News like these put a huge “DILEMMA” in retail investor’s mind.
This maybe a small trivial incident, but again as WB says there is never just one cockroach in the kitchen.
With such news, it feels like better to invest in safe ( less compounding) large caps like Deepak Nitrite. Large caps MAY have better environments safeties and regulations.
Regards,
Dr. Vikas
This is the typical example of bad corporate governance. Managements short cutting on waste disposals. Unless exemplary punishment is not imparted such management will not improve. It can’t be financial punishment
Hi @zahare2001 ,
I have confused when you said vendor in this case. I suppose you mean waste disposal “contractor” instead of “vendor”. The vendor of the waste disposal company is Hikal. I am also guessing that this waste disposal is actually outsourced by Hikal. Anyways management might have to be a little bit conscious about these types of contractors, otherwise, media and people might overreact and make the investors confused.
Thanks.
The only reason why I didn’t invest in deepak nitrite is there was an article where they were caught dumping waste in sea. It has been a 20 bagger since then
https://www.newsclick.in/Deepak-Nitrite-Gujarat-Government-Hazardous-Waste
Clarification submitted
Disclousre: Invested and forms 1% of my portfolio.
Disclosures can only be based on facts, which the company did. They are essentially saying 2 things:
This is the best the company can say at this point. Ongoing investigation can reveal if the sub-contractor did any manipulation to the material received from Hikal or the source of toxic fumes is from a completely different source.
I think once you enter contract - the liability may be someone else’s. That is the standard norm for any chemical company in the world. People using fancy terms like “vicarious liability” etc which neither applies here nor recognized by law. Yes, the company may tighten its sub-contractor selection process even further which may be good in the long run. But in this case, i think there is nothing to prove at this point that company is directly in the wrong, as the arrests proved, unless something else crops up in the investigation
Courts have given various judgments depending upon the situation in the case using vicarious liability in India… Refer :- Anita Bhandari & Ors. v. Union of India …
Company started it’s clarification saying ‘As per several media reports’ - these same media reports pointed out a company called Sangam Enviro Private Limited is a repeated offender and they don’t even have licence to handle chemical wastes.( I’m not jumping into any conclusions here )
. why no clarification yet on this matter? … or they excused that part of media reports convinently …
A company claiming to follow the highest level of HSE standards , don’t even screen the background of contractors who they allot work?
If this doesn’t amount for gross negligence, what else will?
On the other side few people will come up with defence , stating past example of other chemicals companies accidents and claiming it’s a part and parcel of chemical business …
So it’s upto individual how he/she assess things here .
Yes, i do agree on the Background screening part - they could definitely do a much better job
But on “Vicarious Liability” - we see this more in the Medical field. As long as there is a signed contract/undertaking on the risk transfer, the liability cannot be really enforced by law. For e.g. now a days many top companies get their employees to sign “Anti Sexual Harrassment” undertakings, and once done - the company liability is transferred to the employee and only the employee is responsible for his/her actions. Same is the case in case of e-waste sub-contractors entered into contracts with IT companies.
Generally, waste handling vendors including vendors for Hazardous waste are approved by State Pollution Boards/committees and the vendors also provide a certification of indemnification to owner of facility generating waste (Hikal in this case). Hence, I think that in all probability Hikal won’t be held accountable in this case…
A company is buying Hikal’s industrial waste (Sodium Hydro Sulphide is the bi product) as their feed stock , to process the same and sell it to Cement / textile sector.
Hikal confirmed the truck under investigation is not the same that is left their site
Why Hikal is responsible for the goods that they have sold ( I am assuming though it their industrial waste, and can be used as feedstock for other usages hence this can be monetized )
Fly Ash bricks ( Fly Ash is a industrial waste in coal fired power plants ) , earlier factories used to dump on the road side, when someone found this can be reused to make bricks then this waste has become gold.
I am still not clear what is the Fault of Hikal if at all any. The company that is agreed to buy (or take it free ) is not responsible to handle the product ?
A random thought - how many chemical companies in our country can stand up & be counted on pollution standards? How pollution control boards work is known to all those who interact with them.
Hope Hikal is clean in this as claimed
Disc: Invested
The company’s version is that firstly the material was not hazardous and secondly, it was not the same truck that had left the factory.
These days every manufacturer even mid sized has CCTV cameras installed in their factory gates and at important points which track every truck moving in and out and clearly capture the truck numbers. Also the time when the finished goods/byproduct/waste/scrap has left the factory and inputs have come into the factory is also recorded. This is mainly done from GST/customs perspective.
A company may purchase raw materials from 1000s of vendors and suppose on investigation at one of the vendors end it is found out that the said vendor only issues bills/invoices without actually supplying the materials, then the GST department issues notices to all the purchasers claiming that every invoice basis which the buyers have taken input stage credit is fake as it is only invoice that is received and no actual receipt of goods. Therefore, this shifts the burden on the companies which have taken credit to prove that they have received not just and invoice but also the goods. This is where the CCTV cameras/ photographs of materials loaded, unloaded etc., comes to their rescue to build evidence in their favour.
Therefore, when a company says it not the same truck, mind you they know what they are speaking and they all the evidences to support it. Here no court can prosecute a company/promoter as it has direct/primary evidence in its support. Finally we must understand that the Court goes on facts and evidence and not on morality.
The Supreme Court has laid down several principles in its judgements, which casts certain responsibility on the industries such as polluter pays, vicarious liability etc. These are broad principles laid down in a public interest litigation (popularly called as PILs). A public spirited citizen can go to the Supreme Court and say look the environment where I live is being polluted by theses industries and under the constitution I have a fundamental right to live. The Government by giving permission to these industries to operate is acting against my fundamental rights. The Court in this context has laid down the principles that the industries owe a sense of responsibility to the environment etc., and directs the Government to make strict laws/ stringent regulations which protects the environment etc.
So, if we see most of these judgements of the Supreme Court they are of the 1980s/1990s when there were not many regulations. It is because of the judicial activism today we have these regulations like hazardous waste management rules etc.
Therefore, at this stage its only speculation what we are doing. What does the investigation say? which law they have violated and what is the punishment under the criminal law when the fault is of the contractor? to what extent the manufacturer also can be held liable for engaging the contractor who does not have license? is it that the contractor did not have license or his license was lapsed/not renewed? The company has evidence that the goods are not only not hazardous but also the truck which carried it was different. so how it cant be the truth? Its a very long drawn process.
In my view, there seems to be a lapse on their part in keeping proper check over the contractor (i.e. when the license expires? was it renewed etc.)
Several companies which handle hazardous materials do go through this and its nothing new. See jubilant ingrevia and Deepak Nitrite history.
In the end what is morally wrong need not be legally wrong.
Just to update:
As per news, Police has arrested three company officials.
Translated This news with Google language
Huge respect for such people, irrespective of being a shareholder putting up cold facts , rather than defending like few others just for their personal interests…
Why will existing shareholders need to defend? Those who are not convinced will exit like how Shashank did, while those who are convinced of Hikal’s long term story will want it to fall more so that they can buy more… isn’t it??.. Its not defending bro… its just making the distinction between being theoritical and being aware of practical realities in business… These are chemical companies and these things are pretty recurring … just few days back, there was explosion in GFL and 2 people died… no chemical company in the world - not even Dupont, Bayer - are immune to such events. Ultimately, an investor has to decide whether to be in the company in the sector or not - he will not get anything by convincing others
Disclaimer - Have a small tracking position and waiting for it to fall to invest more
Well. This forum has become very active after this incidence. Good to see.
Well. I am sharing my 2 ( kind of ) mistakes after such news in 2 big businesses.
First one was - Divi’s - When there was some corporate governance issue with the CFO. I sold that stock and since then it has become 2-bagger at least ( in less than 2 years)
Second one was - Page Industries - Some media reports claimed some issues with the workers related to wages and working conditions. And again I sold the stock and since then it has become a 2-bagger ( in less than 1 year I guess)
With these TWO HUGE MISTAKES, now I have learned “not to react” immediately to such news.
Have Patience and wait for some time. Let the dust settle and then take the DECISION.
Regards,
Dr. Vikas
i am also having patience. But the larger issue remains that is our chemical industry really zero effluent which everyone is claiming.
Sodium Hydrogen Sulphide (NaSH) is not a toxic gas.
As one can see from the news that the Sodium hydrogen sulphide was dumped in a a place where acidic waste was discharged.
Sodium hydrogen sulphide reacts with acid to form toxic hydrogen sulphide H2S gas
This gas is highly toxic. Inhalation of this toxic H2S gas resulted in death of of 6 people
