In March, the hedge fund, known as TCI, said it had “sufficient evidence” to prove Coal India was bowing to directions from the government, rather than acting independently.

TCI had sought advice from its lawyers and warned of the possible legal action.

According to Zeenews India, TCI has now made it clear it will initiate the legal action as soon as next week.

“We will file a lawsuit against [the] CIL board within a week or so,” TCI partner Oscar Veldhuijzen told the news service.

TCI, one of Coal India’s biggest foreign shareholders, is claiming the company has failed to protect the interests of minority shareholders.

The threat of legal action comes as Coal India prepares to sign fuel supply agreements with power firms, after the government issued a presidential directive earlier in the month.

Failure to ink the agreement could result in Coal India being ordered to pay a penalty.

Indian Prime Minister Manmohan Singh reportedly asked Coal India to commit a minimum 80% of coal supply to the power producers.

It is believed the coal giant hasn’t signed agreements with utilities since 2009 due to a reduced supply of fuel sources.

The company will import the fuel to overcome local production hurdles and to reduce frequent power blackouts in the country.

The Indian government has a 90% controlling stake in Coal India, while the remaining 10% is owned by public shareholders.