Govt denies irregularities in HZL stake sale, requests SC to recall order

The government had in 2014 fiscal planned to raise at least Rs 15,000 crore through the residual stake it held in HZL and Balco. Vedanta had acquired the majority shareholding of the two companies in the previous NDA regime in 2003.

Denying any irregularity in the decision to divest 26% in HZL, it said that proper procedure was followed including selection of a global adviser through global competitive bidding.
Denying any irregularity in the decision to divest 26% in HZL, it said that proper procedure was followed including selection of a global adviser through global competitive bidding.

The government has moved the Supreme Court seeking recall of its order that asked CBI to register a regular case in relation to 26% divestment in Hindustan Zinc — which is now majority-owned by Vedanta — in 2002, saying that the investigative agency had submitted incomplete information that was contrary to the record.

The application filed by the Department of Investment and Public Asset Management (erstwhile Department of Disinvestment) has sought recall/modification of the SC’s directions on the grounds that the apex court based its ruling on the file notings and one “self-contained (incomplete) note” filed by the CBI in a sealed cover.

The Supreme Court had on November 18 allowed the Centre to disinvest its residual 29.5% stake in HZL in the open market as HZL ceased to remain a government company since sale of its majority stake in 2002. However it had ordered registration of a regular case by the CBI into the alleged irregularities in the disinvestment of its controlling share in 2002. Since then the Anil Agarwal-led Vedanta firm, Sterlite Opportunities and Ventures, holds 64.92% in HZL.

Stating that it is duty bound to approach the SC for placing true facts on record, the finance ministry said any such direction by the top court “to commence a criminal investigation after about 20 years of disinvestment, in the absence of true facts being bought before it, would severely deter global players from paticipating in the process of disinvestment in future which will not be in public interest,” it said.

It also stated that such direction and conducting of a criminal investigation may not be necessary, inexpedient and not in the larger public interest.
Denying any irregularity in the decision to divest 26% in HZL, it said that proper procedure was followed including selection of a global adviser through global competitive bidding.

To set the record straight, the government gave all the details, including file notings, with regard to divestment since 1999. “All the decisions were taken after scrutiny at various levels and at all levels collective decisions were taken. The transparent manner in which the decision-making process has taken place at various levels eliminates any possibility of any criminal conspiracy,” the ministry said, adding the CBI created an “incorrect impression” by submitting incomplete information that is contrary to the record.

“…The CBI had after an elaborate and thorough preliminary enquiry and, after considering views and counter views in the hierarchy, decided to close the PE and therefore the facts relating to decision to disinvest 26% culminating into the actual disinvestment were never placed by the applicant before the SC. The applicant, thus, had no occasion to know that the CBI had not placed the complete facts…,” the MoF said in its affidavit.

A Bench led by Justice DY Chandrachud had taken objection to the closure of preliminary inquiry (PE) by the CBI in the HZL disinvestment during 1997-2003 and directed registration of a regular case by CBI and to fully investigate the Atal Bihari Vajpayee-led National Democratic Alliance government’s 2002 decision to disinvest its majority shareholding in HZL. The divestment was done during Arun Shourie’s tenure.

The government had in 2014 fiscal planned to raise at least Rs 15,000 crore through the residual stake it held in HZL and Balco. Vedanta had acquired the majority shareholding of the two companies in the previous NDA regime in 2003.

The Union cabinet had approved a stake sale in Hindustan Zinc in 2014, the National Confederation of Officer’s Association, an employee union, approached the SC seeking a CBI probe into the alleged irregularities in HZL’s stake sale to Vedanta Ltd (earlier called Sesa Sterlite Ltd) in 2002. The association alleged that Sterlite, part of Vedanta, had picked up a majority stake in the PSU at an undervalued price, resulting in estimated losses running into hundreds of crores to the exchequer.

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