The state government of Gujarat has attacked the clearance granted to American glass giant Guardian to set up a 100% subsidiary in India, adding a new twist to the dispute between the US multinational…
The state government of Gujarat has attacked the clearance granted to American glass giant Guardian to set up a 100% subsidiary in India, adding a new twist to the dispute between the US multinational and Modi Rubber. GACL and GMDC, two Gujarat government-owned companies each with a 4.75% stake in Gujarat Guardian, have been asked to insist that Guardian should not invest outside the state. The two PSUs (Public Sector Undertaking) have also been told to insist that the American company should inject fresh investment in collaboration with its existing partners in Gujarat Guardian: GACL, GMDC and Modi Rubber, which holds 22.4%. The Foreign Investment Promotion Board (FIPB) recently recommended that Guardian be allowed to set up a wholly-owned subsidiary without no-objection certificates (NOCs) from its joint venture partners. The government approved the proposal, overruling objections from partners who cited violation of Press Note 1. The American company, which holds a 50% stake in Gujarat Guardian, has said that the proposed subsidiary would be located outside Gujarat and it would not affect the business of the JV. A major legal battle is also in prospect as Modi Rubber seeks to overturn the decision favouring Guardian in the Ahmedabad high court. Government officials closely following the dispute said Guardian has sought transfer of the cases to the Delhi high court. The outgoing chairman and managing director of GACL, Mr P K Taneja, said the Gujarat government“s view was that Guardian should invest in the state, in association with the existing partners. Modi Rubber has made common cause with the two Gujarat government-owned companies, saying that capacity expansion by Gujarat Guardian was a better option than a fully-owned subsidiary of the American multinational. Modi Rubber GACL and GMDC refused to provide no-objection certificates to Guardian for a 100% subsidiary. Guardian and Modi Rubber are also seeking to buy each other out, besides working on plans to buy the two Gujarat government-owned PSUs.