SCA/8936/1998 1/10 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 8936 of 1998 With CIVIL APPLICATION No. 12939 of 2001 In SPECIAL CIVIL APPLICATION No. 8936 of 1998 For Approval and Signature: HONOURABLE THE CHIEF JUSTICE MR. K.S.RADHAKRISHNAN HONOURABLE MR.JUSTICE AKIL KURESHI ================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================== ARVIND GUPTA & 1 - Petitioner(s) Versus STATE OF GUJARAT & 9 - Respondent(s) ====================================== Appearance : Party-in-person Mr. Arvind Gupta, MR KAMAL B. TRIVEDI, ADVOCATE GENERAL with MS. SANGEETA VISHEN, ASSISTANT GOVERNMENT PLEADER for Respondent(s) : 1 - 3. MS PJ DAVAWALA for Respondent(s) : 2, SERVED BY RPAD - (R) for Respondent(s) : 4, MR HV CHHATRAPATI for Respondent(s) : 5, MS SHRUTI D TRIVEDI for Respondent(s) : 6, MR MM SINGHI for Respondent(s) : 7, MR MIHIR THAKORE, SR. COUNSEL for SINGHI & BUCH ASSO. for Respondent(s) : 8, MR RS SANJANWALA for Respondent(s) : 9, MR ANAND G BHATT for Respondent(s) : 9, MR S.I. NANAVATI, SR. COUNSEL with MR. SAURIN MEHTA for NANAVATI & NANAVATI for Respondent(s) : 10, ====================================== SCA/8936/1998 2/10 JUDGMENT CORAM : HONOURABLE THE CHIEF JUSTICE MR. K.S.RADHAKRISHNAN and HONOURABLE MR.JUSTICE AKIL KURESHI Date :19/12/2008 CAV JUDGMENT (Per : HONOURABLE THE CHIEF JUSTICE MR. K.S.RADHAKRISHNAN) Decision taken by the Government of Gujarat on 16.7.1997 to disinvest its equity shares of Ahmedabad Electricity Company Limited (for brevity “AEC”) in favour of Torrent Group as part of its dis- investment policy, is the subject matter of challenge in this writ petition filed in the public interest. 2. Petitioner claiming to be a share-holder of AEC and a social activist, has approached this Court by this public interest litigation, seeking a writ of certiorari to quash the Government Resolution dated 16.7.1997, deciding to disinvest the shares of Government of Gujarat in favour of Torrent Group, contending the same is arbitrary, illegal, violative of Article 14 of the Constitution of India and also in violation of breach of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. 3. Petitioner, who appeared in person, submitted that State Government favoured Torrent Group by parting its equity shares, that too without following the procedure laid down in disposing of the equity shares and in gross violation of the Rules and Regulations. Petitioner submitted that Government Resolution published through public announcement did not disclose any rationale in State Government dis- SCA/8936/1998 3/10 JUDGMENT investing its equity shares without inviting any competitive bidding or offer for sale through public auction. Petitioner pointed out that Government of Gujarat, after selling its entire substantial equity stake of 28.89% in AEC, as stipulated under Clause 6 of the impugned Regulation Torrent Group should acquire additional 20% of AEC shares by public offer, which will amount to malafide exercise of power by the State Government. Petitioner also submitted that he had submitted a representation to SEBI to conduct an investigation with regard to clandestine take-over of AEC with Torrent Group, which amounts to violation and breach of norms laid down under SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. Petitioner further submitted that SEBI (Substantial Acquisition of Shares and Takeovers) Regulation casts an obligation on the acquiring company to comply with the Takeover Regulation, but the Government of Gujarat went beyond its scope of contracting agreement to sell the share-holding of AEC to Torrent Group. 4. Petitioner therefore, submitted that the action of the State Government was clearly arbitrary, discriminatory and unfair and was not for public good, or in public interest. Petitioner has therefore, sought for a direction restraining Government of Gujarat from selling additional 18.89% stake in AEC to Torrent Group and also for a direction to the respondent Government to restore the share-holding of the State Government in subsidiary company, as it were before impugned decision dated 16.7.1997. Various other directions have also sought for by the petitioner. Petitioner who appeared in person submitted that he is not, as such, concerned with the Government Policy of disinvestment, but the manner and method in which the equity shares were sold in violation of the various laid down procedures, irks him. According to the petitioner, disinvestment policy was mooted, by violating all norms, surreptitiously, SCA/8936/1998 4/10 JUDGMENT and by not giving any opportunity to the public to make an offer. It is submitted that the entire procedure lacks transparency, and it is done in an arbitrary and discriminate manner, warranting interference by this Court in exercise of powers under Article 226 of the Constitution of India. 5. Mr. Kamal B. Trivedi, learned Advocate General submitted that Government of Gujarat took a policy decision to disinvest the equity shares, or else the Government would have lost amount of at-least Rs. 50 crores, and that Government felt that private investment is highly necessary to improve the working of AEC. Learned Advocate General submitted that AEC is a Public Limited Company, which generates and supplies power, especially to the industrial belts of Ahmedabad and it was highly necessary to extend a helping hand to AEC, so that it can generate large quantity of power to satisfy the needs of industrial and residential consumers at a reasonable cost. Government had great confidence in the Torrent Group, which is already a share-holder in AEC at the relevant point of time. It was felt that the company could be managed in a professional and efficient manner, if the equity shares are sold to Torrent Group of industries. Government of Gujarat was holding 16.51% of the total equity shares of AEC, and Gujarat State Investment Corporation, a fully owned company of Government of Gujarat was holding 12.38% of total equity shares of AEC. Government, after due deliberation took a policy decision to disinvest above equity stake of 28.89% of AEC in favour of Torrent Group. Government had noticed that Torrent Group was already having stake of 21.33% shares in AEC, and that while parting with shares no dis-equillibrium or disturbance within the major blocks of shareholders be created, which was likely to happen if a competitive bidding for disinvestment was made. Government had consulted professional Chartered Accountants and SCA/8936/1998 5/10 JUDGMENT other qualified persons before valuating the shares and there was minute discussion at all levels. Further, Government took a conscious decision to offer 10% of the total holding, including of its company, to be sold to Torrent Group at the rate of Rs. 117/- per share. Such a decision was taken after working out the economics and after getting expert opinion. Public interest was upper most in the minds of the Government when it took decision to disinvest its equity shares and to be sold in favour of Torrent Group. Learned Advocate General pointed out that no allegation of malafide or motive was attributed to the Government by the petitioner. Government took a policy decision in public interest and hence, petitioner was not justified in filing this public interest litigation, challenging the policy decision taken by the State Government. 6. Mr. Mihir Thakore, learned Senior Counsel appearing for 8th respondent submitted that the present petition is misconceived and was instituted not for public interest, but only to achieve private ends. Learned counsel submitted that decision of the Government of Gujarat to sell 10% of its equity shares to Torrent group was subjected to public offer and public offer documents were vetted by SEBI. Further, it was also stated that remaining shares of the Government was decided to be sold in future at a price to be calculated as per SEBI formula of Rs. 117 per share. Torrent group offered to purchase AEC equity shares at Rs. 117/- though market price of the said share was hovering around Rs. 60 per share. Further, even prior to the sale of 10% equity shares, much publicity through newspaper media was given. Even though Government decision was taken on 16.7.1997, petitioner had approached this Court only in October, 1998 after waiting for almost 15 months and by that time, company had already invested crores and crores of rupees for purchase of shares and also for improving infrastructure facilities of the company. Contention that by selling equity SCA/8936/1998 6/10 JUDGMENT shares to Torrent Group, huge loss has caused to the exchequer, is merely an allegation without any proof. Public interest was never compromised in the whole transaction and the Resolution dated 16.7.1997 was not arbitrary, discriminatory or illegal and the company has not done anything surreptitiously so as to cause loss of public revenue. Further, it was stated that all statutory procedures and regulations laid down by SEBI were scrupulously followed and whole attempt of the petitioner is only to tarnish the image of the company and therefore, the public interest litigation may not be entertained. 7. Mr. Sudhir Nanavati, learned Senior Counsel appearing for 10th respondent submitted that Ahmedabad Electricity Company has never been a Government company and it was started by Killick Nixon Group in 1913. Company was given term loan by the State Government and 20% of the term loan was converted into equity shares in 1989 at par. Prior to the conversion, State Government was holding only 0.5% shares approximately and by conversion, State Government got shares at Rs. 10/- (at par) for which now it is getting Rs. 117/- per share, even when this share was quoted at Rs. 55/- in the share market. He also submitted that when 3rd respondent offered to purchase AEC shares at Rs. 117/- per share, market price was hovering around Rs. 50 to Rs. 60 and after the offer was made, market price had touched Rs. 103/-. It was stated that decision taken by the Government on 16.7.1997 was reported in all leading newspapers and public was well aware that the Government was selling 10% equity shares to Torrent Group, and nobody had raised any objection including the petitioner, who had approached this Court after 15 months of the publication of Notification. It was also submitted that petitioner had not pointed out any provision obliging State Government to sell its equity shares only through public auction. Government was selling its shares only to its existing share-holders and it has never been SCA/8936/1998 7/10 JUDGMENT objected to by SEBI or by any statutory authority. Further it was necessary to maintain equilibrium in the share-holdings and decision for disinvestment was taken in the best interest of the company. Government still holds shares after parting with 10% equity shares in favour of Torrent Group. Learned Senior Counsel submitted that therefore, there was no justification in interfering with the decision of the State Government, which was taken in July, 1998 and was fully implemented. 8. Detailed counter affidavit has also been filed on behalf of SEBI. It was stated that the acquirer accepted the shares offered in the public offer and there was no breach of SEBI Regulations, as stated by the petitioner. In the counter-affidavit filed by 1st respondent, it is stated that offer was made by the Government to Torrent Group since it was the only major group holding 21.35% of equity stakes in the company. Further it was also stated that there was possibility of disequilibrium and disturbance within AEC, as process of competitive bidding could have led to a situation in which offered shares being purchased by other parties while Torrent had a large block of shares. Counter affidavit has also been filed by 5th respondent, Reserve Bank of India, and no violation of statutory provision was pointed out by the Bank in the matter of sale of equity shares, or in the various dealings or in any of the activities of Torrent Group. 9. We may at the out-set point out that in this age of globalization and open market economy, disinvestment of shares is an alternative economic policy adopted by various developed and developing countries in the world for public good and for mutual benefit and for improving the infrastructure and the general development of the State. Government of Gujarat had equity shares in AEC, which is a public utility SCA/8936/1998 8/10 JUDGMENT company. Company generates and supplies power to a large area, especially to the industrial belts of Ahmedabad, which has power houses at Sabarmati and Vatva. AEC has to be managed in a professional manner so as to generate maximum quantity of power to meet with the needs of residential, agricultural and industrial consumers, and to supply uninterrupted power to them at a reasonable tariff. Government is naturally interested in the proper and efficient management and administration of AEC. Torrent Group company is a major group holding 21.35% of AEC equity stakes, besides financial institutions and State Government. There were three major blocks of shares when the Government took a policy decision to part with a fraction of its equity shares, of which one of the major share-holders was Torrent Group. Government was having 28.89% equity shares along with its company called “Gujarat State Investment Corporation”. 33.92% equity shares was held by various financial institutions. 21.35% equity shares was held by Torrent Group industries. For proper and efficient management of AEC, it was found necessary that Government should create a situation which would cause least disturbance or disequilibrium with the major block of share-holders in the company. By going in for a competitive bidding of dis-investment, Government would be inviting third parties, which may destabilise or cause disturbance to the existing structure of the company. Share-holders of the company had always an option to purchase Government shares, but the only existing share- holder who came forward to purchase Government stake was, Torrent Group of company. AEC being a public utility company, Government always wanted that company to function efficiently, smoothly and effectively for public good, and any disruption of power supply would have a far reaching consequence affecting industrial and commercial growth of the State of Gujarat. Further it may also disrupt power to the domestic sector as well. Taking into consideration all aspects of the SCA/8936/1998 9/10 JUDGMENT matter, Government took a policy decision to disinvest 10% of its equity shares to Torrent Group, a company which is having repute and already having share-holdings in AEC. We are satisfied that decision was taken by the Government bonafide and in public interest. SEBI is an expert body created under the provisions of SEBI Act, 1992, to protect the interest of investors and to promote development of and regulate the securities market and other related matters. The Securities and Exchange Control Board has also not pointed out any violation of the provisions of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. On the other hand, the stand of the SEBI is that Government has clearly followed all the procedures laid down in the Regulation. Petitioner also could not point out violation of any statutory provisions. Petitioner has rightly said that he is not questioning the policy of disinvestment. Law is also well settled that the Court sitting in Article 226 of the Constitution of India shall not enter into and adjudicate upon a policy decision of the Government. Reference be made to the decision of the Apex Court in Tata Cellular Vs. Union of India - (1994) 6 SCC 651. Law is settled that it is not for the Court to determine whether a particular policy or particular decision taken in the fulfilment of that policy is fair. 10. We have in this case examined whether the procedure followed by the Government in dis-investing its equity shares was fair or transparent. We are convinced that the decision was taken and implemented taking into consideration best interest of the State, so as to see that Ahmedabad Electricity Company, a public utility company would function effectively and efficiently, so that there will not be any disruption of power in the areas covered by AEC, which will also give impetus to further development of the State industrially or otherwise. Further it may also be noted that though decision was taken by the Government on SCA/8936/1998 10/10 JUDGMENT 16.7.1997, writ petition was filed after more than 1 year and 3 months, and by the time Torrent Group had invested crores of rupees not only in the matter of purchase of shares, but also for improving the infrastructural facilities of the company. Prayer of the petitioner in this public interest litigation to put the clock back by restoring the share- holding of the State Government and its subsidiary company as it existed prior to 16.7.1997 cannot be granted. Public interest litigation therefore, fails and is dismissed. 11. Consequently, Civil Application also stands disposed of. (K.S. Radhakrishnan, C.J.) (Akil Kureshi, J.) */Mohandas