SC Halts HPCL, BPCL Selloff

New Delhi, September 16: | Updated: Sep 17 2003, 05:30am hrs
In a blow to the disinvestment process, the Supreme Court on Tuesday restrained the government from privatising Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd (BPCL) without the approval of Parliament.

Parliaments approval for the sale of the two public sector undertakings (PSUs) will be extremely difficult in the present circumstances, as the Congress has a majority in Rajya Sabha. Welcoming the apex court verdict, the Congress has said that it would oppose oil PSU privatisation tooth and nail in the Upper House. Besides, many allies in the ruling National Democra-tic Alliance are not favourably disposed towards disinvestment in HPCL and BPCL.

Allowing the appeals filed by the Centre for Public Interest Litigation (CPIL) and the Oil Sector Officers Association (OSOA), a bench comprising Justice S Rajendra Babu and Justice GP Mathur said on Tuesday the government cannot go ahead with disinvestment in the two oil companies without appropriate parliamentary legislation.

Earlier, many political parties, including the main Opposition Congress, had challenged the governments decision to privatise HPCL and BPCL on the same ground.

The bench of the apex court took note of the fact that the two companies were acquired by the government after passing an appropriate legislation in Parliament in 1974.

The bench agreed with the petitioners, OSOA and CPIL, that the government should have approached Parliament for enacting a suitable law for privatisation of the two companies which were in 1974 acquired through a parliamentary legislation.

OSOA counsel Fali S Nariman said the petitioner was not against the decision to privatise the two PSUs. What it was opposing was the manner of privatisation of the oil PSUs which were in the strategic sector, he added.

Even as the government decision to privatise HPCL and BPCL was pending in the court, the government had initiated the process for the sale of two companies. While HPCL was slated for strategic sale, BPCL was being sold by way of offer for sale.

Suitors for governments 34.01 per cent stake in HPCL began due diligence on August 5. Reliance Industries Ltd was the first firm to initiate the process, which was followed by British company BP visiting the data room for the due diligence.

The government had argued that the Acts of Parliament nationalising various companies in 1974 were of two kinds one which imposed a specific bar on the government to lower its stake below 51 per cent, and the other which did not contemplate any such condition.

The Acts nationalising banks and coal mines specifically provided that the government at all times shall hold not less than 51 per cent of the paid-up capital but similar provision was not there in the act for nationalisation of oil PSUs.

The government on Tuesday said the Supreme court decision halting disinvestment of HPCL and BPCL unless there was a parliamentary approval, would have far-reaching consequences on the sell-off process.

Reacting to the apex court verdict, disinvestment minister Arun Shourie told PTI, it will have far-reaching consequences not only for disinvestment in these two PSUs but in other matters also. There may be other PSUs not only at the Central level but also at the state level which were created through legislative acts and whose disinvestment would become more difficult, Mr Shourie said.

Speaking to UNI, he said, the Cabinet committee on disinvestment will meet on October 3 to discuss an option paper to be prepared by the disinvestment ministry after consulting the law ministry and attorney general Soli Sorabjee.

OSOA, other trade unions and most political parties hailed the Supreme Court decision. The Congress welcomed the decision, saying that it would oppose the privatisation of HPCL and BPCL tooth and nail in both Lok Sabha and Rajya Sabha.

Describing the verdict on expected lines, Congress spokesman S Jaipal Reddy regretted that the government did not agree with its logic that the two companies which were nationalised through an Act of parliament could be privatised only through an Act of Parliament.

Besides, he said Mr Sorabjee gave a wrong opinion.

Another opponent of privatisation, CPI (M) leader Somnath Chatterjee also welcomed the SC decision.

The BJP said the Supreme Court order will not affect disinvestment in other PSUs as those were not set up by Act of Parliament. BJP president M Venkaiah Naidu said the highest courts views have to be respected and the government would take appropriate measures.

Meanwhile the disinvestment ministry has halted the privatisation of HPCL and BPCL after the Supreme Court ruling. We are complying with the judgement... Government will take advice of law officers about the next course of action, a senior disinvestment ministry official said.

Union petroleum minister Ram Naik, who is known for his resistance to oil sector privatisation, termed the Supreme Court judgement as historic and said the ministry of disinvestment would decide the future course of action.

After receipt of the full judgement, the nodal ministry (disinvestment ministry) will study the order and ask for comments from the concerned ministry (petroleum and gas) and the Union cabinet will take decision on the matter, the minister said.