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There Is No Constitutional Right For Insisting On Continuation Of Union's Stake In BPCL; Bombay HC Dismisses Petitions Challenging UOI's Decision To Disinvest

Nitish Kashyap
14 Nov 2020 5:37 AM GMT
There Is No Constitutional Right For Insisting On Continuation Of Unions Stake In BPCL; Bombay HC Dismisses Petitions Challenging UOIs Decision To Disinvest
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The Bombay High Court on Thursday dismissed petitions primarily challenging the decision taken by the union of India of in-principle disinvestment of its shareholding in Bharat Petroleum Corporation Ltd observing that there is no fundamental or constitutional right for insisting on continuation of Union's strategic stake in BPCL.

Division bench of Justice SC Gupte and Justice Madhav Jamdar was hearing a writ petition filed by Federation of all Maharashtra Petrol Dealers Association along with three other PILs. All four petitions raised a connected issue concerning the validity of repeal of the Burmah Shell (Acquisition of Undertakings in India) Act, 1976.

Case Background

Two of the petitioners are petroleum employees unions representing the employees of BPCL. Petitioners in the fourth petition claim to be public spirited individuals espousing the cause of public interest in the matter of strategic disinvestment of the Union's stake in BPCL.

The predecessor of BPCL was Burmah Shell Oil Storage and Distributing Company of India Ltd, which was incorporated in England in 1928, and was carrying on the business of distribution and sale of petroleum products in India. On January 24, 1976, Union of India, by an act of parliament known as the Burmah Shell (Acquisition of Undertakings in India) Act, 1976 (Burmah Shell Acquisition Act), acquired the right, title and interest of Burmah Shell's undertakings in India on and from the appointed date, which was January 24, 1976.

The said act reserved the Central Government's right to direct, by notification, vesting of the right, title and interest and liabilities of Burmah Shell in a Government Company instead of continuing to vest in the Central Government. Around the same time, Union also acquired one Burmah Shell Refineries Ltd., which was also a foreign company carrying on oil refining business, and vide a notification of Ministry of Petroleum dated 24 January 1976, directed vesting of the right, title, interest and liabilities of Burmah Shell in the newly acquired company. The name of this company was changed first to Bharat Refineries Ltd. and subsequently to its current name, BPCL in 1997.

In 2002, the Union Government, by exercise of its executive powers, sought to disinvest its shareholding in BPCL and another Government Company by the name of Hindustan Petroleum Corporation Limited (HPCL), which had vested in it the right, title, interest and liabilities likewise of another foreign company by the name of ESSO, which was acquired by Union of India by another acquisition Act, namely, ESSO (Acquisition of Undertakings in India) Act, 1974. The executive decision of the Union to disinvest its shareholdings in these two companies was challenged before the Supreme Court by one Centre for Public Interest Litigation. The Supreme Court, in the case of Centre for Public Interest Litigation vs. Union of India, held that the Union Government could not disinvest its shareholding, through an executive action, in either of the two companies without the repeal or amendment of the respective acquisition Acts, under which the respective undertakings were acquired by the Union.

By the Repealing and Amending Act, 2016, the Union of India inter alia repealed the Burmah Shell Acquisition Act. The Repealing Act received Presidential Assent on May 9, 2016.

On November 20, 2019, the Cabinet Committee of Economic Affairs, headed by the Prime Minister, granted its in-principle approval for strategic disinvestment of the Union Government's shareholding in BPCL along with transfer of its management and control to a strategic partner. On March 7, 2020, BPCL, in pursuance of the in-principle approval referred to above, published an advertisement and released Preliminary Information Memorandum (PIM) to assist buyers in evaluating the acquisition of the Union's shareholding in BPCL and submitting an Expression of Interest (EOI).

The original date for receipt of EOI was extended from time to time due to the prevailing pandemic of Covid-19 and presently stands at November 16, 2020.

Submissions

Senior Advocate Navroz Seervai appeared on behalf of one of the petitioners and submitted that the original business and undertaking of Burmah Shell, acquired through an Act of parliament and vested in BPCL by a notification in pursuance of that Act, cannot be disinvested without specific legislative approval for such disinvestment from the parliament.

Relying on the Supreme Court judgement in the case of Centre for Public Interest Litigation, argued that the original acquisition being under an Act of parliament, without the parliament having given its approval for disinvestment either by repeal or amendment of the Burmah Shell Acquisition Act, it is not legally possible for the Union Government to disinvest its shareholding in BPCL.

Repealing the act, to the extent it repeals Burmah Shell Acquisition Act, does not amount to such parliamentary approval for disinvestment, Seervai added.

While Additional Solicitor General Anil Singh appeared on behalf of the Union, Senior Advocate Darius Khambatta appeared for BPCL. Both questioned the locus of the petitioner to challenge the act of repeal and the decision to disinvest, besides urging the grounds of delay and suppression against the petitioner.

Judgment

After examining the Supreme Court's judgment in Centre for Public Interest Litigation vs. Union of India, Court noted-

"The Supreme Court judgement in Centre for Public Interest Litigation, accordingly, by no means rules that disinvestment in a Government company is possible only through a statutory enactment or with parliamentary approval. It does not even support Mr. Seervai's case that an undertaking acquired through an Act of Parliament and meant to vest in the Union or a Government company cannot be disinvested except through parliamentary approval. The ratio of the judgement is that if an undertaking is acquired through an Act of parliament and is required to vest in the Union or its company under that law, the same cannot be disinvested so long as the law requiring such vesting is on the statute book; that statute would have to be suitably amended so as to enable the Union to disinvest its controlling stake or change the public character of the undertaking, or the statute would have to be repealed altogether."

Moreover, Justice Gupte observed that parliament has repealed the Burmah Shell Acquisition Act. The effect of such repeal is that as of today, it is as though the statute never existed. Absent the statute of acquisition, there is no legal impediment for disinvestment by the Union of its controlling stake in BPCL, Court said.

Furthermore, Justice Gupte asserted -

"A repeal is but a repeal; it removes from the statute book an enactment which had held the field until then; and it does so in a manner as though the statute never existed. The courts cannot thereafter question the motive behind such removal – whether such removal was simply on the ground that the original statute had become obsolete or whether such removal was actually informed by the parliament's tacit approval of a possible disinvestment which may follow as a result of the repeal.

Much less would it be open to the courts to fault the legislation itself or parliament's wisdom behind it on the ground that it ought to have been informed by such approval or that the parliament did not apply its mind to the aspect of such approval or the effects, including a possible disinvestment, which might follow it. It is not open to courts to scrutinize the legislative process in that manner."

Finally, the bench relied upon the Apex Court's decision in BALCO Employees' Union (Regd.) vs. Union of India and observed-

"There is no fundamental or constitutional right for insisting on continuation of the Union's strategic stake in BPCL. As submitted by Mr. Khambata, subsidies are a matter between the Government and the consumers; these may well continue whatever be the character of BPCL, whether public or private."

Referring to petitioner's advocate Ramesh Ramamurthy's submission that the said decision to disinvest will affect several groups, Court said-

"As for reservations for MSMEs, women entrepreneurs, physically handicapped and war widows, apart from the fact that they are operational matters yet to be assessed and formulated, there is no fundamental or even statutory right to insist on any such reservation and, in any event, these are all incidental fall-outs and the economic policy itself can never be faulted on their basis. Same goes for the extant job reservations in favour of SC, ST, OBCs in BPCL as a Government company which would be lost after a change in its public character as a result of disinvestment."

All four petitions were dismissed.

Click Here To Download Judgment

[Read Judgment]


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