2003 (9) TMI 543 - SC - Companies Law

Whether or not there is any express or implied limitation on the Government to privatise HPCL and BPCL? Held that - There is no challenge before this Court as to the policy of disinvestment. The only question raised before us whether the method adopted by the Government in exercising its executive powers to disinvest HPCL and BPCL without repealing or amending the law is permissible or not. We find that on the language of the Act such a course is not permissible at all. In the result 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.

Summary

Issues Involved:
1. Government's decision to sell majority shares in HPCL and BPCL without Parliamentary approval.
2. Whether such disinvestment violates the provisions of the Esso Act, Burma Shell Act, and Caltex Act.
3. The requirement of Parliamentary approval for disinvestment.
4. The interpretation of the relevant statutes concerning the vesting of assets in the State or Government companies.
5. The constitutional and legal framework governing the disinvestment process.

Detailed Analysis:

1. Government's Decision to Sell Majority Shares in HPCL and BPCL without Parliamentary Approval:
The petitioners challenged the Government's decision to sell the majority of shares in HPCL and BPCL to private parties without Parliamentary approval. They argued that this decision was contrary to the provisions of the Esso (Acquisition of Undertaking in India) Act, 1974, the Burma Shell (Acquisition of Undertaking in India) Act, 1976, and the Caltex (Acquisition of Shares of Caltex Oil Refining India Limited and all the Undertakings in India for Caltex India Limited) Act, 1977.

2. Violation of the Provisions of the Esso Act, Burma Shell Act, and Caltex Act:
The petitioners contended that the preambles of these enactments mandated that the oil distribution business must vest in the State or Government companies to subserve the common general good. They argued that disinvestment without repealing or amending these enactments would result in HPCL and BPCL ceasing to be Government companies, thus violating the object of these laws. The Government countered that the Acts did not contain any restrictions on disinvestment and that the companies were governed by the Companies Act, 1956, which did not require Parliamentary approval for the sale of shares.

3. Requirement of Parliamentary Approval for Disinvestment:
The petitioners argued that disinvestment required Parliamentary approval, as the assets and businesses of HPCL and BPCL were acquired under specific statutes aimed at ensuring State control over petroleum distribution. The Government, however, maintained that prior approval of Parliament was not necessary and cited instances where shares of other public sector undertakings were sold without such approval.

4. Interpretation of Relevant Statutes Concerning the Vesting of Assets:
The Court examined the provisions of the Esso Act, particularly Section 7, which allowed the Government to transfer the undertaking to a Government company. The Court noted that the absence of specific provisions in the Act, like those in the Banking Companies (Acquisition & Transfer of Undertakings) Act or the Coal Mines Nationalisation Act, did not imply that the Government could disinvest without Parliamentary approval. The Court emphasized that the preamble and the provisions of the Act indicated that the ownership and control of petroleum products were intended to be vested in the State or Government companies to subserve the common good.

5. Constitutional and Legal Framework Governing Disinvestment:
The Court discussed the constitutional requirement for Parliamentary approval when setting up new companies and the need for a similar mandate when dismantling such companies. It concluded that the method adopted by the Government to disinvest HPCL and BPCL without repealing or amending the relevant statutes was not permissible. The Court highlighted that the control and audit mechanisms applicable to Government companies would be lost if these companies ceased to be Government companies.

Conclusion:
The Court allowed the petitions, restraining the Central Government from proceeding with the disinvestment of HPCL and BPCL without appropriately amending the concerned statutes. The judgment emphasized the need for Parliamentary approval or suitable amendments to the laws governing the acquisition and control of these companies before any disinvestment could take place.