IFFCO Moves NCLT Against Swan Energy and Triumph Offshore Following Joint Venture Turmoil

IFFCO Moves NCLT Against Swan Energy and Triumph Offshore Following Joint Venture Turmoil

Indian Farmers Fertiliser Cooperative Limited (IFFCO) has filed a petition with the National Company Law Tribunal (NCLT) against Swan Energy Ltd (SEL) and their joint venture, Triumph Offshore to prevent the joint venture firm from making any decisions without IFFCO’s approval. Specifically, IFFCO seeks to restrain Triumph Offshore from passing resolutions or issuing shares or securities to lenders without prior consent.

In its petition before the Ahmedabad bench of the NCLT, IFFCO alleges that Triumph Offshore’s prepayment of debt could lead to a dilution of IFFCO’s shareholding in the joint venture. This potential dilution is detrimental to IFFCO’s interests.

The legal action by IFFCO is based on sections 241 and 242 of the Companies Act 2013, which address allegations of oppression and mismanagement.

IFFCO owns 49 per cent of the joint venture, which was established with Swan Energy. Swan Energy Ltd (SEL) holds the majority stake of 51 per cent. The board composition includes three nominees from Swan Energy, two from IFFCO, and two independent directors. Triumph Offshore secured a term loan of ₹1,604 crore, with State Bank of India (SBI) sanctioning ₹500 crore. To secure this loan, IFFCO mortgaged its entire equity share capital with lenders.

IFFCO alleges that Triumph Offshore, through its nominee directors and independent directors, collaborated with SEL (referred to as R2) to create a financial crisis for Triumph (referred to as R1).

Furthermore, Triumph Offshore has not taken any steps to charter a Floating Storage and Regasification Unit (FSRU). The decision to proceed in this manner was made by the directors with the intention of facilitating Swan Energy Ltd’s (SEL) ultimate leadership of Triumph Offshore. In light of this situation, accepting SEL’s loan proposal becomes necessary to restore the joint venture’s capacity to repay bank loans.

IFFCO has petitioned NCLT to issue directions preventing Triumph Offshore and its employees from obtaining any loans from SEL or its affiliates without written approval.

In its petition, IFFCO highlights that Swan Energy decided to convene an extraordinary general meeting on October 19, 2023, with the aim of raising ₹1,435.50 crore through a preferential share issue to foreign entity GCP INAB PTE Ltd, Singapore. The proposed issue price was approximately 60 per cent higher than the prevailing market price at that time.

Subsequently, Triumph Offshore called a board meeting on October 10, 2023, on short notice to approve a rights issue of ₹1,100 crore to SEL. This rights issue was intended to replace the existing bank loan with a promoter loan. However, IFFCO’s nominee director opposed this move, emphasizing that these matters fell under the category of “reserved matters.” According to the Articles of Association (AoA) and the tri-partite agreement, decisions related to such matters require the petitioner’s consent.

During the board meeting on October 10, 2023, both of IFFCO’s nominee directors raised objections and opposed the introduction of the proposed agendas. They pointed out that Triumph Offshore had more than ₹400 crore in available funds, rendering additional capital unnecessary. As per the AoA, prior consent from IFFCO was mandatory.

Following the board meeting, Triumph Offshore sent a letter to IFFCO, seeking approval to pre-pay the lenders by issuing additional shares on a rights basis.