[BREAKING] Supreme Court refuses interim relief in challenge to LIC IPO; issues notice

The Supreme Court on Thursday refused to grant stay in a batch of petitions challenging the decision of the Central government to trade 5 per cent of its shareholding in Life Insurance Corporation (LIC) through an Initial Public Offering (IPO) [Thomas Franco vs Union of India]..The IPO opened on May 4 and the share allotment is set to take place today.A bench of Justices DY Chandrachud, Surya Kant and PS Narasimha issued notice to the Central government in the case but declined to pass any stay order."We cannot grant any interim relief now. In matters of IPO, court will be reluctant in granting interim relief. It is about investments," the bench said. The Court said that the issue raised is regarding enactment of law as a money bill and the same is already pending before the apex court. Hence, it said that the case will be tagged along with the pending matter. "Issue regarding money bill has been referred to the Constitution bench and it has to go to 7 now. We will issue notice and tag it with that matter," said Justice Chandrachud. It then passed an order refusing interim relief."On the aspect on interim relief the court must be guided by well settled principle of prima facie case, balance of convenience and irreparable injury. The Court has been informed that 73 lakh applicants from India and globally have subscribed to the IPO and it has been over subscribed 6 times even by policy holders. It is important to note percentage dilution of LIC has been 3.25 percent, 22.13 crore equity shares of value of ₹10 each is offered at ₹939 and consolidated fund will receive ₹22.5 k crores. IPO opened for anchor investors on May 2 and others on May 4 and closed on May 9. We are of the view that no case of interim relief has been made out. No interim relief granted," the order said.However, the issue regarding money bill needs examination, the Court said."On first aspect we issue notice on the issue of passing of money bill, The submission by petitioner regarding Section 28 warrants further consideration...Notice on the writ petition and the SLPs filed. Counsel to formulate brief note on submissions. Reply in 4 weeks and counter after that in 4 weeks," the order said.The proceedings will be tagged with the pending proceedings before the Constitution Bench on the aspect of money bill, the Court added. .One of the petitioners, an LIC policyholder, had initially approached the Madras High Court challenging provisions of the Finance Act, 2021 and the Life Insurance Corporation (LIC) Act, 1956 on the ground that they were introduced by way of a Money Bill under Article 110 of the Constitution of India, even though the amendment did not fall in the category of a Money Bill.The High Court, while dismissing the petition on March 21, had held that “it directly impacts the economic growth of the country and interference therein may have far reaching consequences, because the receipt of money into the Consolidated Fund of India is to be used for the development of the country.”The appeal in the Supreme Court stated that the amendments being challenged effectively reduce the share of LIC’s surplus which the petitioner is legally entitled to, causing losses to her and other participating policyholders to the tune of ₹4,14,919 crore.The appeal filed through advocate Abhishekh Jebaraj said that the High Court failed to appreciate that the amendments - Sections 128 to 146 of the Finance Act, 2021 - do not fall under Article 110(1) of the Constitution."Therefore, the Speaker’s certification of the Bill as a Money Bill, and its subsequent enactment as one, is a colourable exercise and a fraud on the Constitution," the plea stated.Further, it was contended that decision of a Speaker certifying a Money Bill under Article 110(3) of the Constitution is justiciable and amenable to judicial review on the ground of illegality.Other petitions were also filed under Article 32 of the Constitution. Last month, the Bombay High Court had also refused to stay the Draft Red Herring Prospectus (DRHP) filed by LIC for the issuance of shares through its IPO..Senior Counsel Indira Jaising appearing for one of the writ petitioners, told the apex court on Thursday that the case besides relating to money bill aspect, also involves violation of right to property under Article 300A of the Constitution. "My plea argues that there is a violation of Article 300A. The question that whether it is money bill or not is there but it also has to be seen if it violates Article 300A," she said. .She also pointed out how the money belonging to policy holders would now be diverted to shareholders. "My money is here being diverted to the shareholder. there was a statute which said I am entitled to 95 percent. Such percentage of remaining surplus was to be allocated to members. Now in 75 years there is the first time definition of members as shareholders. Outsiders become owners," she submitted. She also highlighted the valuation change and speculative profits due to the IPO."Between March and September there was a jump of ₹540 crores. Where did the valuation change. Where did this jump come from? It came from Section 28 which was about bifurcation of fund which is now being diverted to shareholders. This money was meant for me (policyholders)," Jaising contended. Jaising also said that with the allotment, the rights of shareholders would also now be involved. "Speculative and windfall profits will be made now. There should be some sort of interim relief without affecting the rights of those who have applied for IPO. The money invested by them can be kept in blocked account and LIC will not suffer as they have lien," she suggested. .She also said that if the Court is not inclined to grant interim relief, it should alert the shareholders about the case in Supreme Court."In case you are not inclined, Court should make it clear that those who are purchasing it (shares) today their rights are dependent on the outcome of the case. This way at least they will be put on notice," she submitted. Additional Solicitor General (ASG) N Venkataraman appearing for the Central government, submitted that the petitioners have approached the Court at the eleventh hour."This petition is just to scare investors and to play a spoilsport! 73 lakh bank accounts are blocked. How can such important policy decisions be interfered with at the eleventh hour," he said.He highlighted the time line of events to buttress his claim. "Please see the article 32 plea was filed on May 9 when the issue was closed. Now on Madras High Court order was passed on March 21 and SLP filed after 50 days. Bombay High Court on April 13 dictated open court order. From March 28, 2021, this act came into being, they waited for 15 months," he said.The ASG also argued vehemently against grant of any interim relief. "Only 2 shareholders out of 50,000 are before you. What is the criteria of interim order? Where is the balance convenience or irreparable injury, who will compensate this," he demanded. "Finance Act draws a distinction between participating and non participating policy holders. Any interim order will send complete wrong signal to the markets and then any IPO can be interfered with," Venkataraman added. Jaising, however, countered by saying that there was no delay on the part of the petitioenrs."March 4, 2022 is the first date when they exercised powers under finance act 2021 so there is no delay," she said.She also said that the issue of locus does not arise since policyholders are owners. "We certainly represent the policyholders of LIC so there is no question of Locus. Policyholders are the owners of LIC and today the company is changing hands! issue here is what is the legal character of LIC. If they convert to joint stock company they have to compensate through mutual benefit society and demutualisation. when you change your legal status what is your obligation to your former owners," she argued. .The Court after hearing the parties refused to grant any interim relief but issued notice in the matter.

[BREAKING] Supreme Court refuses interim relief in challenge to LIC IPO; issues notice

Debayan Roy

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