Essar Energy, a subsidiary of Indian conglomerate Essar Group, is facing more setbacks after the family business lost a billion-dollar-plus tax case.
“We are looking at legal options and we will file a review with the Indian Supreme Court within the next 30 days,” a spokesman for the company told CampdenFB.
His comments follow a ruling by the Supreme Court against Essar Oil, a part of London-listed Essar Energy, making it liable to pay $1.2 billion (€936 million) in deferred taxes.
The case deals with an incentive that had been introduced by the government of Gujarat – a state in western Indian – that allowed businesses that invested in the state to postpone payment of sales tax.
Essar Oil, controlled by the Ruia family, began to build an oil refinery in Gujarat, in an attempt to take advantage of the scheme. But delays in construction caused the company to begin operating the refinery when the scheme was no longer in effect.
Although the state’s court said the oil company still qualified for the temporary tax break, the Supreme Court ruled against the family-run company on 17 January.
The decision doesn’t bode well for group patriarch Ravi Ruia, who hit headlines last month for his alleged involvement in India’s multi-billion-dollar telecoms case. It resulted in the chairman stepping down from his role temporarily on 21 December 2011. He was replaced by his nephew Prashant Ruia as the interim chairman.
Ravi, who founded Essar Group along with his brother Shashi, is credited with transforming the business into one of India’s biggest conglomerates, with operations in steel, shipping and construction.
But the group was hit by poor share performance last year – Essar Energy’s 70% fall in share price made it the worst performing stock in the FTSE 100 index. The court ruling saw shares fall by more than 25% in one day.
The Mumbai-based company had 2010 revenues of $17 billion.