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SC stays disinvestment in HPCL, BPCL
S.S. Negi
Our Legal Correspondent

New Delhi, September 16
In a severe blow to the NDA government’s decision to privatise profit-making public sector oil companies HPCL and BPCL, created by an Act of Parliament, the Supreme Court today stayed the disinvestment procees, holding that it could not be done without the approval of the Legislature.

A Bench comprising Mr Justice S. Rajendra Babu and Mr Justice G.P. Mathur said the two public sector undertakings (PSDs) could not lose their status of government companies without the law on the oil sector’s nationalisation being amended by Parliament.

“We restrain the Central Government from proceeding with disinvestment, resulting in HPCL and BPCL ceasing to be government companies without appropriately amending the statutes concerned suitably,” the Bench said, allowing two public interest litigations (PILs) challenging the decision.

The PILs had challenged the government’s decision of offloading of 34.01 per cent equity in HPCL and 35.02 stake in BPCL in favour of private investors on the ground that any such step would be illegal without repealing or amending the Act under which the two PSUs had been created by nationalising private oil companies ESSO, Burma Shell and Caltex.

The court made it clear that it was not going into the merits of the government’s disinvestment policy as in the writ petitions there was no challenge to it.

“The only question raised before us whether the method adopted by the government in exercising its executive powers to disinvest in HPCL and BPCL without repealing or amending the law was permissible or not. We find that on the language of the Act such a course is not permissible.” the Judges ruled.

Quoting from the Preamble of the Act on the nationalisation of foreign oil companies ESSO (1974), Burma Shell (1976) and Caltex (1977) and relevant clauses laid therein, the court agreed with the arguments by senior advocates Fali S. Nariman and Shanti Bhushan, for the petitioners that despite offloading of its shares below the limit of 51 per cent by the government, the two PSUs would not lose their status as government companies because of the specific provision of Section 7 of the statute.

The court said Section 7 made a distinction between a private company and a government company as it contemplated for audit of the accounts of the government companies by the Comptroller and Auditor General of India and placing the annual reports on their affairs before Parliament.

“Sale of shares of these companies, though uninhibited, cannot be to such an extent so that the substratum of the character of the government companies is allowed to be lost and converted into an ordinary company without being approved by the general body of shareholders and, in this case, by the government,” the Bench said.

The court rejected the arguments by Centre’s counsel Harish Slave that there was no specific provision in the statute for the nationalisation of the oil sector putting a bar on sale of the shares of HPCL and BPCL. It said, “What is contemplated under Section 7 of the Act is only a government company and no other.”

On the Centre’s argument that the court had approved the disinvestment of Balco, done by an executive order, and the government had gone ahead with offloading its equity in Maruti Udyog, the court said the case of HPCL and BPCL stood on a different footing than of the two former PSUs.

The court referred to the disinvestment policies being pursued by some major economies of the world like the UK, France, Italy, Argentina, Mexico and Brazil, but it refrained from making any comment on the government’s disinvestment policy.

Ministry complies with order
Tribune News Service

New Delhi, September 16
The disinvestment process of the oil refining and marketing majors HPCL and BPCL today came to a halt, with the Disinvestment Ministry instructing the stopping of the due diligence process following today’s Supreme Court ruling asking the government to get Parliamentary approval for offloading stake in the two oil companies.

Disinvestment Minister Arun Shourie, who is presently in Berlin on an official tour, was quoted as saying: “We will immediately stop all processes for disinvestment in HPCL and BPCL. It will have serious consequences for the privatisation process”.

The government is learnt to have issued instructions to HSBC Securities, the disinvestment adviser of HPCL, to immediately stop the due diligence process.

US audit firm Little and Co has been instructed to halt the preparation of BPCL’s accounts. Little and Co had been mandated with the task of redoing the accounts in conformity with the Generally Accepted Accounting Principles (GAAP) of the USA. This is in tune with the requirements for offloading equity in US equity markets. The government had come under heavy attack from the Opposition on the proposal to disinvest HPCL and BPCL. The Cabinet Committee on Disinvestment (CCD), after much deliberation, had decided to disinvest the two oil companies. While it was proposed to offload government stake in HPCL to a strategic investor, the IPO route was decided upon for BPCL.

The Opposition, including the Congress and the Left, had charged the government with seeking to bypass Parliament and implement the CCD decision through an executive order.

The Opposition had said the government was surreptitiously going ahead with the decision to the disinvestment of HPCL and BPCL.

The government had sought the views of the Attorney-General, who had opined that parliamentary approval was not required, though both companies had been created by an Act of Parliament.

SC ruling won’t affect disinvestment in other PSUs, says BJP
Tribune News Service

New Delhi, September 16
The BJP today said the Supreme Court order on HPCL and BPCL disinvestment would not affect disinvestment in other public sector undertakings (PSUs) as those were not set up by an Act of Parliament.

While BJP President M. Venkaiah Naidu said the apex court’s views had to be respected and the government would take appropriate measures, the party’s economic cell convenor P.N. Vijay asserted that the order would in no way affect the disinvestment in other PSUs, as they had not been set up by an Act of Parliament.

The BJP also rejected the demand of the Congress and the Left for the resignation of Law Minister Arun Jaitley in the wake of the Supreme Court’s adverse order.

Asserting that the disinvestment and economic reforms process would not be reversed by the NDA government, BJP spokesperson Mukhtar Abbas Naqvi said the NDA government or Union Law and Commerce Minister Arun Jaitley do not require any certificate of ability and credibility from these parties.

“Their demand is politically motivated and we will not oblige them,” Mr Naqvi said.

Former convener of the BJP economic cell and one of the think tank of the party, Mr Jagdish Shettigar, said the government had initiated the disinvestment process of HPCL and BPCL only after seeking the views of Attorney-General Soli Sorabjee.

“When the Opposition raised the issue in Parliament, the government had taken the views of the Attorney-General and proceeded according to his advice,” Mr Shettigar said, adding that the government could always appeal against the order or could get the approval of Parliament to comply with the requirement.

Opposition hails verdict on privatisation
Tribune News Service

New Delhi, September 16
Hailing the Supreme Court decision restraining the government from privatising oil majors HPCL and BPCL without parliamentary approval, opposition parties today said they would oppose any government legislation for disinvestment of the two companies. The Left demanded the resignation of Disinvestment Minister Arun Shourie and Law Minister Arun Jaitley.

Congress chief spokesman S. Jaipal Reddy regretted that the government did not agree with its logic that the two companies could be privatised only through an Act of Parliament.

He said the Law Minister and the Attorney-General had given false and perverse advice on the issue.

The spokesman said the oil units were in the strategic sector and should not be privatised. “We will oppose any Bill by the government on the privatisation of these companies. There were differences within the NDA on the issue,’’ he said.

Welcoming the Supreme Court judgement, the Samajwadi Party said it was a virtual endorsement of the report of the Standing Committee on Petroleum headed by party chief Mulayam Singh Yadav.

He said Mr Yadav had categorically stated in his report that disinvesting BPCL and HPCL should have the formal sanction of Parliament.

Hailing the Supreme Court judgement, left parties demanded the resignation of Mr Shourie and Mr Jaitley for misleading Parliament on the issue.

The CPI, the CPI(M), the CPI(ML), the Forward Bloc and their frontal organisations said the judgement would boost the morale of the working class, which had been resisting the NDA government’s privatisation and liberalisation policies.’’

They said the Supreme Court had vindicated the position of the Left that the two companies could not be privatised without a prior discussion in Parliament.

CPI(M) leader Somnath Chatterjee welcomed the Supreme Court decision, saying Parliament should look into the issue of disinvestment afresh.

The time had come to stop the disinvestment of national assets by reckless methods, he added.

CPI(ML) Central Committee member Ranjit Abhigyan said the decision was another slap on the Central Government’s face after the indictment of the Narendra Modi government in Gujarat in the Best Bakery case.

Forward Bloc General Secretary Debabrat Biswas said the policy of privatisation and disinvestment was violative of the Constitution and demanded its reversal.

CITU secretary Swadesh Dev Roy, pointed out that the two companies had been created by an Act of Parliament and they had been nationalised by Parliament, keeping in mind the importance of the oil sector.