The Children's Investment Fund (TCI), which is he second largest investor in Coal India Limited (CIL), has warned of a legal action against the company for allegedly ignoring the interests of minority share holders.

TCI said that is considering taking legal action individual directors for not performing their duties to protect the rights of minority investors in the company. The London-based activist hedge fund has written a letter to directors and top officials of Coal India on Monday.

It warned that it will not accept the abuse of minority shareholders and would seek legal action "if no clear commitments are made public in the immediate future to provide parity of coal prices to import prices and rectifying the other breaches of fiduciary duties which we have outlined".

M Viswanathan, company secretary, CIL, said that the company has not received any letter from the investors. The threat of legal action follows a move by the company to aler its pricing mechanism.

CIL had announced its decision to move from "useful heat value" (UHV) based pricing to (gross calorific value) GCV-based price mechanism from the beginning of 2012. The GCV is a internationally accepted pricing mechanism but the UHV mechanism was used in India to consider heat trapped in ash instead of just the heat released by carbon and hydrogen in the coal when it is heated.

CIL was offering the coal in seven categories until December 31, 2011 and is now offering the fuel in 17 price categories. The types vary from the type producing 2,200 kilo calorie to one that produces 7,000 k cal. Each price band differs with 300 k cal from the previous one under the mechanism.