Hindustan Zinc files criminal case against Glencore AG in Indian Court

The element of fraud, forgery, and cheating came to light during the course of an arbitration proceedings before London Court of International Arbitration (LCIA), London, where Glencore AG representatives admitted that they deceived Hindustan Zinc, followed by a finding on record by arbitrators that the concealments in  reports were made to promote sales of Glencore AG. The charges on which cognizance has been taken, and for which Indian court summoned Glencore AG and its representatives for trial, involves criminal conspiracy between consultant and Glencore AG senior officials named in the cognizance order along with cheating and forgery , to promote sales. This may also fall within the purview of UK Bribery Act.

Hindustan Zinc, world leading Zinc producer has filed a criminal case in Indian Court against another mining giant Glencore AG for supply of wrong MRM concentrate and deceiving the company.

A Criminal Court in India has found sufficient grounds to initiate trial proceedings against Glencore AG and its representatives Emir Zouk and a technical consultant Pierir Vix by taking cognizance of offences relating to cheating, fraud, forgery and criminal conspiracy.

Some of the offences are non-bailable and imprisonment up to 10 years in Indian court.  The matter relates to the McArthur River Mine (MRM) concentrate sold by Glencore AG in 2011 to Hindustan Zinc.  The element of fraud, forgery, concealment and cheating came to light during the course of the arbitration proceedings before LCIA London where Glencore AG representatives admitted that they deceived Hindustan Zinc followed by a finding on record by Arbitrators that the concealments, fraud and forgery of reports were made to promote sales of Glencore AG.

Arbitrations are civil proceedings, which are confined within the purview of the contracts, and as offences disclosed are criminal offences, so upon disclosure, the same become a subject matter of separate criminal proceedings initiated by Hindustan Zinc.

When came in knowledge about concealments and admission regarding deceivement, Hindustan Zinc had immediately filed a criminal complaint on which cognizance was taken by the Magistrate after finding sufficient material on record to initiate trial proceedings. The Indian Court has now summoned Glencore AG and its representatives.

The issue may further sound alarm bells for Glencore AG and its representatives under UK Bribery Act due to its extra-territorial jurisdiction apart from US FCPA as charges are of serious nature. Section-7 of the UK Bribery Act imposes liabilities on failure of commercial organization to prevent bribery and Glencore AG senior management may have to explain what action they took at least once the admitted concealment came to their notice.

The charges framed by Indian Criminal Court involves criminal conspiracy between consultant and Glencore AG sales representatives and charges for  trial in cheating and forgery also initiated.

Hindustan Zinc spokesperson confirmed this to Asian Age and informed that, Hindustan Zinc and Glencore AG had initiated negotiations for MRM concentrate in 2009. During negotiations Hindustan Zinc specifically checked about certain parameters relating to Sulphate and Glencore AG senior officials made definite confirmations to the satisfaction of Hindustan Zinc that the Sulphate was minor.

Logically, Sulphate is higher in concentrates stored for more than 6-7 months and hence it is no longer fresh. Higher Sulphate agglomerates a concentrate which leads to formation of a binder (ZnSO4) and bad sintering and higher dross generation. Hindustan Zinc believed in Glencore AG representation and entered into a contract in December 2011 for purchase of MRM concentrate, Hindustan Zinc spokesperson added.

Company also confirmed that, since Hindustan Zinc trusted Glencore AG and the personal dealing were same as in 2009 and 2011, the Company did not insist on including the parameters in agreement in good faith and signed on the standard Glencore AG draft. The contract provided for Glencore AG appointed expert consultant, who will visit Hindustan Zinc’s Chanderiya Unit, handhold the Company and advice on the processing.

Hindustan Zinc had started facing issues in processing of concentrate but the consultant misguided the Company by citing many reasons that included questioning performance of Company’s plant. The consultant also provided a report, after much insistence, giving various reasons to divert Hindustan Zinc’s attention from real issues and pointing out improvements in plant and its processing methods of MRM.

Hindustan Zinc had also informed Glencore AG Global CEO about the ethical misconduct and criminal conspiracy coming to light for the first time during the course of arbitration proceedings.

The Arbitration Tribunal recorded the concealment made by Glencore AG with a specific finding that concealment was made with an intent to promote Glencore AG sales. Further Arbitral Tribunal also concluded that it was MRM only which caused loss to Hindustan Zinc.

However, Arbitration being a civil proceeding, with limited power to function, within the purview of contract and no jurisdiction to entertain criminal conspiracy issues, in August 2017 award declined Hindustan Zinc damage claim in absence of contractual specification.

Hindustan Zinc confirmed that immediately after getting this Award, the Company not only challenged the Award before High court in India but also launched criminal proceedings for forgery, cheating and criminal conspiracy against Glencore AG.

The Local Indian Court in India based on various documents including the findings of concealment and excerpts of cross examination found sufficient documentary evidence to take cognizance of charges against Glencore AG and issued summons to Emir Zouk, Pierir Vix and Glencore AG to be represented by person or officer in charge.

Note: London Court of International Arbitration had ruled in Glencore’s favor on Aug. 17 last year. “Glencore rejects the allegation,” co. says in statement. “HZL’s complaints have already been considered under binding arbitration in London and unanimously found to be without foundation”