Case BriefsHigh Courts

Delhi High Court: The Division Bench of D.N. Patel, CJ and Jyoti Singh, J., dismisses Dr Subramanian Swamy’s plea stating that any delay in the process of disinvestment of Air India would cause loss to public exchequer, besides creating uncertainty amongst the existing employees.

Factual Matrix

The process of disinvestment of Air India and its subsidiaries commenced in June, 2017 with the in-principle approval of the Cabinet Committee on Economic Affairs. A policy decision to disinvest was taken after following the transparent procedure through multi-layered decision making, involving Inter-Ministerial Group, Core Group of Secretaries on Disinvestment and the empowered Air India Specific Alternative Mechanism at the apex Ministerial level, with support for the entire process from reputed Transaction Adviser, Legal Adviser and Asset Valuer.

Advertisements inviting bids mentioned that the Government would cease to be responsible for loss after the date of disinvestment.

Submissions of Dr Subramanian Swamy (Petitioner)

He submitted that the Air India Disinvestment process was arbitrary, unconstitutional, unfair, discriminatory and unreasonable and the same could not be sustained in law. The said process also violated Article 14 of the Constitution of India as well as against the interest of national integrity and security due to an ongoing investigation against Air Asia (India) Private Limited.

Further, it was urged that since there were only two financial bids, out of which one bidder was the Consortium led by Mr Ajay Singh, effectively the bidding process was a mere sham only to fulfil the technical requirement of there being more than one bidder. It was obvious that the whole process was collusive and tailor-made to facilitate Respondent 6 acquiring Air India.

Adding to the above submissions, the petitioner repeatedly stated that he was aggrieved by the methodology of valuation, which according to him was arbitrary, corrupt, illegal and against the public interest.

Hence, the petitioner sought a direction for quashing the Air India disinvestment process as also directing CBI to investigate the role and functioning of the official respondents, involved in the disinvestment process.

Mr Harish Salve, Senior Counsel on behalf of respondent 6 urged that the present petition was a challenge to a policy decision taken almost five years ago and was highly belated.

Decision

High Court found no reason to entertain the present Public Interest litigation for the following facts and reasons:

  • Neither Tata Sons Private Limited nor Respondent 6 are facing any criminal proceedings in relation to the subject matter of WP (C) 5909 of 2013 or in any other matter. Both Respondent 6, as well as Tata Sons Limited, are Indian entities and therefore, no question arises of violation of Foreign Direct Investment Policy, in any event. Moreover, AirAsia (India) Private Limited has no interest in M/s Talace Private Limited, who is the highest bidder.
  • No charge sheet had been filed in any criminal proceedings against Air Asia (India) Private Limited or Talace Private Limited or Tata Sons Limited, as on date, in the matter pertaining to Air Asia and accordingly, no ground for disqualification of respondent 6 was made out.
  • Since SpiceJet Limited was not a member of the Consortium, thus any proceedings pending against SpiceJet Limited will be of no consequence and would not result in disqualification of the Consortium, having Mr Ajay Singh, as the lead member. There was no material on record which would support the allegations of the petitioner that respondent 6 colluded with Mr Ajay Singh’s Consortium or was aware of the Consortium’s bidding strategy.
  • Methodology of Valuation: In the light of the excessive debt and other liabilities of Air India, arising out of huge accumulated losses, the bidding construct was revised in October, 2020, to allow the prospective bidders an opportunity to resize the balance sheet and increase chances of receiving bids and competition.

The apprehension of the Petitioner was based upon a news report in one of the newspapers that the Government sought Parliament’s nod to infuse over Rs 62,000 crores to its Company that holds Air India’s debt, liabilities and some non-core assets, whereas in October, 2021, Department of Investment and Public Asset Management (“DIPAM”) Secretary had stated that net liability on Government after Air India’s privatization amounted to Rs 28,844 crores.

Mr Harish Salve, Senior Counsel had clearly brought out the exact import of the said article. The article was self-explanatory and indicated the balance amounts due, including interest liabilities towards working capital and aircraft loans, lease rentals, owing to the oil companies and to the Airports Authority of India and did not read in the manner sought to be read by the Petitioner. Thus, there was no substance in these allegations.

  • Lastly, the submission that Air India was a profitable enterprise until 2004 should not have been privatized, the same did not appeal to this Court and was not even germane to the issue in question.

The process of disinvestment of Air India was a policy decision by the Central Government, taken after due deliberations, at various levels and was not open to interference in judicial review by this Court, exercising jurisdiction under Article 226 of the Constitution of India.

High Court found merit in the submission of respondents 1 to 4 that each day, approximately Rs 20 crores are being invested to run the Airline by the Government. The successful bidder needs to invest huge capital to infuse new life into the concerned Airline.

Respondents 1 to 4 have been working towards closing of the disinvestment process, at the earliest and any further delay shall cause loss to the public exchequer, besides creating uncertainty amongst the existing employees, with regard to their future prospects and it needs no gainsaying that public interest shall be adversely affected.

Therefore, in view of the above discussion, the petition was dismissed. [Dr Subramanian Swamy v. Union of India, 2022 SCC OnLine Del 34, decided on 6-1-2022]


Advocates before the Court:

For the Petitioner:

Dr Subramanian Swamy, Petitioner-in- Person with Ms Ramni Taneja, Mr Satya Sabharwal and Mr Vishesh Kanodia, Advocates

For the Respondents:

Mr Tushar Mehta, Solicitor General with Mr Chetan Sharma, Additional Solicitor General, Mr Amit Mahajan, Central Government Standing Counsel, Mr Dhruv Pande, Ms Amita Gupta Katragadda, Ms Preksha Malik, Mr Kaustubh Rai and Ms Isha Chaudhary, for Respondents 1 to 4.

Mr Nikhil Goel, Special Public Prosecutor for Respondent 5.

Mr Harish Salve, Senior Advocate with Ms Anuradha Dutt, Mr Lynn Pereira, Ms Feresthe Sethna, Mr Haaris Fazili and Mr Kunal Dutt, Advocates for Respondent 6.

Case BriefsSupreme Court

Supreme Court: The Division Bench comprising of Dr. Dhananjaya Y Chandrachud* and B V Nagarathna, JJ., partly allowed the petition challenging Union Government’s disinvestment of its shareholding in Hindustan Zinc Ltd. (HZL). The Bench, though held that the government was within its powers to disinvest its shares, it was of the opinion that a full-fledged CBI enquiry was required regarding previous disinvestment by the government. The Bench stated,

“There is no bar on the constitutional power of this Court to direct the CBI to register a regular case, in spite of its decision to close a preliminary enquiry.”

HZL was incorporated as a public sector company to develop the mining and smelting capacities, so as to substantially fulfil the domestic demand for zinc and lead. In 1991-92, the Union Government disinvested 24.08 per cent of its shareholding in HZL and again in 2002 it disinvested 26 per cent of its shareholding in HZL to a ‘strategic partner, Sterlite Opportunities & Ventures Ltd. (SOVL). Consequently, the Union Government was left with an equity holding of 49.92 per cent.

Res Judicata and PILs

While determining the issue that the first relief sought by the petitioners, i.e. residual disinvestment can occur only after the amendment of the Nationalisation Act 1976 was  substantially similar to the reliefs sought by Maton Mines Mazdoor Sangh when the disinvestment of 2002 and 2014, the Bench opined that the Court must be alive to the contemporary reality of “ambush Public Interest Litigations” and interpret the principles of res judicata or constructive res judicata in a manner which does not debar access to justice. The Bench expressed,

“While determining the applicability of the principle of res judicata under Section 11 of the Code of Civil Procedure 1908, the Court must be conscious that grave issues of public interest are not lost in the woods merely because a petition was initially filed and dismissed, without a substantial adjudication on merits.”

Considering that the three judges Bench had rejected the petition filed by Maton Mines Mazdoor Singh in limine, without a substantive adjudication on the merits of their claim, the Bench held that the instant petition was not barred by res judicata.

Whether disinvestment was barred by the Nationalisation Act 1976?

Relying on the object of the Nationalisation Act, 1976 which was to acquire control over the strategic mineral deposits of lead and zinc, since zinc plays important role in the country’s economy, the petitioners contended that disinvestment could not be made without amending the Nationalisation Act 1976. Assailing the contention of the petitioners, the Union Government made following submissions:

  1. After 16 March 1999, the mining of zinc has ceased to retain a strategic character, given the changes in industrial policy.
  2. There was no challenge to the disinvestment which took place in 1991-92 or in 2002.
  3. The HZL had ceased to retain its status as a government company within the meaning of Section 617 of the Companies Act 1956.

In view of the above, the Bench opined that it would be inconsistent to read an implied limitation on the transfer by the Union Government of its residual shareholding in HZL representing 29.54 per cent of the equity capital. Considering that HZL was not a government company, the Bench stated, when a decision has been taken by the government as a shareholder of a company to sell its shares, it acts as any other shareholder in a company who makes the decision on the basis of financial and economic exigencies.

Whether the decision in Centre for Public Interest Litigation would result in a bar on the disinvestment of the residual shareholding?

In Centre for Public Interest Litigation v. Union of India, (2003) 7 SCC 532, the Court had held that that the divestment of the shareholding of the Union Government in HPCL and BPCL, as a result of which the companies would cease to be government companies, could not be undertaken without amending the statutes under which they were nationalized. Distinguishing the decision in Centre for Public Interest Litigation, the Bench stated that HPCL and BPCL were government companies when the disinvestment action was challenged while HZL ceased to be a government company as a consequence of the disinvestment in 2002, since its shareholding fell below 51 per cent. The Bench opined,

“The fact that the Union Government is amenable to the norms set out in Part III of the Constitution would not impose a restraint on its capacity to decide, as a shareholder, to disinvest its shareholding, so long as the process of disinvestment is transparent and the Union Government is following a process which comports with law and results in the best price being realized for its shareholding.”

Hence, the Bench held that the decision of the Union Government, as an incident of its policy of disinvestment, to sell its shares in the open market, could not be questioned by reading a bar on its powers to do so, from the provisions of the Nationalisation Act 1976.

CBI’s preliminary enquiry

Evidently, in spite of conflicting opinion of the Director of CBI and the Director of Prosecution, CBI regarding the closure of the preliminary enquiry and conversion of it into a regular case; and the fact that the matter was referred to the Attorney General but the Court was not apprised of the status of referral, the preliminary enquiry was closed.

Upon perusal of reports and recommendations in favour of registration of a regular case, which indicated irregularities in the decision to disinvest 26 per cent, instead of 25 per cent, in the bidding process and the valuation of 26 per cent equity for disinvestment, the Bench opined that the disinvestment in 2002 evinced a prime facie case for registration of a regular case. The Bench stated,

“We are desisting from commenting on some crucial facts and names of individuals involved, so as to not cause prejudice to the investigation of the matter.”

Accordingly, opining that there was a prima facie case for cognizable offence, as mandated in para 9.1 of the CBI Manual, the Bench held that a full-fledged investigation must be conducted.

Hence, the petition was partially allowed. The CBI was directed to register a regular case and periodically submit status reports of its investigation to the Court.

[National Confederation of Officers Association of Central Public Sector Enterprises v. Union of India, 2021 SCC OnLine SC 1086, decided on 18-11-2021]


Kamini Sharma, Editorial Assistant has put this report together 


Appearance by:

For the Petitioners: Prashant Bhushan, Senior Counsel

For Union of India: Tushar Mehta, Solicitor General

For Sterlite Opportunities & Ventures Ltd. (SOVL): Harish Salve, Senior Counsel


*Judgment by: Justice Dhananjaya Y Chandrachud

Know Thy Judge| Justice Dr. DY Chandrachud

Case BriefsHigh Courts

Rajasthan High Court: Dinesh Mehta, J., granted interim protection from arrest to former Union Minister Arun Shourie along with former disinvestment secretary Pradip Baijal issuing a stay notice and rebuked the CBI court for issuing arrest warrants against them along with 3 others in connection with the Laxmi Vilas Palace hotel case.

Background:

The case relates to the disinvestment of Laxmi Vilas Palace Hotel, which was an India Tourism Development Corp (ITDC) hotel and was sold to Bharat Hotels Ltd., a private entity when Mr Shourie was the disinvestment minister in the Atal Bihari Vajpayee-led National Democratic Alliance government at the Centre in 2001. Petitioner in the current revision petition is presently Managing Director of Bharat Hotels Ltd., and is wife of late Shri Lalit Suri, who was Managing Director of said company at the relevant time (year 2001) when the company had participated in the process of disinvestment of  Laxmi Vilas Hotel. The CBI had registered a case on 13-08-2014, that some unknown officers from the Department of Disinvestment, in connivance with a private hotelier during 1999-2002 renovated and then sold Laxmi Vilas Palace at a throwaway price and after investigation, it had concluded that no case was made out against any of the accused persons. On 16-04-2019, CBI had submitted its closure report before the special judge of CBI. However, on 13-08-2019, the special judge had rejected the closure report and asked CBI to further investigate the matter by a senior officer of the rank of deputy superintendent of police (DSP), the CBI Court on 16th September had ordered the registration of cases against to former Union Minister Arun Shourie, former disinvestment secretary Pradip Baijal, Ashish Guha, the managing director of Lazard India Ltd who was the financial adviser, valuer Kantilal Karamsey of Kantilal Karamsey & Company and Jyotsana Suri, director of Bharat Hotels Ltd. Again on 15 June 2020, CBI filed a supplementary final report before the special judge submitting that no criminality was found on part of any person and reiterated the request for closure of the case.

Contentions:

The Counsel for the petitioner in Jyotsana Suri Case, Mr. Harish Salve assisted by Harish Nadda submitted that the CBI Court had refused to accept the final closure report filed by the CBI but has also issued an arrest warrant to the petitioner and has gone ahead to attach the assets, land, building and hotel business of the said hotel. He further submitted that process was transparent and open bids were invited while fixing the reserve price at Rs 6.12 crores. It was submitted that the petitioner was the sole bidder and had offered a bid of Rs 7.52 Crores (25% above the reserve price) and was declared successful. He further contended that, there was no material with the CBI Court to come to the conclusion that the petitioner’s Company has defrauded the Central Government by Rs 244.36 Crores. He contended that the CBI Court was not legally justified in issuing warrant of arrest to the petitioner. Per contra, the Counsel for the respondent,  R.D. Rastogi assisted by B.P. Bohra submitted that the District Collector, Udaipur – the appointed receiver had taken charge of the property at 12.35 p.m. on 16-09-2020 itself, and submitted that staying the effect and operation of the order at this juncture, would amount to putting the clock back.

In Arun Shourie’s case, the counsel for the petitioner, Mr. Prashant Bhushan and  Pradeep Shah contended that the trial Court had committed an error holding that the prosecution sanction under Section 19 of the Prevention of Corruption Act was not required and that the High Court in Pradip Baijal’s case had already considered this argument and had granted interim order/protection to the petitioner. They further informed that the petitioner was a senior citizen, writer and editor, ex-minister and was suffering from various age-related issues.

Decision

The Court in the Jyotsana Suri’s case rebuked the CBI Court for issuing arrest warrants against the former Union minister and four others. The Court observed that,

 “Court below has not recorded any reason worth the name before resorting to the extreme mode of securing presence of an accused – issuing arrest warrant. The issuance of warrant of arrest becomes all the more serious, when the petitioner was not put to any notice of the pending proceedings.”

The Court further ordered that Mr Shourie and Mr Baijal shall not be arrested in pursuance of the arrest warrant issued by the Special Judge, CBI in the petitions filed by them individually. [Jyotsana Suri v. Union of India, S.B. Criminal Revision Petition No. 663 of 2020, decided on 22-09-2020]


Suchita Shukla, Editorial Assistant has put this story together