A dispute has erupted between partners Jindal Vijayanagar Steel (JVSL) and Praxair, the US-based industrial gas major. JVSL has alleged irregularities in the sale of products from Jindal Praxair Oxygen (JPOCL) to Praxair India (PIPL) — a wholly owned subsidiary of Praxair and customer of JPOCL.

JPOCL is a 74: 26 joint venture between Praxair and JVSL. Praxair, which has complete management control of JPOCL, runs the world’s largest oxygen plant at Bellary in Karnataka. It sells oxygen and other gases such as argon to JVSL’s integrated steel making facility.

JVSL has alleged that majority stakeholder Praxair committed significant irregularities and improprieties in relation to concessional pricing extended to PIPL on sale of argon in contravention of board directives and agreements.

JVSL claims that liquid argon, which was to be sold to PIPL at Rs 30/Nm3, was supplied at concessional rates of Rs 15/Nm3.

This resulted in significant reduction in revenue generation recorded in the accounts of JPOCL, the joint venture, between April 1, ’00, and March 31, ’03, JVSL said.

A Praxair India spokesperson, when contacted, said: “Praxair has always been and continues to be fully committed to its partnership with JVSL in its joint venture, JPOCL. JVSL is also a customer.

Praxair is proud of its contribution to JPOCL’s role as a reliable, cost-effective supplier of oxygen, so JVSL is able to produce quality steel products, which are currently in high demand in the Indian market.”

On the allegations made by JVSL, the spokesperson said: “Naturally, business discussions between Praxair and its partners are confidential and Praxair does not comment on rumours.”

The dispute resulted in JPOCL functionning without an auditor for the financial years ’02-03, ’03-04 and ’04-05, as JVSL stalled moves by Praxair to reappoint PwC as the auditor. JVSL was not confident about PwC and had asked for a change of auditor, which the Praxair-controlled management refused.

JVSL stuck to its stand and refused to approve the resolutions to appoint PwC as auditors. Subsequently, it also approached the regional director (RD), department of company affairs, for appointment of a statutory auditor in place of PwC.

It put forth the names of four firms — Deloitte, VB Haribhakti, Ferguson and Ernst and Young.

Before an order could be passed by the RD, Praxair approached the company law board (CLB) asking the quasi judicial authority to quash JVSL’s request and allow JPOCL to hold the AGM without JVSL directors.

The CLB said it did not have the authority to stay the proceedings of the RD, but allowed Praxair to hold the AGM without JVSL nominees.

Praxair also moved a writ petition in the Madras High Court and got an ex-parte injunction restraining the RD from acting on JVSL’s complaint. The matter is now pending with the Madras HC; the hearing on the matter is expected to come up soon.

A PwC spokesperson said: “The insinuations against PwC are entirely incorrect. It is not our policy to disclose confidential information about clients to the media in matters of alleged disputes between shareholders.

We have followed appropriate audit procedures; we stand by our opinion and will robustly deal with any allegations that are false and designed to affect our reputation.”

The minority shareholders got wind of the alleged irregularities when JVSL appointed Deloitte Haskins & Sells as concurrent auditors. Deloitte, in its report to JVSL, listed irregularities allegedly committed by the JPOCL management.

The Deloitte reports states: “It may be examined whether the actions of the management of JPOCL and Mr Reidy are in line with the decisions of the board and the terms of agreement between the joint venture partner.”

Mr Reidy is a non-executive director on the board and a Praxair nominee. Based on its concurrent auditors’ reports, JVSL claims that he had no authority to sign the representation and PwC also shouldn’t have relied on such representation.

In its complaint to the ICAI, JVSL said: “Despite irregularities and improprieties in JPOCL’s accounts, PwC, as the statutory auditor of the company, in its report has not only failed to report the irregularities, but has on the contrary, opined that the accounts reflect a true and fair view of the financial position and state of affairs of JPOCL.