In a setback to the Government, the Supreme Court on Tuesday restrained it from going ahead with any further disinvestment of its minority share in Hindustan Zinc Ltd (HZL), the management of which is under the control of a Vedanta subsidiary.
The apex court also questioned the government for showing "hurry" in selling its 29% of valuable shares in the company which deals with the "strategic minerals." "There will be status quo as of today pertaining to disinvestment of Hindustan Zinc Ltd to be maintained by parties," a bench comprising Chief Justice T S Thakur, Justices A K Sikri and R Banumathi said.
The bench clarified that it was not stopping Sterlite Vedanta, which has taken over the company, from carrying out investment but only stopping the government from selling its residuary shares in it. The bench also said it will not allow any further disinvestment in HZL till the matter is heard as it admitted the petition filed by National Confederation of Officers' Associations of Central Public Sector Undertakings through advocate Prashant Bhushan challenging the proposal to relinquish the remaining shares in the company.
The union cabinet had approved a stake sale in Hindustan Zinc in 2014. Senior advocate C A Sundaram, appearing for Vedanta, submitted that the private company had taken over the majority stakes 14-years back when HZL was a loss-making firm and now it has emerged as a profit-making unit.
The court asked Attorney General Mukul Rohatagi, "What is the requirement to hand over the valuable assets to Vedanta. Don't do this and don't go for the disinvestment. We will hear the matter. We will not allow them to sell." The bench also wanted to know why the government wanted to part with the residuary stakes in HZL.
"What is the compelling reason to disinvest further. Why are you in a hurry? Let us first hear the case. You will not disinvest your shares till our orders," the bench said. The Attorney General said it was a policy decision and there was only 29% shares with the government.
After the apex court proceedings, the government said it was in no hurry to sell its remaining stake in the Vedanta Resources-controlled HZL due to volatile stock market conditions. Besides, it has been waiting to get more legal clarity on the issue, which is subjudice.
Sources said the government had decided not to go ahead with the stake sale as current market conditions are volatile, hindering efforts to realise the real value of its stake.
When asked about the sale, Mines Secretary Balvinder Kumar told PTI: "The stake sale was approved long back in 2014, but we did not go ahead with this as we wanted more legal clarity on it."
The Centre on October 9, 2014 had told the apex court that no decision has been taken yet on the proposed disinvestment of government stake in HZL.
During the hearing on Tuesday, Bhushan submitted that when the first disinvestment was carried in the company, there was transgression of the law which had become clear when a two-judge bench of the apex court had dealt with disinvestment in another PSU.
Taking note of the contention, the bench said, "Already you have committed a wrong and we would not allow the second transgression."
Referring to the earlier judgments, it said further disinvestment could not be carried out without amending the relevant legal provisions and asked the Attorney General, "What is the compulsion for the disinvestment." The Attorney General maintained that it was a policy decision and asked what will the government do with the remaining shares of the company. "It is a peculiar situation," Rohatgi said.
The bench then said that there is no other way left but for the government to go before Parliament and seek amendment of the relevant law, otherwise it has to retain the remaining stakes in the company.
The petitioner has challenged the proposed disinvestment, saying the decision is "irrational, illogical, illegal, unreasonable, mala fide and arbitrary". The apex court was informed on October 9, 2014 that CBI had registered a preliminary investigation with regard to the sale of stakes in HZL to Vedanta-promoted Sterlite Opportunities and Ventures Ltd in 2002-03.