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By J. Venkatesan
In a stunning blow to the Central Government's action of going ahead with privatisation through executive orders bypassing Parliament, a Bench, comprising Justices S. Rajendra Babu and G.P. Mathur, held that such a procedure was not permissible at all. The Bench said: "We allow these petitions restraining 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 petitions were filed by the Centre for Public Interest Litigation and Oil Sector Officers Association. The judges made it clear that they were not expressing any opinion on the disinvestment policy as there was no challenge before the court as to the policy of disinvestment. The only question before it was whether disinvestment in these two oil majors could be made without parliamentary approval as they were governed by specific statutes — ESSO (Acquisition of Undertaking in India) Act, 1974 and the Burma Shell (Acquisition of Undertaking in India) Act, 1976. The Bench pointed out that in the preamble of the two Acts acquiring the assets of the foreign companies, it was stated that the acquisition was done to ensure that the ownership and control of petroleum products, distributed and marketed in India by the said companies, were vested in the State and thereby so distributed as best to subserve the common good. It said that the Act contemplated that the oil PSEs would be Government companies. "Here what is required to be seen is not which asset can be transferred or not, but whether the undertaking can change its character from a Government company to an ordinary company without Parliamentary clearance in the light of the statute of acquisition," the judges said. The Government, which currently holds 51 per cent stake in HPCL, has proposed to offload 34.01 per cent stake to a strategic partner along with management control, while five per cent would be offered to the employees at a concessional price. Those in the race for acquiring the 34.01 per cent stake in HPCL, include Reliance Industries Ltd. (RIL). The other bidders for the country's second largest oil firm are British Petroleum, Kuwait Petroleum, Petronas of Malaysia, and the Shell-Saudi Aramcoc. The Bench pointed out that under the Constitution for starting a new public sector enterprise, parliamentary approval was necessary as the expenditure was to be made from the Consolidated Fund of India. "If this is the background in which a new company is set up, can such a company be dismantled without some kind of parliamentary mandate," it asked. When the provisions of the Act provided for vesting of the property of the undertaking in the Government or a Government company, it could not mean that it enabled the same being held by any other person, the Bench said. The judges referred to the debate all over the world whether privatisation law was necessary and said this aspect had been dealt with in Pierre Guislain's book `The Privatization Challenge' published by the World Bank, according to which some countries had opted to enact privatisation laws even when privatisation could have been implemented without amending the existing legislation. The Bench also noted that countries such as the United Kingdom., France, Italy, Argentina, Mexico and Brazil had enacted laws to achieve privatisation. In the case of `Balco' (where disinvestment was upheld), executive action to disinvest was not challenged probably due to the fact that there was no statutory backing as in the present case. In the case of Maruti Udyog Ltd., though it was acquired under an Act there was no challenge to the same to disinvest merely by executive action. Thus, these two cases stood on a different footing, the Bench held and rejected the Government's contention in this regard.
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