2018 (12) TMI 1607 - HC - Indian Laws

Divestment in shares - Reduction of Government s shareholding in IDBI Ltd. below 51% - appellant had also sought a direction that the Life Insurance Corporation of India should not acquire the controlling stake of 51% in the IDBI Ltd - Held that - The Supreme Court has in catena of judgments reiterated that in matters of policymaking the courts would normally not interfere until and unless it is categorically shown that the exercise of legislative judgment appears to be palpably arbitrary. A Court cannot strike down a policy decision taken by the Government merely because it feel that another policy would have been fairer or wiser or more scientific or logical. It is not within the domain of the Court to weigh the pros and cons of the policy or to test the degree of its beneficial or equitable dispossession. Appeal dismissed.

Summary

Issues Involved:
1. Disinvestment of Government's shareholding in IDBI Ltd.
2. LIC's acquisition of controlling stake in IDBI Ltd.
3. IRDAI's directive to LIC to acquire more than 15% equity share capital of IDBI Ltd.
4. Impact on employees' terms and conditions of service.
5. Alleged breach of assurance given in Parliament.
6. Alleged breach of fiduciary duty by LIC’s Board.
7. Validity of IRDAI's relaxation of Investment Regulations.

Issue-wise Detailed Analysis:

1. Disinvestment of Government's Shareholding in IDBI Ltd.:
The appellant challenged the Government of India's decision to reduce its shareholding in IDBI Ltd. below 51%. The court held that disinvestment is the prerogative of the Government. The learned Single Judge noted that Section 5(1) of the IDBI Repeal Act, 2003, provided employees the option to accept employment with IDBI Ltd. on the same terms and conditions. There was no assurance that IDBI Ltd. would continue to be a Government company. The Supreme Court in Balco Employees Union v. Union of India established that employees do not have a vested right in their employer remaining a Government company. The court concluded that disinvestment does not change the terms and conditions of employment.

2. LIC's Acquisition of Controlling Stake in IDBI Ltd.:
The appellant contended that LIC’s decision to acquire a 51% stake in IDBI Ltd. was arbitrary, unreasonable, and breached fiduciary duty. The court held that LIC’s decision was a commercial one, and judicial review is limited to the decision-making process, not the merits. The court found that LIC’s Board had approved the decision after due deliberation and was aware of IDBI Ltd.'s state of affairs. The court concluded that LIC’s decision was neither perverse nor unreasonable.

3. IRDAI's Directive to LIC to Acquire More Than 15% Equity Share Capital of IDBI Ltd.:
The appellant argued that IRDAI’s directive was arbitrary and unreasonable. The court noted that Regulation 14 of the Investment Regulations empowers IRDAI to relax the provisions of Regulation 9. The court found that IRDAI had sufficient material to justify its decision and that the policyholders' funds were protected. The court held that IRDAI’s decision was not subject to judicial review on merits.

4. Impact on Employees' Terms and Conditions of Service:
The appellant argued that the dilution of the Government’s shareholding would alter the conditions of service for IDBI Ltd. employees. The court reiterated that Section 5(1) of the IDBI Repeal Act, 2003, assured employees of the same terms and conditions of service, not the nature of the employer. The court concluded that disinvestment does not affect the contractual terms of employment.

5. Alleged Breach of Assurance Given in Parliament:
The appellant claimed that the Government’s decision violated an assurance given in Parliament. The court held that statements made in Parliament during legislative debates do not preclude the Government from changing its policy. The court noted that the proposed amendment to ensure the Government’s stake remained above 51% was not included in the final legislation. The court concluded that the principles of promissory estoppel were inapplicable in this context.

6. Alleged Breach of Fiduciary Duty by LIC’s Board:
The appellant contended that LIC’s Board failed to exercise due diligence. The court found that LIC’s Board had considered the proposal in detail and had taken steps to ensure IDBI Ltd. would be professionally managed. The court concluded that LIC’s Board had acted within its commercial wisdom.

7. Validity of IRDAI's Relaxation of Investment Regulations:
The appellant argued that IRDAI’s relaxation of Regulation 9 was arbitrary. The court held that IRDAI is empowered to relax the regulations and had done so based on sufficient material. The court found that the proposed investment did not expose policyholders to unwarranted risks and complied with the Investment Regulations. The court concluded that IRDAI’s decision was justified.

Conclusion:
The court upheld the decision of the learned Single Judge on all aspects, including the Government’s disinvestment in IDBI Ltd., LIC’s acquisition of a 51% stake, and IRDAI’s approval. The appeal was dismissed, and the application for stay was deemed infructuous.