Case: Centre For Public Interest Litigation Vs. Union Of India

privatization law is necessary has been going on all over the world. This aspect has been discussed by Pierre Guislain in his book entitled ‘The Privatization Challenge’ published by the World Bank. The views of the learned Author are reproduced hereunder; "Whether a country needs to enact a privatization law or can do without one depends on several factors; the political situation and legal traditions of the country, the scope of its privatization program, and the nature of the enterprises to be privatized. Two different issues have to be addressed: does legislation need to be enacted to authorize or facilitate privatization, and if so, should the new provisions take the form of amendments to the pertinent laws or be grouped together in a specific privatization law?Some countries have opted to enact privatization laws even when privatization could have been implemented without amending the existing legislation. This may have the advantage of mobilizing explicit political support and commitment in favour of privatization from the very start. It may confer a stronger , clearer mandate on the Government and agencies if charge of implementing privatization and make them more accountable. A privatization law also provides an opportunity to introduce changes in legislation that, although not required for commencing the process, may substantially facilitate it. On the other hand, a privatization law involves risks, including potentially long delays in getting parliament approval, the sometimes excessively restrictive scope of legislative provisions, and a tendency on the part of some parliaments to interfere too much in the implementation of privatization transactions. Furthermore, special legislation may not be needed for the transfer of the subsidiaries, participations, or assets of State Owned Enterprises or public holding companies." (pp.296-297). 16. The learned Author has further enunciated that if legislation is to be brought for privatization, the same should reflect the broad political lines of the privatization strategy and programme and that it should also endow the Government or privatization agency with the required implementation powers, and it should avoid restrictions that may unduly tie the hands of the executing agencies and slow down the process. The legislation must allow adequate flexibility, in the choice of the privatization technique best suited to each, while providing basic safeguards guaranteeing the integrity and efficiency of the process. Success of the programme hinges on, among other things, a basic consensus among Parliament, Government, and head of state on the scope and broad lines of the programme; a clear mandate given to the executing agencies along with the powers necessary for fulfilling that mandate; and unambiguous, flexible, and competitive privatization procedures applied in a transparent manner by officials accountable for their actions. 17. Apart from United Kingdom, there have been privatization programmes in France and Italy in Europe. Similarly massive programme has been carried out in Argentina, Mexico and Brazil. In these countries, Privatization Acts have been enacted and numerous routes are adopted to achieve privatization, some of which are illustrated below: 1) A public offering of shares combined with a listing on the stock exchange has brought share ownership to many millions of people and have been mechanism through which the Government’s desire to widen share ownership has been brought to fruition.2) A trade sale to another private sector company or to a consortium and such a transaction is inherently more private than a share offering and some of the privatizations executed in this manner have faced some criticism for being insufficiently open to public examination and debate.3) A ‘management buy-out’ where the public sector entity’s management team combine together to raise finance and, in conjunction with the financier, purchase the business through a newly formed vehicle company.4) A private placing of shares in a business with a group of investors.5) Making State assets available under concession so that the assets may then be worked out by the concessionary.,6) Special features of making provision for a golden share that is a special share in the privatized entity which is retained by the Government and which typically entrenches certain provisions within the company’s articles or association in such a way as to prevent specified changes occurring without the consent of the Government. Such processes are adopted in certain businesses which are important in defence and strategic grounds and so should be insulated from the possibility of take over or, more generally, that business which are new to the private sector should not be blown off course by an unsolicited take over offer made clearly in their newly private lives. This special share can be double-edged sword and it may give protection to the Government in certain sensitive circumstances but leave the Government with the risk of incurring the wrath of shareholders who would be denied the right to accept what might be a very attractive offer for their shares.(Vide C. Graham and T. Prosser Golden Shares: (Industrial Policy by Stealth)7) There were certain other categories where debt equity swaps were followed. 18. We have an overview of the position world over on whether there is any need for law regarding privatisation or what routes are to be adopted for achieving the same. Irrespective of those considerations, we base our decision on the statutes with which we are concerned. 19. In the case of BALCO (supra) executive action to disinvest was not challenge probably due to the fact that there was no statutory backing of the nature with which we are concerned in the present case. In the case of Maruti Udyog Limited (supra), though acquired under an enactment, there was no challenge to the same to disinvest merely by executive action. Thus, these cases stand on a different footing. 20. There is no challenge before this Court as to the policy of disinvestment. The only question raised before us whether the method adopted by the Government in exercising its executive powers to disinvest HPCL and BPCL without repealing or amending the law is permissible or not. We find that on the language of the Act such a course is not permissible at all.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]14. Again accretions to the Governmentassets subsequent to acquisition of the undertaking is an irrelevant factor in the context of the question we are considering. Here what is required to be seen is, not which asset can be transferred or not, but whether the undertaking can change its character from a Government company to ordinary company without Parliamentary clearance in the light of the statute of acquisition.There is no challenge before this Court as to the policy of disinvestment. The only question raised before us whether the method adopted by the Government in exercising its executive powers to disinvest HPCL and BPCL without repealing or amending the law is permissible or not. We find that on the language of the Act such a course is not permissible at all.