Supreme Court Dismisses Centre's Review Against CBI Probe Into HZL Disinvestment

Earlier this month, the Supreme Court, dismissed the Central Government's review into its judgment dated 18.11.2021, directing the Central Bureau of Investigation (CBI) to register a regular case in relation to the illegalities in the 26% disinvestment of Hindustan Zinc Ltd. (HZL) by the Centre in March, 2002. Refusing to list the review petition in open Court, a Bench comprising Justices D.Y. Chandrachud and B.V. Nagarathna concluded that there being no merit in the petition, interference was unwarranted. "Application for listing the review petition in open Court is rejected. We have carefully gone through the review petition and the connected papers. We find no merit in the review petition and the same is accordingly dismissed." The order dated 18.11.2021 noted the observations of officials of CBI, who had recommended conversion of the preliminary enquiry conducted by the CBI into a regular case as a prima facie case for a cognizable offence in terms of 9.1 of the CBI Manual had been made out in this matter. A preliminary enquiry on the basis of 'confidential source information' in relation to HZL disinvestment during the period between 1997-2003, was registered by the CBI on 06.11.2013. On 14.07.2020, the Head of Branch, Anti-Corruption Branch, Jodhpur filed an affidavit before the Apex Court, detailing the closure of the preliminary enquiry. The Director of Prosecution, among others, recommended the closure of the preliminary enquiry without registering a regular case. However, the Additional Director, CBI on 22.08.2014, recommended the conversion of the preliminary enquiry into a regular case against some named officials. In view of the difference of opinion that matter was referred to the Attorney General on 17.10.2014. After, the Supreme Court had directed CBI to conduct a probe into the 2002 disinvestment, the Union of India had filed a Miscellaneous Application recalling the said order claiming that the foundational facts presented by the CBI before the Court, based on which the aforesaid direction was passed, are factually incorrect. The Apex Court was not inclined to interfere and discerning the same the Solicitor General, Mr. Tushar Mehta, on 07.02.2022, withdrew the recall application seeking liberty to pursue other remedies in law. Background On 10.01.1966, HZL was incorporated as a public sector company to develop mining and smelting capacities in order to fulfil the domestic demand for zinc and lead. The Union Government decided to disinvest its shareholding in HZL and in the first tranche, between 1991-92, disinvested 24.08% of its shareholding in the domestic market. In the second tranche, the Union Government decided to disinvest 26% of its shareholding in HZL to a strategic partner, by selling 10,98,58,294 paid-up equity shares of Rs. 10 each, at Rs. 40.51 per share, aggregating to about Rs. 445 crores. In terms of the Shareholder's Agreement and Share Purchase Agreement in April, 2002 with Sterlite Opportunities & Ventures Ltd. (SOVL), the Union Government invested 26% of its equity in HZL. This second tranche of disinvestment of 26% was challenged before the Rajasthan High Court. The Union Government approached the Supreme Court seeking transfer of the petition. Eventually, on 11.10.2004, the Apex Court transferred the petition to itself. During the pendency of the petition, SOVL acquired 20% of the equity in HZL from the open market, raising SOVL's holding in HZL to 46%, reducing Union Government's share to 48.45%. On 13.05.2009, the writ petition was withdrawn. The Shareholder's Agreement contemplated two call opinions. Exercising the first call, in November 2013, SOVL transferred 18.92% of the equity holding in HZL in its favour. Thereafter, it became the majority shareholder with 64.92% equity stake in HZL. In 2012, the Union Government proposed to further disinvest 29.54% of its shareholding. A writ petition was filed challenging the said proposal, which was summarily dismissed by the Apex Court. On 06.11.2013, CBI initiated preliminary enquiry into alleged irregularities in the disinvestment of 26% in 2002. On 14.02.2014, a public interest litigation was instituted seeking Court monitored probe in the said irregularities and directions to restrain the Government from disinvesting the residual shareholding of 29.54 %. On 06.03.2017, the CBI had filed a closure report with reference to the preliminary enquiry stating that it did not disclose facts warranting registration of criminal case. [Case Title: Union of India v. National Confederation of Officers Association of Central Public Sector Enterprises And Ors. Review Petition (Civil) Diary No. 4693/2022]Click Here To Read/Download Order

Supreme Court Dismisses Centre's Review Against CBI Probe Into HZL Disinvestment

Sohini Chowdhury

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Supreme Court Dismisses Centre's Review Against CBI Probe Into HZL Disinvestment

Sohini Chowdhury

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INR 1099+GST

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