Lanco 'not entitled to terminate deal', says Perdaman

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Griffin, Lanco 's purchase from an economic interest has terminated its coal supply agreement with Australian company, Perdaman. The agreement according to Lanco was terminated because Perdaman did not achieve all the conditions precedent related to financial closure in the agreement.

However, in an interview to CNBC-TV18 on the latest development, Vikas Rambal, chairman and managing director of Perdaman Chemicals says Griffin's termination of the supply contract is illegal, since the company is 'not entitled to terminate' in the first place.

While Griffin has offered a renegotiation time period, Rambal says, "the contract does not stand terminated; hence, there is no point of them giving us enough time." He further clears that the company has received an undertaking from Griffin and Lanco and they will not put any mortgage. "The case now is that this breach becomes part of our damage claim," he adds.

Below is an edited transcript of Vikas Rambal's interview to CNBC-TV18. Also watch the accompanying video.

Q: What is your initial reaction? We heard from Lanco that Perdaman has not achieved financial closure by August 29 and therefore, Griffin was within its rights to terminate the supply contract.

A: If you see our release of August 31, we set out that they were not entitled to termination of a contract because you cannot create a breach and then terminate on your breach, which is as per the Australian Law. We have contested and have made that point in Supreme Court of Australia that they have terminated unlawfully. Lanco was not in a position to terminate our contract. It is because of their conduct, their threat of increasing prices on whatever is under their contract that has sabotaged our project.

Q: They have offered you a time period till October to be able to renegotiate and get your financial closure. Do you think you will be unable to do that by October?

A: That is again misleading and hence, why we had a press release to clear things with the public, our stakeholders and financers. The first action taken by then was to terminate our contract and put a public release in India. They have then issued a letter which says in good faith we are able to give you September 6 to renegotiate. However, we are contesting and firstly, the contract is not terminated, so it's not a question of them giving us enough time. From our point of view, that letter has no standing.

Q: What is the next step - do you take them to court for terminating the contract or is the next step the ongoing case that you are fighting with them?

A: This morning Griffin and Lanco lawyers went to court for some termination for the injunction. They have given undertakings that they cannot put any mortgage. They have gone on the basis that - we have issued a press statement on August 31; somehow a misleading statement has been issued. However, what the director of Griffin has said will affect their share price. Hence, the company is giving an undertaking and not injunction.

On that basis, they went to the Supreme Court today and tried to convince the judge that they should be removed from undertaking and their case has been dismissed. The case is moving too fast, hence until till the appeal is there we have an undertaking from Griffin and Lanco, they will not put any mortgage. The main case now is that this breach becomes part of our damage claim. 

Q: So, what is the damage claim you are making now?

A: Until now, we have not increased our damage claim it is still USD 3.38 billion.

Q: Coming down to the issue of the financial closure with regards to your plant, give us some perspective on whether or not you can achieve financial closure and if you all cannot why not?

A: On May 31, we have issued the writ because by that time we had almost signed the terms sheet with the banks. What Griffin did is a public record now has almost killed our project and that is the bottomline of our litigation. It is not the matter of when it will happen, we think it is damaged, unless there is way we can retrieve treat the project. My bankers who are putting USD 2.4 billion dollars will fund the project when a gentleman or company is saying they have not done anything wrong.

Q: If you haven't completed financial closure, how exactly is Lanco in the wrong here?

A: Sometimes superficial knowledge is dangerous. There were two conditions, there were some things which were supposed to be done by Griffin Coal which is a part of contract which is confidential and have not done it at the time which was required and then financial closure should have been achieved because you need to do certain things. You are the main stake holder, like coal supply is the main input to our plant so you have to achieve some condition to meet some financial closure. It goes hand in hand and cannot be seen as isolation.

Q: Is out of court settlement an option for you all at any point?

A: We will rigorously pursue the case through Supreme Court against Lanco and Griffin's conduct because from my perspective, this is unprofessional way of doing business in Australia.

Q: When was the original agreement signed between Griffin and Perdaman?

A: The agreement with Griffin came in October 2008, which was formalized on December 2010. So, we had agreements with them for the last three-half years, it is not that the agreement has come from blue.

Q: It is just that we were thinking that if for the last three years you have not been able to get financial closure were there other reasons?

A: Financial closure means we were investing our equity we have invested. We have invested and completed our designing. I am giving you benefit of doubt because building project in different countries with different rules and regulations. In this country it take normally two to two and half years to complete environment approval and unless you do environment approval nothing moves in Australia. So, any project development in Australia, I have done another fertilizer in Australia, it took us minimum two and half years to achieve what we have achieved now.

Q: When are you likely to increase the damage claims, should we hear from you shortly on what could be the ballpark figure?

A: I cannot answer the question about the amount but what I can say is because there perpetrated termination of the contract was unlawful that becomes one of the breached under Supreme Court. We have made that as one of the writ but I don't know the amount that is the accountants job because is has just happened 24-48 hours before.