Supreme Court allows Centre to disinvest remaining shares in Hindustan Zinc Limited

The Supreme Court on Thursday allowed the Central government to disinvest its remaining shares in Hindustan Zinc Limited (National Confederation of Officers Associations of Central Public Sector Enterprises & Ors v. Union of India)..The Bench of Justice DY Chandrachud and AS Bopanna held that the Centre can disinvest the remaining 29.5 percent of its shares in Hindustan Zinc, since it isn't a government company anymore..In 2016, the Supreme Court had directed the Central government to maintain status quo on the proposed disinvestment of the public sector undertaking (PSU) Hindustan Zinc Limited. The government was thus restricted from initiating any process of further disinvestment of its shares in the PSU..Advocate Prashant Bhushan, who appeared for the petitioner organisation, had filed a Right to Information (RTI) query on why Hindustan Zinc's shares were disinvested. The response revealed that 50 percent of the shares of Hindustan Zin were disinvested and sold to Vedanta, which according to Bhushan, had been done by the government to fill its pockets..The bench held that principles enumerated by this court in the Centre for Public Litigation do not apply here since HZL had seized to be a government company at the stage of disinvestment which is under challenge. The union government has been allowed to make sell the remaining shares in open market following the rules of Securities and Exchange Board of India(SEBI) to ensure that the best price is realised for the shareholding. .The court also noted that there was enough material available to reasonably direct the Central Bureau of Investigation to register a regular case against the disinvestment of 26% equity of HZL by the union government in 2002..It was observed that while divestment of 25% equity was suggested by the core group of secretaries in-charge of the disinvestment process, 26% was put up for sale to a strategic partner for management control and appointment of an advisor by the cabinet committee..Further, it was noted that the advertisement for sale of this 26% equity did not mention that the roapmap to the sale of entire company to a strategic partner eventually was ready. .The first bidding opened in 2001 where the price was fixed at Rs 35.90 per share. Nine parties submitted an expression of interest, however only six were considered as qualified bidders. Only one bid of SOVL was received for Rs. 29.22 per share. In the second bid, the price was reduced from Rs 35.90 to Rs 32.15 per share without recording any reason..Only the six qualified bidders were invited during the final bid instead of hosting a competitive open bidding process. Only two entities submitted their bids- SOVL and Indo Wealth Corporation, out of which the former was successful. SOVL's bid of Rs 40.51 per share was accepted totalling to Rs 445 crore. However, three bidders were required to process the matter. The oversight was not explained..It was also seen that BP Paribas was appointed as the global advisor. They chose the discounted cash flow (DCF) method of evaluation in March 2002. RB Shah Associates were appointed as evaluators without issuing competitive bidding advertisement- which was the union government's policy. The appointment was made by an unknown public servant who overlooked the fact that RB Shah did not have the required expertise..They had valued Rs 39000 crores worth of ore reserves at Rs 784 crores. Voluntary Retirement Scheme expenditure was taken to be Rs 756 crores allegedly incorrectly assuming that all 7222 employees and 1058 officers of HZL were given VRS..During the Central Bureau of Investigation's enquiry it was found that if evaluation was conducted properly, the value would have come to over Rs 1000 per share. .Noting the abovementioned, the court decided to exercise its special powers by having CBI conduct an investigation into the matter and register it as a regular case."The CBI is directed to register regukar case and proceed in accordance with law. Accordingly, petition under Article 32 is partially allowed. CBI is directed to send periodical reports of the investigation to this court every quarter or as otherwise directed by the court," the bench held.