2008 (12) TMI 852 - HC - SEBI

Court Upholds Gujarat's Decision to Disinvest Shares in AEC to Torrent Group, Finds No Legal or Regulatory Violations.

Arvind Gupta Versus State Of Gujarat

The HC dismissed the public interest litigation challenging the Government of Gujarat's decision to disinvest its equity shares in AEC to Torrent Group. ... - Issues Involved:1. Legality of the Government of Gujarat's decision to disinvest its equity shares in Ahmedabad Electricity Company Limited (AEC) to Torrent Group.2. Alleged violation of Article 14 of the Constitution of India.3. Compliance with SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.4. Alleged arbitrariness and lack of transparency in the disinvestment process.5. Public interest concerns regarding the disinvestment.Issue-wise Detailed Analysis:1. Legality of Disinvestment Decision:The petitioner challenged the Government of Gujarat's decision dated 16.7.1997 to disinvest its equity shares in AEC in favor of Torrent Group, arguing that the decision was arbitrary and illegal. The petitioner contended that the process lacked competitive bidding or a public auction, which was necessary for transparency and fairness. The court examined the government's rationale, which was to prevent a loss of at least Rs. 50 crores and to improve AEC's operations through private investment. The government believed that Torrent Group, already a significant shareholder, could manage AEC more professionally and efficiently. The court found that the decision was made after consulting experts and was in the public interest, thus dismissing the petitioner's claims of illegality.2. Violation of Article 14:The petitioner argued that the disinvestment violated Article 14 of the Constitution of India, which guarantees equality before the law. The petitioner claimed that the decision was discriminatory and unfair. However, the court concluded that the policy decision was made in good faith and aimed at public welfare, thus not violating Article 14. The court emphasized that it is not within its purview to adjudicate on policy decisions unless there is a clear violation of law or constitutional provisions.3. Compliance with SEBI Regulations:The petitioner alleged a breach of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, by the government and Torrent Group. However, SEBI, in its counter affidavit, confirmed that there was no violation of its regulations. The court noted that SEBI is an expert body responsible for regulating securities markets and protecting investors, and it found no procedural lapses in the disinvestment process. The court further stated that the petitioner failed to point out any specific statutory violations.4. Arbitrariness and Lack of Transparency:The petitioner claimed that the disinvestment process was arbitrary and lacked transparency, as it was done without public bidding or auction. The court, however, found that the government had conducted thorough deliberations and consultations with experts before deciding on the disinvestment. The decision to sell shares to Torrent Group was based on maintaining equilibrium among major shareholders and ensuring efficient management of AEC. The court concluded that the process was transparent and in the best interest of the state, thus rejecting the petitioner's claims.5. Public Interest Concerns:The petitioner, identifying as a social activist, argued that the disinvestment was not in the public interest. The court, however, determined that the decision was made to improve AEC's efficiency and ensure uninterrupted power supply, which is crucial for the industrial and residential sectors. The court emphasized that the decision was made in the public interest and that the petitioner had not demonstrated any compromise of public welfare. Furthermore, the court noted the delay in filing the petition, which undermined the urgency of the public interest claim.In conclusion, the court dismissed the public interest litigation, finding no merit in the petitioner's claims. The decision to disinvest was deemed lawful, transparent, and in the public interest, with no violations of constitutional or statutory provisions. The court also dismissed the related civil application.