Shares in Jindal Steel and Power Ltd. fell sharply by 24%, as Naveen Jindal was named in criminal case as allegedly misrepresenting crucial information in order to obtain valuable coal fields from the Indian Government.
In a first information report (FIR) registered by the Central Bureau of Intelligence, both Naveen Jindal and Jindal Steel and Power were charged with cheating and conspiracy.
Corporate lawyer HP Ranina said Mr Jindal will be called for questioning. The CBI will be investigating the matter further before a charge sheet is filed, he added.
Manu Kapoor, Jindal Steel's head of external affairs, said, "JSPL, as a law abiding company, is governed by a strong ethical code of conduct. This is an ongoing CBI investigation into coal block allocation. At this stage of investigation, JSPL is committed to fully cooperate with CBI."
These latest developments have links with the so-called ‘Coalgate’ scandal, which has been developing in India since 2012.
The Indian government gave away mining licenses for captive blocks to private and state-owned companies to enable them to generate power for their own use. License applications were considered by a screening committee in a process that has since received heavy criticism.
In August 2012, the Comptroller and Auditor General (CAG) released a report to parliament stating that the government had lost billions of dollars giving away or selling off undeveloped coal reserves to private companies without competitive bidding. CAG found that companies had acquired 142 coalfields for free or cheaply, without intending to operate them. Many were then later sold off for huge profits.
The failure to allocate the licenses through an auction process was branded 'non-transparent' by the independent CAG. There are claims the country has lost £20 billion (US$ 32 billion) by allocating the licenses too cheaply.
Noting the sharp fall in share prices, market analysts have suggested the cause is that investors don't want to own stocks with perceived governance issues.
Analysts also suggested that the continuing investigation could lead to slower and stricter clearances in the coal sector, which would then potentially have a negative impact on sector growth.
Adapted from various sources by Samuel Dodson
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