CS(OS) No.1102/2006 Page 1 * IN THE HIGH COURT OF DELHI AT NEW DELHI Reserved on: 22.04.2008 Pronounced on: 13.04.2009 + CS (OS) No.1102/2006 PETRONET LNG LTD. ….PLAINTIFF Through : Mr. Valmiki Mehta, Sr. Advocate with Mr. Dhananjay Shahi and Mr. N.L. Ganapathi,advocates Versus INDIAN PETRO GROUP AND ANOTHER ….DEFENDANTS Through : Mr. D.Moitra, Advocate for defendant No.1. Mr. Shantanu Saikia, Defendant No.2 in person. CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT 1. Whether the Reporters of local papers may be allowed to see the judgment? 2. To be referred to Reporter or not? 3. Whether the judgment should be reported in the Digest? S.RAVINDRA BHAT, J. % 1. The plaintiff seeks permanent injunction restraining the defendants, their successors, assigns, etc or anybody claiming through them, from publishing confidential and/or misleading information relating to the plaintiff’s negotiations and contracts, in the form of articles or news items or in any other form, in the website www.indianpetro.com and its sister or other websites, or through e-mail alerts, without the written consent of the plaintiff; It also seeks mandatory injunction directing the defendants, their successors, assigns, etc. to unconditionally CS(OS) No.1102/2006 Page 2 remove the confidential and misleading information/news items/articles detailed in paragraph 19 of the plaint from the defendants’ said website www.indianpetro.com. 2. The Plaintiff is a listed, joint venture company promoted by four Public Sector Undertakings, (viz, GAIL (India) Limited, Oil Natural Gas Corporation Limited Indian Oil Corporation Limited and Bharat Petroleum Corporation Limited with an authorized share capital of Rs.1200 crores, to import Liquefied Natural Gas (hereafter referred as “LNG”) and set up LNG terminals in the country, Gaz De France, a French national gas company, through its investment subsidiary GDF International, holds a minority stake of 10% equity in the plaintiff as a strategic partner, Asian Development Bank holds 5.2% equity stake as an investor and 34.8% of the equity in the plaintiff is held by the general public. 3. The plaintiff is not aware of the exact legal status of defendant No.1. The particulars of defendant No.1 is based on the information provided in the website of defendant No.1, www.indianpetro.com. Defendant No.1 claims to be India’s largest news and informal market intelligence provider on Indian Oil and Gas, power and Fertilizer sectors. It also claims to have long standing relationships and networking arrangements to provide the most comprehensive, macro and micro reports of the respective industries. The defendant No.1 owns and operates at least three websites, viz., www.indianpetro.com, www.energylineindia.com and www.indianfertilizer.com. Defendant No.2 is the Executive Editor of defendant No.1 and has registered the website www.indianpetro.com; the registration is for a period from 13.11.2001 to 13.11.2011. 4. The defendants have been publishing several news items/articles relating to the plaintiff in the suit website from time to time since 2003, and, barring a few items/articles published in June 2005, April and May 2006 they only published such information which was already in the public domain or which never affected its (the plaintiff’s) interests in any manner. The plaintiff has no objection to the publication of news items or articles involving it, which are already in the public domain. It is, however, averred that unauthorized publishing of sensitive information shared between the plaintiff and international LNG sellers, present and/or prospective, or publishing of half-baked or misleading reports about the plaintiff or its CS(OS) No.1102/2006 Page 3 commercial transactions, as it is bound to have serious repercussions on the plaintiff, cannot be permitted. This is in view of facts relating to the terms of LNG sale and purchase, particularly terms like price and quantity are negotiated separately for each transaction, if published have impact on potential agreements, which could lead to failure of negotiations. The adverse impact on publication could also be existing Sale and Purchase agreements getting breached/terminated (if there are disclosures about that agreement), the plaintiff facing claims for damages, and even on adverse impact on the plaintiff in the stock market. It is contended that any adverse impact on the plaintiff’s transactions or potential transactions would have an adverse chain reaction on other stake –holders in the petroleum sector. 5. It is alleged that the defendants, despite being aware of such adverse consequences, had published confidential information relating to the plaintiff in the suit website on 02.06.2005 and 07.06.2005, the details of which are as follows : (a) On 02.06.2005, the defendants published information under following the headings: (i) “PLL appoints Baker Botts as international legal advisor”, (ii) “Disagreement over routing of additional 2.5 mmtpa Ras Gas LNG through Petronet”, (iii) “Petronet has to look for LNG sources other than Ras Gas and Iran to regasify additional quantities”. (iv) “Petronet LNG not to hand our EPC contract for Dahej expansion project until LNG is tied up and GSPAs signed”, and (v) “Details of PLL’s reconstitution of EPC and finance sub-committees”, (b) On 06.06.2005, the defendants published information under following the headings: (i) “PLL Kochi LNG terminal: August 2009 is target completion date, BEP consultancy likely to be given to EIL”, (ii) “PLL Dahej expansion: Single EPC contract for both regasification and tank construction”. (iii) “PLL Dahej Expansion/Kochi Project I: Details of bidding consortia, eligibility criteria and tender committee recommendations” and CS(OS) No.1102/2006 Page 4 (iv) “PLL Dahej Expansion/ Kochi project II: Details of evaluation of proposals by shortlisted EPC consortia; and (d) On 07.06.2005, the defendants published information under following the headings: (i) “PLL-Kochi project: PLL starts marine studies on advice of Gaz de France” and (ii) “PLL Dahej expansion : EIL beings work on bid packages”. 6. The defendants, says the plaintiff, did not publish confidential/misleading information pertaining to it (the plaintiff) from 11.06.2005 to 26.04.2006. However, when the plaintiff’s officials accessed the website on 27.04.2006, 28.04.2006, 03.05.2006 and 05.05.2006, it was found that the defendants had published, inter alia, three news items/articles on 27.04.2006, one news item/article each on 28.04.2006, 03.05.2006 and 05.05.2006 (hereafter referred as “the offending news items” pertaining to the plaintiff, which were also sent as e-mail alerts to subscribers, part of which made sensitive and confidential information public, and part of which was wrong and misleading. The offending news items are reproduced in the plaint; they are as follows: A (i) “PLL to co-develop Kochi SEZ, CPT to be developer April 26: Petronet LNG Ltd., (PLL) will be a co-developer of the Kochi Special Economic Zone (SEZ) along with Cochin Port Trust (CPT) which will be the developer. Besides, PLL will also share the cost of development of Kochi SEZ. On account of being a co-developer, PLL would get fiscal incentives as per the SEZ Act 2005. These would include waiver of customs duty on capital imports, waiver of taxes and levies including VAT for procurement of capital of capital goods within India to SEZ, income has holiday for 10 years and waiver of stamp duty and service tax. Besides, it would be exempted from taxes and other levies of local bodies such as Panchayat and municipalities. Though ensuring export earnings by the units situated in SEZ does not fall in the ambit of the co- developer’s duty, it is expected to develop infrastructure in SEZ. Thus, of the Rs.20 crore expected to be spent on providing common internal roads, security, boundary wall, drains, street lights and gate office for sez, PLL will foot one- fourth of the bill. PLL will also bear half the expense of the Rs.18 crore expected to be spent on a direct road connectivity to Puthuvypeen.” CS(OS) No.1102/2006 Page 5 (ii) “LNG sourcing for Kochi terminal : PLL, Exxon Mobil and offtakers agree on various issues but pricing remains a problem. April 26 : Exxon Mobil is in active negotiations with Petronet LNG and the three offtakers of LNG- BPCL, IOC and GAIL for supply of LNG to the Kochi terminal from the Multinational’s share of gas from the $7.30 billion Gorgon LNG Project in Australia. The following issues came up for discussion; Completion of the terminal before the date of commencement of supply. This is to be done by removing obstacles preventing completion or facilitating adequate financing to cover all EPC or other costs associated with construction and completion of receiving facilities, Construction of necessary pipelines connecting Kochi terminal customers. Till the receiving facilities are completed, obligation under Sales and Purchase agreement (SPA) will remain in place. However, to mitigate take-or-pay obligations in the event of delayed completion, diversion of cargoes will take place to other terminals in India. However, in the case of force-majeure, this guarantee shall not be enforceable. Though it was agreed that the off-takers would resolve the pattern of offtake between themselves and communicate it to Exxon Mobil, the later requested for a speedy decision in the matter. Exxon Mobil also said PLL should revisit the pricing agreement proposed in view of the rise in prices of petro products. PLL and the offtakers promised to take up the issue in the next meeting.” (iii) “LNG transportation : PLL shortlists shipowners, moots Speical Purpose Company April 26: Petronet LNG Ltd., (PLL) is addressing the issue of long-term requirements of LNG through a two- fold strategy. They are : Selection of shipowners for transportation of LNG, and Creating a Special Purpose Company for transportation of LNG to India by PLL or its subsidiary/ nominee. Regarding selection of shipowners for transportation of LNG for its Kochi terminal, a fresh bidding process is on. After extension of the last date for bidding from February 24, 2006 to March 3, 2006, the pre-qualification document was procured by 14 parties. Out of these, 6 companies have been short listed and these shall be issued the bidding document (RFP). The six companies are : CS(OS) No.1102/2006 Page 6 NYK Lines MISC Berhad Teekay Shipping Corp. Oman Shipping Co. Exmar Marine NV A.P. Moller – Maersk PLL has also mooted a special purpose company for the transportation of LNG to India. It is proposed that PLL would hold 49% equity in the company, (Click on details for a full analysis of the selection process.” B. The offending news item published on 28 April 2006; “PLL resists PMO directive that bulk of Kochi LNG should go to NTPC “April 27 : Petronet LNG Ltd., (PLL) has sought the approval of its board to limit the supply of LNG from its Kochi terminal to NTPC’s Kayamkulam power project at 0.3 MMTPA, which would meet the requirements of the power plaint’s existing capacity of 350 MW. This is despite a specific directive form PMO – issued by Principal Secretary T.K.A Nair – that the Kayamkulam project should get 2.1 MMTPA of LNG, out of PLL’s total terminal capacity of 2.5 MMTPA, to help meet the power palint’s requirements when its capacity is enhanced to 2,340 MW. PMO had also directed that the 0.4 MMTPA is to go to BPCL for captive use at Kochi Refinery Ltd., (KRL), Clearly, LNG offtakers – GAIL, IOC and BPCL – are unhappy about the fact that the entire LNG quota would get earmarked to only two consumers. The trio had plans to market the gas to a clutch of industries – including fertilizer companies – which are currently using naphtha as fuel or feedstock. GAIL is also reported to be unhappy with PMO’s direction that its petrochemical plant in Kochi – based on extraction of c2+ fractions from LNG – be put on hold until the terminal’s LNG processing goes up to 5 MMTPA. The additional LNG – to take capacity to 5 MMTPA – is meant to have been sourced from Iran but GSA for the gas is yet to be ratified by the Iranians, casting a shadow over the availability of this gas for the Kochi Plant.” C. the offending news item published on 03.05.2006 CS(OS) No.1102/2006 Page 7 PLL plans $ 100 million FCCB: ADB bailout in case of redemption pressure “May 2 : The management of Petronet LNG Ltd., (PLL) is forced to conduct some tight maneuvering no picking up additional funds – to meet conditions precedent that financial closure be tied up by June 30, 2006 set by LNG supplier for its Kochi LNG Plant – without immediate placing any pressure on expanding the already high equity base – of Rs.750 crore- of the company. The management had mooted a $ 100- million foreign currency convertible bond (FCCB) issue to plug the financing gap but there were differing views – within a four member committee set up to took into the proposal – in resorting to this instrument. Finally, the Asian Development offered to help out in case FCCB redemption (expected five years after the issue. In 2011-2012) was not supported by adequate cash flows from within the company.” D. The offending news item published on 05.05.2006: “PLL’s $ 100 – million FCCB: Salient points “May 4: Petronet LNG Ltd., (PLL) proposed issue of $100 million foreign currency convertible bonds (FCCB) to finance Kochi LNG terminal saw five merchant bankers making their detailed presentations to the board members of India’s largest liquefied gas importer. The salinet point of the presentation were: . the redemption of the bonds would be guaranteed by the merchant banker, . In the event of the bonds being converted into shares, they would become zero coupon bonds. However, if conversion takes place after 5 years, the indicated yield to maturity (YTM) would be between 4.5% to 5.5% per annum. . The indicated conversion premium for the bonds would be in the range of 30% and 40% . To covert the bonds to shares, a premium would be charged on the market price prevailing after 15 months, thus effectively blocking conversion of the bonds for this period, . Redemption or conversion may be enforced till the market price of the stock does not exceed 130% of the converted price plus cumulative YTM, . The transaction can be completed within a period of 4 to 6 weeks. CS(OS) No.1102/2006 Page 8 . FCCBs could be denominated in either dollar or yen. However, yen- denominated FCCBs would be expensive considering the fully hedged cost. Therefore, dollar denominated FCCBs would be the right way to go, . By law, FCCBs are required to be listed at least one stock exchange abroad. Singapore stock exchange is the preferred stock exchange in view of the low cost of listing and easy procedures involved in the stock exchange; and Promoters can buy recover the 3.25% dilution in their holding through creeping acquisition route. This route has two advantages- ? cash outlay being spread over five years and low average cost of acquisition of shares on account of lower cost of shares in the initial years.” 7. The plaintiff says that it would be seriously prejudiced and would suffer irreparable injury if the offending news items are allowed to remain in the suit website. It is claimed that the information contained in the news item reproduced in paragraph A (i) above falls within the purview of being ‘price sensitive information’ as provided for in SEBI (Prohibition of insider Trading) Regulations, 1992 (“SEBI Regulations”); it is speculative in nature and contains disclosures relating to the plaintiff’s business plans at the present only at the drawing board stage, with no certainty about if they would materialize wholly or in part. Such disclosure by unauthorized means of such price sensitive information of a publicly listed company could have a strong bearing on the market behavior of the shares of the company and may affect the interests of lakhs of investors adversely. Under the SEBI Regulations all listed companies are required to frame and comply with a code of internal procedures and conduct which casts an obligation on the plaintiff to protect and prevent the misuse of price sensitive information. In addition, any violation of the SEBI Regulations is an offence punishable with ten years imprisonment or fine up to Rs.25 crores or both. Further, under Section 21 of the Securities contract (Regulation) Act, 1956 {“Securities Act”), a company whose securities are listed on a recognized stock exchange has to comply with the listing Agreement of that stock exchange. Under the Listing Agreements that the plaintiff had entered into with the Bombay Stock Exchange and the National Stock Exchange, (where the plaintiff’s securities are listed) there is an obligation on its part, to inform the respective stock exchanges of any significant business plans such as undertaking of new projects, new investments etc., before such information is CS(OS) No.1102/2006 Page 9 disclosed to the general public and non compliance is an offence punishable with ten years’ imprisonment or fine up to Rs.25 crores or both. 8. The information in the news item reproduced in paragraph 5 A(ii) above, says the plaintiff, pertains to confidential negotiations between the plaintiff and certain Exxon Mobil companies which are covered by a Confidentiality agreement, in terms of which a party cannot make, or cause to be made any statement to a third party, the public or media regarding the occurrence or the substance of any communications, discussions or negotiations without the prior agreement in writing of others. Parties cannot even use or permit use of the name of the others or any of their affiliates in any publication, advertisement or other disclosure. The unauthorized publication of this offending news item by the defendants has the potential of being treated by the other parties to the confidentiality Agreement as a material breach committed by the plaintiff resulting in the other party’s potential suspending on-going negotiations or altogether walking out of the negotiations. The consequence of this would be disastrous for the plaintiff both in terms of loss of business and loss of reputation. The plaintiff claims to have suffered embarrassment and the threat of potential default due to the unauthorized publication of the offending news items. It is alleged that Exxon Mobil companies have viewed it as a breach of the confidentiality agreement by the plaintiff and sought its explanation, which has been given. However, such embarrassment could have been well avoided if the defendants had acted with some sense of responsibility. The plaintiff is not in a position to give the details or produce documents in this regard as it claims to be bound by the confidentiality clauses; it undertakes to produce it for the perusal of this Court if and when directed to do so. It is contended that there are media reports that for a significant amount of the LNG that the plaintiff is presently negotiating, the seller has been in parallel negotiations with LNG buyers in China, Korea and Japan. In such situations unauthorized disclosure and publication of critical information relating to price, quantity, etc., of the plaintiff’s ongoing negotiations with the LNG sellers gives its competitors an unfair advantage as they are at all times aware of confidential information. The disclosure of such information can mean that the plaintiff and in turn other oil and gas industry stakeholders may lose their share of LNG which would result in adverse impact on gas and energy consumers. CS(OS) No.1102/2006 Page 10 9. The news item reproduced in paragraph 5-A (iii) above which states that the plaintiff has selected ship owners, to be issued bid documents is incorrect, according to the plaintiff. The time charter contract to be awarded is of significant commercial value. Hence, the matter of selection of ship-owners is highly confidential and a closely guarded secret till the plaintiff’s board of directors decides this finally, based on an evaluation of the recommendations of a committee appointed by it. The said news item was misleading at the time it was published by the defendants on the suit website. The true position was that the committee looking into the matter had only made its preliminary recommendations, which could be subject to variation from what had been reported and published on the website. There was always a possibility that till the formal approval was given by the plaintiff’s Board some of the ship-owners (whose names were listed on the suit website) might have been excluded and other ship owners included. Such unauthorized and premature publication of confidential information put the plaintiff in an awkward position as it could end up facing unnecessary litigation, if the Board’s decision on the ship owners was at variance with the said news item. 10. The plaintiff says that the information contained in the news item reproduced in paragraph 5-B above, in as much as it suggests that the plaintiff resisted directions/ orders of the Prime Minister’s Office (hereafter referred to as ‘PMO”), is false and misleading. The news item sensationalized confidential discussions involving the plaintiff and other stakeholders where participants merely expressed divergent views on the pros and cons of implementing a PMO directive. The issue was not finally decided; the plaintiff had not yet taken a definite stance on the matter. The said report also affected the plaintiff adversely as it conveyed the impression that the plaintiff did not respect the PMO, which is malicious. 11. It is claimed that information contained in the news item reproduced in paragraph 5-C and D above are also incorrect and misleading and were published with the sole intention of causing sensation by reporting confidential internal discussions of the plaintiff involving its fund and cash flows. The defendants have twisted internal discussions as conflicting views portraying that there is in-fighting within the plaintiff Company. As the defendants could not have published such confidential issues, even if the information published was accurate, till they had CS(OS) No.1102/2006 Page 11 been made available in the public domain, it goes without saying publishing of inaccurate information cannot be permitted at any cost. Further, this is also price sensitive information and therefore there is an obligation on the plaintiff to ensure that it is not leaked to the general public, before formal decisions were taken in this regard. 12. The plaintiff, in view of their allegations, seeks permanent injunction to restrain the defendants The Defence 13. In their written statement, the defendants contend that the first Defendant had been regularly publishing news and information regarding four public sector undertakings who own 50% of the equity of the plaintiff, namely GAIL (India) Limited Oil and Natural Gas Corporation Ltd., Indian Oil Corporation Limited and Bharat Petroleum Corporation Limited and none of them ever complained about it. In fact, some of these entities are in the very business that the plaintiff is involved in. Defendant No. 1 has been publishing news and views on contractual and commercial negotiations involving import of LNG by some of these entities without eliciting any legal action or litigation there from. For example, Defendant No.1 has published a total of 1781 news articles relating to GAIL India’s activities concerning LNG. Similarly, there are 837 news items on Indian Oil Corporation and issues relating to LNG. None of those companies ever sought legal recourse in respect of such news items. This shows that those companies understood the principle Freedom of Press to report on commercial matters involving billions of dollars of investments of public money in commercial ventures. 14. The defendants deny that they are in the habit of publishing confidential information or any information which could harm the plaintiff’s interest, and that of the public. They say that the plaintiff contradicts itself as the “highly confidential’ information about itself could not have fallen in the hands of the defendants. It is averred that if, as the plaintiff claims, the information published in the website had such serious repercussions on its ongoing negotiations for multi billion LNG projects, the plaintiff should have kept such information to itself. That the media had access to such information implied either that the information is not confidential or that the plaintiff failed in its duty to its shareholders and business partners to keep such information CS(OS) No.1102/2006 Page 12 from the public. To subsequently blame the media, particularly defendants No.1 & 2 for imagined loss of business by publication of so-called confidential information is to make them convenient scapegoats. The defendants say that it will be ironic should a multi-billion dollar transaction be predicated on the