Court in Bhopal Lifts Freeze on Union Carbide : Firm Permitted to Sell Assets but Must Retain Funds to Cover Claims

A judge on Sunday lifted a freeze on the sale of Union Carbide assets but ordered the U.S.-based corporation to hold at least $3 billion in assets to cover claims stemming from the 1984 Bhopal gas disaster.

The decision by District Judge G. S. Patel clears the way for Carbide’s financial restructuring plan to proceed.

The company had offered to maintain the $3 billion in assets if the plan were allowed to go ahead.

Union Carbide said in a statement issued shortly after the ruling: “We are pleased that our offer has been accepted by the court, because we firmly believe the recapitalization plan will benefit everyone concerned.”

India is seeking just over $3 billion in compensation for the victims of the Dec. 3, 1984, leak of toxic methyl isocyanate gas from a Carbide subsidiary’s pesticide plant here.

India says that at least 2,347 people died in the accident, history’s worst industrial disaster. Thousands more were injured. About 520,000 people have filed Bhopal-related claims with the Indian government, which is representing all of them.

January Date Set

Patel scheduled for Jan. 12 the first arguments in the main government suit against Carbide.

On Nov. 17, he issued a temporary injunction barring Carbide from selling any assets, paying dividends or buying back debt. The government had requested the move to ensure that Carbide would be able to pay victims’ claims.

On Wednesday, Patel ruled that the company could pay dividends due Dec. 1 and cover its outstanding interest and debt obligations.

Patel’s ruling Sunday was conditional on the company’s pledge to maintain “unencumbered assets with a fair market value of $3 billion.”

Carbide has said its offer to maintain the assets does not amount to an admission of liability.

The Sunday ruling said the $3 billion was “in addition to any other unencumbered assets the corporation might be required to keep” to meet legal obligations. It did not elaborate.

The action clears the way for Carbide’s plan to repurchase more than $2.5 billion of debt taken on to repel a takeover bid this year by GAF Corp.

Carbide plans to issue $500 million of new common stock and sell its agricultural products and electronics components businesses. It also will sell and lease back its headquarters in Danbury, Conn.

The main Indian suit against Carbide was filed in Bhopal, the capital of the central Indian state of Madhya Pradesh, in September. It came after U.S. District Court Judge John Keenan ruled in May that India, not the United States, has jurisdiction in the case.

India claims that Carbide was wholly responsible for the gas leak and says its pesticide plant was badly designed, poorly maintained and lacking in adequate safety systems.

Carbide says Indian experts and contractors were responsible for the plant and says Indian authorities were partly responsible because they allowed slums to be arise around the plant. It also has alleged that the leak was caused by sabotage.

Carbide filed an affidavit in Bhopal saying that the government originally wanted only $630 million in an out-of-court settlement.

India last March turned down a Carbide offer of $350 million for settling out of court.