrels of oil per day, is also owned by government-owned Oil and Natural Gas Corporation (40 per cent), Cairn Energy (India) Pty Limited (22.5 per cent) and Marubeni Corporation 12.5 per cent.

Another violation pointed out by the ministry is that finance raised by Videocon was not entirely utilised for development of the oil field but also for its other business.

‘‘As per DTD, VPL has raised finance with a view to meet part of the company’s fund requirement towards developmental expenditure of the Ravva oil field and making investments/providing loans to group companies’’.

The ministry has issued a notice of termination under Article 31.1 of the Ravva PSC saying: ‘‘On expiry of 90 days’ time, if no satisfactory reply is given and/or breach of contract is made good, the contract shall stand terminated and you will be liable to pay damages as envisaged under the provisions of Indian Contract Act, 1872.’’

Videocon said it had received the ministry’s showcause letter, but refuted the charges. ‘‘There is no irregularity,’’ Petrocon’s Chief Executive Officer Venugopal Dhoot said. He said: ‘‘It is a usual letter. It is not the first time that we have received it.’’ He added that his company had not filed for arbitration. But government officials said Videocon has served notice for arbitration and appointed retired Justice J.K. Mehra as arbitrator. The ministry is also considering appointing Justice G.T. Nanavati as its arbitrator.