2022 (5) TMI 1557 - SC - Indian Laws

Constitutional validity of the provisions of Sections 130 131 134 and 140 of the Finance Act 2021 and certain provisions of the Life Insurance Corporation Act 1956 - process which led up to the enactment of the amendment to the Life Insurance Corporation Act through Parliament was on the basis that it was a Money Bill - existence of a prima facie case - balance of convenience - irreparable harm and injury. HELD THAT - On the construction of Section 28 the submission which has been made on behalf of the petitioners would warrant further deliberation. The Court has been apprised of the fact that as many as 73 lakh applicants both from within India and beyond have subscribed to the IPO. The IPO has been over subscribed six times even in the category which has been specially reserved for policy holders. It is necessary to note that (i) the dilution of the share holding of LIC as a result of the Offer for Sale is to the extent of 3.5%; (ii) 22.13 crore equity shares of a face value of Rs 10 each are being offered at a premium of INR 939; (iii) the expected receipts into the Consolidated Fund of India are estimated to be INR 20, 500 crores; (iv) the IPO opened for anchor investors on 2 May 2022 and for members of the general public on 4 May 2022 and closed on 9 May 2022; and (v) the IPO has been over subscribed by 2.95 times by the general public that is net of anchor investors. No case for the grant of interim relief has been made out - the interim relief is declined - petition dismissed.

Summary

Issues:
Challenge to the constitutional validity of provisions of Finance Act 2021 and Life Insurance Corporation Act 1956, process of enactment of amendment, conversion of LIC to a joint stock company, violation of Article 300A, interim relief for IPO investors, delay in filing petitions, consideration of Money Bill passage, share allotment to LIC shareholders, over-subscription of IPO.

Analysis:
1. Constitutional Validity Challenge: The petition under Article 32 challenges the constitutional validity of provisions of the Finance Act 2021 and the Life Insurance Corporation Act 1956. The main arguments include the process of amending the Life Insurance Act, conversion of LIC to a joint stock company, and the alleged violation of Article 300A protecting property rights.

2. Process of Enactment: The challenge includes the contention that the amendment to the Life Insurance Corporation Act was based on the assumption that it was a Money Bill. This issue is significant as it raises concerns about the correct procedure followed in enacting the amendment, especially considering the reference to a larger Bench regarding Money Bills.

3. Conversion of LIC: The amendment to Section 28 of the Life Insurance Corporation Act is argued to change LIC's nature from a mutual benefit society to a joint stock company. This conversion is seen as expropriating surplus from policyholders for distribution to shareholders, affecting the rights of participating policyholders.

4. Interim Relief: The petitioners sought interim relief even after the IPO closed, suggesting that the monies in ASBA accounts should be retained or investors' rights should be subject to the pending proceedings. The court considered the balance of convenience and timing of the petitions in deciding against granting interim relief.

5. Delay in Filing Petitions: The delay in filing the petitions, especially the Special Leave Petitions arising from the judgments of the Madras High Court and the Bombay High Court, was highlighted by the Additional Solicitor General as a factor against granting relief, emphasizing the importance of timely legal actions.

6. Money Bill Passage Consideration: The court acknowledged the need for further consideration of the issues raised, particularly in light of the pending reference on the parameters for passing Money Bills, indicating a thorough examination of the legislative process involved in the amendments.

7. Share Allotment to LIC Shareholders: The amendment envisaged allotting shares to Life Insurance Corporation shareholders, which raised questions about the distribution of surplus and the impact on participating policyholders' entitlements, leading to a detailed analysis of the implications of the share allotment.

8. Over-Subscription of IPO: The court noted the overwhelming response to the LIC IPO, with a significant oversubscription even in categories reserved for policyholders, highlighting the public interest and financial implications of the IPO, which influenced the decision on granting interim relief.

In conclusion, the judgment declined interim relief, issued notices for further proceedings, and emphasized the need for detailed submissions to facilitate the case's disposal. The issues raised encompass constitutional, procedural, and financial aspects, reflecting a comprehensive legal analysis of the challenges to the amendments and their implications on policyholders and shareholders of the Life Insurance Corporation.