Breaking: Supreme Court Allows Centre To Further Disinvest Its 29.5% Shares In Hindustan Zinc Ltd., Orders CBI Investigation Into 2002 Disinvestment Case

The Supreme Court on Thursday ruled that the Union of India may disinvest its residual shareholding of 29.5% in HZL.The Court also directed that a prima facie case for registration of Regular Case by the CBI as regards the illegalities in the March, 2002 disinvestment of 26% shares is concerned, and order the CBI to do the needful.The bench headed by Justice D. Y. Chandrachud was pronouncing its judgment on the plea by National Confederation of Officers' Associations of Central Public Sector Undertakings and one more petitioner in the Hindustan Zinc disinvestment case."There is no challenge to the disinvestment which took place in 1991- 1992 or 2002, the latter having resulted in HZL ceasing to be a government company. That being the position it would be inconsistent to read an implied limitation on the transfer by the government of its residual shareholding in HZL representing 29.5% of the equity. The government now acts as any other shareholder in a company to be able to transfer shares on the basis of financial and economic exigencies", the bench held."The decision in CIPL is distinguishable for the reason that Hindustan petroleum and Bharat petroleum were government companies when the disinvestment action was challenged before this court. In the present case the disinvestment is of little consequence as HZL ceased to be a government company as a result of disinvestment which took place in March 2002. What is in question is the first relief sought as regards the 29.5% residual shareholding in HZL after it ceased to be a government company. The union government is a shareholder of HZL, though its control and management does not vest with the union government. The shareholding of SOVL has increased to 62.9% after the first call option in 2002. During the course of the hearing this court has been apprised by SOVL that it does not seek to exercise a second call option in view of the share purchase agreement. In this backdrop the decision has been taken by the union government to sell its shares in the open market. The union government as it is in its capacity as shareholder of HZL has the right to take certain decisions to disinvest its shareholding so long as the process of disinvestment is transparent and the union government is following a process which comports with law and results in the best price being realised", the bench has stated.The bench further ruled that the disinvestment in 2002 evidences a prima facie case for registration of a regular case- "We abstain from commenting on some crucial facts and names of individuals involved so as to not cause prejudice to the investigation of the matter, though we set out details from the CBI officers investigation as regards the registration of a regular case which have not been addressed adequately...The registration of a regular case followed by a full fledged investigation must be conducted. This court shall be duly apprised of the status of the investigation."The bench held-(1) The summary dismissal of an earlier petition under article 32 of the Constitution does not bar the present writ petition on the grounds of res judicata as there has been no substantive decision on the merits of the issue (2)the decision in Centre for Public interest litigation does not apply to the present facts as HZL ceased to be a company before the stage of the disinvestment which is to be challenged. The union government decision to disinvest 29.5 % shares is not governed by the principle laid down by the principal in CPIL. (3) SOVL has stated before the court that it is not exercising its secondCall option. The union government has said the shares will be divested in the open market and the rules and regulation of SEBI to secure the best price. (4) There is sufficient material for registration of a regular case with regard to the 26% disinvestment in HZL in 2002. The CBI is directed to register a regular case, and periodically submit status report of investigation to this court, every quarter or as otherwise directed by this court.BackgroundOn October 25, Advocate Prashant Bhushan opened the arguments for the petitioners, telling the bench of Justices D. Y. Chandrachud and B. V. Nagarathna how the Metal Corporation of India was nationalised by an Act of Parliament in 1965 and incorporated as Hindustan Zinc. "The Act of the Parliament stated that the government has the power to vest it in a government company. So it was vested in a government company. Sometime around 2000, the government divested a very substantial part of its shares in it, thereby rendering it to cease to be a government company in the technical sense, in the sense of the government holding being left at 29.5%. At that point of time, some employees challenged that disinvestment.That writ petition was dismissed in limine in 2012. Then we came to know that the government is proposing to disinvest even these 29.5% shares that they have which gives them any valuable rights- Under the Companies Act, if you hold...

Breaking: Supreme Court Allows Centre To Further Disinvest Its 29.5% Shares In Hindustan Zinc Ltd., Orders CBI Investigation Into 2002 Disinvestment Case

Mehal Jain

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