TaxTMI 
TaxTMI 
2003 (9) TMI 543
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....ndertaking in India) Act, 1974, the Burma Shell (Acquisition of Undertaking in India) Act, 1976 and Caltex (Acquisition of Shares of Caltex Oil Refining India Limited and all the Undertakings in India for Caltex India Limited) Act, 1977. 2. The petitioners contended that in the Preamble to these enactments it is provided that oil distribution business be vested in the State so that the distribution subserves the common general good; that, further, the enactments mandate that the assets and the oil distribution business must vest in the State or in Government companies; that, they are not opposed to the policy of disinvestment but they are only challenging the manner in which the policy of disinvestment is being given effect to in respect of HPCL and BPCL; that, unless the enactments are repealed or amended appropriately, the Government should be restrained from proceeding with the disinvestment resulting in HPCL and BPCL ceasing to be Government companies. It is further submitted that disinvestment in HPCL and BPCL could result in the State losing control over their assets and oil distribution business and, therefore, it is contrary to the object of the enactments. 3. It is the s....
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....specific Act. 4. In the counter-affidavits filed on behalf of the contesting respondents, it is urged that the policy of disinvestment followed by the Government of India has been upheld by this Court in BALCO Employees' Union v. Union of India 2002 (2) SCC 333; that the decision to disinvestment and the implementation thereof is purely an administrative decision relating to the economic policy of the State; that, it is the prerogative of each elected Government to follow its own policy; that, the contention of the petitioners that prior approval of Parliament for disinvesting Government's holding in HPCL and BPCL is not necessary since in the Acquisition Act setting up these companies there are no restrictions on the disinvestment of these companies; that, the said companies are registered under the Companies Act, 1956; that, the sale of shares thereof do not require Parliamentary approval; that, the Memorandum and Articles of Association of the said companies also do not contain any such restriction on transfer of shares; that, the Acts in question have worked themselves out after acquisition, that, the provisions of the Companies Act, 1956, and Securities and Exchange Board of ....
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....ivate finance initiative, disinvestment by Government of its shareholding in State-owned companies is an instrument of economic policy accepted globally. It is also brought to our notice by him that assets of the HPCL and BPCL were acquired by the Central Government through Acts of Parliament but in course of time of more than quarter of a century the assets have changed their nature and today they bear hardly any resemblance to the assets which were acquired under the statutes; that most of the present assets of the two companies have been acquired after acquisition by means of investment by the Government and those assets which were initially acquired under statute have also been transformed into substantially different assets; that, data placed before the Court will clearly indicate that the assets of HPCL and BPCL today have only a remote semblance to the assets that had been acquired in 1974 and 1976 and a large proportion of the assets of the two companies have been added after acquisition; that, even the assets that were taken over are no longer the same as capital has been spent on them over the past several years; that, all these assets now belong to HPCL and BPCL which ar....
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.... time the old machinery inherited by them (and the value of which is a small fraction of its current net worth), there is no legal embargo even if it amounts to the company no longer holding any of the assets vested in after nationalisation; that if the contention of the petitioners is accepted, the Central Government cannot sell its shares even in such a company; that, the definition of a Government Company can be amended under the Companies Act generally an unrelated to purposes nationalisation laws or can amalgamate these companies with another company which may ultimately impact the Central Government's shareholding; that thus, there is nothing in law to prevent the Central Government to amend the articles to provide that even if it continues to hold 51%, it will not interfere in the management with the private strategic partner who holds less shares; that the Government can attain the same object in a manner more favourable to the Government-viz. by selling off its shares to reduce its holding; that, the submission that the policy underlying a statute has to be determined from a reading of the preamble; and that reference to the preamble of a statute can be had only when the w....
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....ublic sector company is defined as a 'new instrument of service' for which approval of Parliament is required for expenditure 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 ? In this background we will now consider the case on hand. 7. The pleadings filed and the arguments raised before this Court indicate that the question for consideration before us is whether or not there is any express or implied limitation on the Government to privatise HPCL and BPCL. It is no doubt true that the two companies are Government companies and being instrumentalities of the State, they can enter into contracts among other things, but question is whether this power is circumscribed by any statute either expressly or by necessary implication. It is also clear that there is no provision in the Act expressly stating that the Government shall, at all times, hold not less than 51% of the paid-up capital of each corresponding new company, as has been stated in the Banking Companies (Acquisition & Transfer of Undertakings) Act. Nor is there any provision as in the Coal Mines Nation....
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....nment of the undertakings of Esso in India. Section 4 provides for general effect of vesting. Section 5 provides for the Central Government to be lessee or tenant under certain circumstances. Section 6 deals with removal of doubts. For the present purpose, section 7 of the Act is important and it reads as follows :- "7(1). Notwithstanding anything contained in sections 3, 4 and 5 the Central Government may, if it is satisfied that a Government company is willing to comply, or has complied, with such terms and conditions as that Government may think fit to impose direct, by notification that the right, title and interest and the liabilities of Esso in relation to any undertaking in India shall, instead of continuing to vest in the Central Government vest in the Government company either on the date of the notification or on such earlier or later date (not being a date earlier than the appointed day) as may be specified in the notification. (2) Where the right, title and interest and the liabilities of Esso in relation to its undertakings in India vest in a Government company under sub-section (1), the Government company shall, on and from the date of such vesting, be deemed to hav....
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....company, it cannot mean that it enables the same being held by any other person, particularly in the context that the object of the Act is that the ownership and control of the petroleum products is distributed and marketed in India by the State or Government company and that thereby so distributed as best to subserve the common good. The argument that there is no specific provision in the Act as contained in the Banking Companies (Acquisition & Transfer of Undertakings) Act or in the Coal Mines Nationalisation Act, 1973 does not carry the matter any further because the idea embedded in those provisions are implicit in the provisions of this enactment, as explained earlier. If disinvestment takes place and the company ceases to be a Government company as defined under section 617 of the Companies Act, to say that it is still a Government company as contemplated under section 7 of the Act will be a fallacy. What is contemplated under section 7 of the Act is only a Government company and no other. In relation to a Government company sections 224 to 233 are substituted and the audit of the company takes place under the supervision and control of the Comptroller & Auditor General of In....
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....hereunder: "Whether a country needs to enact a privatization law or can do without one depends on several factors: to political situation and legal traditions of the country, the scope of its privatization program, and the nature of the enterprises to be privatized. Two different issues have to be addressed; does legislation need to be enacted to authorize or facilitate privatization, and if so, should the new provisions take the form of amendments to the pertinent laws or be grouped together in a specific privatization law ? Some countries have opted to enact privatization laws even when privatization could have been implemented without amending the existing legislation. This may have the advantage of mobilizing explicit political support and commitment in favour of privatization from the very start. It may confer a stronger, clearer mandate on the Government and agencies in charge of implementing privatization and make them more accountable. A privatization law also provides an opportunity to introduce changes in legislation that, although not required for commencing the process, may substantially facilitate it. On the other hand, a privatization law involves risks, including p....
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.... sector entity's manage-ment team combine together to raise finance and, in conjunction with the financier, purchase the business through a newly formed vehicle company. 4.A private placing of shares in a business with a group of investors. 5.Making State assets available under concession so that the assets may then be worked out by the concessionary. 6.Special features of making provision for a golden share that is a special share in the privatized entity which is retained by the Government and which typically entrenches certain provisions within the company's articles of association in such a way as to prevent specified changes occurring without the consent of the Government. Such processes are adopted in certain businesses which are important in defence and strategic grounds and so should be insulated from the possibility of take over or, more generally, that businesses which are new to the private sector should not be blown off course by an unsolicited take over offer made early in their newly private lives. This special share can be a double-edged sword and it may give protection to the Government in certain sensitive circumstances but leave the Government with the risk of ....