Case: Federation of All Maharashtra Petrol Dealers Association and Other Vs. The Union of India and Others

2. The predecessor of BPCL was Burmah Shell Oil Storage and Distributing Company of India Ltd. (Burmah Shell), which was incorporated in England in the year 1928, and was carrying on the business of distribution and sale of petroleum products in India. On 24 January 1976, Union of India, by an act of parliament known as the Burmah Shell (Acquisition of Undertakings in India) Act, 1976 (Burmah Shell Acquisition Act), acquired the right, title and interest of Burmah Shells undertakings in India on and from the appointed date, which was 24 January 1976. The Burmah Shell Acquisition Act inter alia reserves the Central Governments right to direct, by notification, vesting of the right, title and interest and liabilities of Burmah Shell in a Government Company instead of continuing to vest in the Central Government. Around the same time, Union of India also acquired one Burmah Shell Refineries Ltd., which was also a foreign company carrying on oil refining business, and vide a notification of Ministry of Petroleum dated 24 January 1976, directed vesting of the right, title, interest and liabilities of Burmah Shell in the newly acquired company. The name of this company was changed first to Bharat Refineries Ltd. and subsequently to its current name, Bharat Petroleum Corporation Limited (BPCL), on and from 1 August 1997. That is how BPCL came to own the right, title, interest and liabilities of Burmah Shell. In 2002, the Union Government, by exercise of its executive powers, sought to disinvest its shareholding in BPCL and another Government Company by the name of Hindustan Petroleum Corporation Limited (HPCL), which had vested in it the right, title, interest and liabilities likewise of another foreign company by the name of ESSO, which was acquired by Union of India by another acquisition Act, namely, ESSO (Acquisition of Undertakings in India) Act, 1974. The executive decision of the Union to disinvest its shareholdings in these two companies was challenged before the Supreme Court by one Centre for Public Interest Litigation. The Supreme Court, in the case of Centre for Public Interest Litigation vs. Union of India1 , inter alia held that the Union Government could not disinvest its shareholding, vide an executive action, in either of the two companies without the repeal or amendment of the respective acquisition Acts, under which the respective undertakings were acquired by the Union. By the Repealing and Amending Act, 2016 (Act No.23 of 2016), the Union of India inter alia repealed the Burmah Shell Acquisition Act. The Repealing Act received Presidential Assent on 9 May 2016. The Repealing Act does not contain any saving clause in respect of any provisions of the Burmah Shell Acquisition Act. On 20 November 2019, the Cabinet Committee of Economic Affairs, headed by the Honble Prime Minister, granted its in-principle approval for strategic disinvestment of the Union Governments shareholding in BPCL along with transfer of its management and control to a strategic partner. On 7 March 2020, BPCL, in pursuance of the in-principle approval referred to above, published an advertisement and released Preliminary Information Memorandum (PIM) to assist buyers in evaluating the acquisition of the Unions shareholding in BPCL and submitting an Expression of Interest (EOI). The original date for receipt of EOI was extended from time to time due to the prevailing pandemic of Covid-19 and presently, stands at 16 November 2020.

Reasoning: Mr. Seervai does not dispute that the Court cannot go into application of mind by parliament in its legislative business or behind the legislation to see the reasoning of legislature behind it, or examine steps prior to the enactment of the legislation. Mr. Seervai also accepts the principle that the Court will always begin with the presumption of constitutionality of the legislation. Insofar as the policy decision of in-principle disinvestment is concerned, Mr. Seervai also accepts that the policy of the Government is not per se open to challenge but that such policy can be challenged only to the extent of its illegality. It is Mr. Seervais case that the policy decision in the present case is open to challenge, because the same is against the law stated by the Supreme Court in Centre for Public Interest Litigation (supra) and, to that extent, involves an illegalityThough there is some substance in the objections of learned Counsel for the Union and BPCL to the Petitioners locus, since there is no legal wrong involving injury to a judicially enforceable or legally protected right so far as the Petitioner is concerned, we are of the view that this controversy need not detain us further, for the Petitioner also asserts its alternative capacity in public interest and, in any event, we are also hearing companion public interest litigations involving the same arguments. We are also not impressed with the grounds of delay (the deadline for the EOI being yet to expire) or suppression (the allegedly suppressed communication of the Petitioner to IOC and HPCL being wholly distinct and independent of the subject matter of the present petition). We would rather deal with the merits of the controversy straightawayBut before we do so, we must make it clear that in doing so, it is wholly irrelevant to consider what view the Union Government has taken of the judgement. The three instances cited by Mr. Seervai do not take us anywhere. Even if the Union Government had taken a particular view of the judgement earlier, whilst disinvesting in other public enterprises such as NEPA Ltd. or Type Corporation, it is really of no significance for our purposes. Any such view is not even binding on Union of India, let alone this Court. The principle of contemporanea expositio is applied in the matter of interpretation of law, though less so now than earlier and restricted anyway to subordinate legislation by the executive, and not for the ratio of any court judgement.8. In Centre for Public Interest Litigation (supra), what was called in question was the decision of the Union Government to sell majority of shares in two public sector oil companies including BPCL to private parties without parliamentary approval or sanction. The decision was said to be contrary to, and violative of, the provisions of the respective acquisition Acts including the Burmah Shell Acquisition Act. It is important to note that the acquisition Acts were very much in force when the question was considered by the court. The petitioners before the court were not opposed to the policy of disinvestment; what they were challenging was the manner in which that policy was being given effect to. Their whole case was that the object of the acquisition Acts was vesting of oil distribution business in the State so that it subserves the common general good; if the Government went ahead with the proposed disinvestment, the oil companies including BPCL would cease to be Government companies; and that would be contrary to the object of the concerned enactments. The petitioners accepted that it was open to the Government to disinvest; but it could not, according to them, do so without first changing the law, namely, the acquisition Acts, either by repealing the enactments or by making appropriate changes by way of amendments in the enactments. The Supreme Court agreed with the petitioners. The court noted at the outset that it was no doubt true that the two companies were Government companies and instrumentalities of the State; they could enter into contracts among other things, but the question was whether this power was circumscribed by any statute either expressly or by necessary implication. The court then went on to notice the preamble to the acquisition Acts and their salient provisions, including Section 3 and 4, which made the provisions for actual acquisition and matters incidental thereto, and Section 7, which inter alia enabled the Central Government to direct by notification the right, title and interest and liabilities of the acquired undertaking (Burmah Shell, for example) to vest in a Government company instead of continuing to vest in the Central Government. The court then observed that when these provisions required vesting of the undertaking in the Government or a Government company, it could not mean that they enabled the same being held by any other person, particularly in the context of the object of the Acts, namely, ownership and control of distribution and marketing of petroleum products in India by the State or Government company so as to subserve the common good. In other words, the limitation on the powers of the Government envisaged by the Supreme Court was nothing but the statute of acquisition itself, which mandated control and management of the acquired undertaking by the Government or a Government company and by no one else. The Supreme Court decision in Centre for Public Interest Litigation was, thus, in its own words, based on the statutes with which we are concerned. On the language of the statutes, the court held, it was not permissible to the Government to disinvest its controlling stake in BPCL or HPCL by exercising its executive powers; it had to either repeal the statutes or amend them so as to make such disinvestment permissible.9. The Supreme Court judgement in Centre for Public Interest Litigation, accordingly, by no means rules that disinvestment in a Government company is possible only through a statutory enactment or with parliamentary approval. It does not even support Mr. Seervais case that an undertaking acquired through an Act of Parliament and meant to vest in the Union or a Government company cannot be disinvested except through parliamentary approval. The ratio of the judgement is that if an undertaking is acquired through an Act of parliament and is required to vest in the Union or its company under that law, the same cannot be disinvested so long as the law requiring such vesting is on the statute book; that statute would have to be suitably amended so as to enable the Union to disinvest its controlling stake or change the public character of the undertaking, or the statute would have to be repealed altogether10. The parliament has repealed the Burmah Shell Acquisition Act by Act No.23 of 2016. The effect of such repeal is that as of today and for our purposes, it is as though the statute never existed. Absent the statute of acquisition, there is no legal impediment for disinvestment by the Union of its controlling stake in BPCL. As we have noted above, the only illegality involved in the executive action of disinvestment, according to the law stated by the Supreme Court in Centre for Public Interest Litigation (supra), was the limitation found in the statute of acquisition for changing the public character of the undertaking. Once that limitation goes away, the Government is clearly within its rights, just like any other ordinary shareholder, to sell its shares or even its controlling stake. Strategic sale of its stake is a matter of its own policy and, as Mr. Seervai fairly accepts, the Government cannot be faulted merely for adopting one particular policy rather than the other. No doubt since it is the State and thus bound by the Constitutional principle against arbitrariness enshrined in Article 14 in the matter of even its policy, but at least the Petitioner herein does not press any such case of arbitrariness. We shall, however, consider the challenge under Article 14 together with the other challenges to the State action when we deal with the case of the other companion petitioners.The case of Centre for Public Interest Litigation, in the first place, does not support any such proposition. It simply talks about repeal or amendment of the acquisition Act which would have the effect of removing the statutory limitation on the powers of the Union to disinvest and not which must be informed by an express parliamentary approval for disinvestment, informed or otherwise. Secondly, and more importantly, any such inquiry, contrary to Mr. Seervais professed caution against inquiring into the motives of the parliament behind enacting a statute, would perforce have us inquire into precisely that. A repeal is but a repeal; it removes from the statute book an enactment which had held the field until then; and it does so in a manner as though the statute never existed. The courts cannot thereafter question the motive behind such removal – whether such removal was simply on the ground that the original statute had become obsolete or whether such removal was actually informed by the parliaments tacit approval of a possible disinvestment which may follow as a result of the repeal. Much less would it be open to the courts to fault the legislation itself or parliaments wisdom behind it on the ground that it ought to have been informed by such approval or that the parliament did not apply its mind to the aspect of such approval or the effects, including a possible disinvestment, which might follow it. It is not open to courts to scrutinize the legislative process in that manner.Even the PMO report made an explicit observation concerning the proposed repeal of the Burmah Shell Acquisition Act that the repeal of the aforesaid Act might send out signals …..of impending disinvestment in the oil and gas sector, which has remained a contentious issue. In the premises, it cannot possibly be suggested that the consideration of a resultant possibility of future disinvestment by the executive was not before the parliament when it enacted the repealing Act. Not only this possibility, but even the idea of an appropriate measure of a saving clause to avoid such possibility was very much within public domain (in the form of 251st Report of the Law Commission), when the parliament repealed the Burmah Shell Acquisition Act.13. Accordingly, there is no merit in the Petitioners challenge either to the repealing Act or to the executive decision of in-principle disinvestment by the Union Government.14. Coming now to the companion petitions, where some of the points not pressed by Mr. Seervai in his petition are urged by the concerned Petitioners as matters of public interest, it is important to note at the outset that none of these points could possibly be urged to challenge the repealing Act for the reasons discussed above. The challenge is based on undesirability of the possibility of disinvestment keeping in mind its consequences in matters of State policy or their non-consideration by the parliament. As we have observed above, no legislative enactment can be challenged either on the ground of undesirability or non-application of mind. The only available challenges to an enactment by a legislature are on the grounds of vires of the enactment, that is to say, lack of legislative competence on the part of the legislature, and violation of a fundamental right. There is no case here of want of legislative competence and as for breach of a fundamental right, Mr. Ramamurthy for the Petitioners has been unable to point any. Mr. Ramamurthy submits that consequent to the repeal (and disinvestment following such repeal), rights of poor consumers to LPG and kerosene subsidies, rights of medium, small and micro enterprises including women entrepreneurs to compulsory purchase from them in a certain percentage points, rights of war widows and physically handicapped persons of preference in allotment of petrol pumps, gas agencies and kerosene distributorship, and rights of SC, ST and OBCs and physically handicapped of reservation in jobs would be lost unto them. These rights are not fundamental rights. Any reservation made by the State in the matter of employment or allotment of State largesse may be constitutionally justified, but it cannot be said to be constitutionally mandated as a matter of fundamental right. There is no fundamental right to any reservation, though particular reservations may be permissible under the Articles providing for fundamental rights. Just as the State may, if it so chooses, make any permissible reservation, it would be perfectly legitimate for it to not make, or withdraw an already made, reservation. Accordingly, no case is made out in the companion petitions for challenging the repeal Act.15. When it comes to the executive decision of the Union Government to disinvest, different considerations may, however, apply. No doubt, disinvestment of controlling interest of the State in a Government Company to encourage privatization and competition is a measure of socioeconomic reform and a matter of economic policy of the incumbent Government. As the Supreme Court noted in Rustom Cavasjee Cooper vs. Union of India2 , whilst considering the validity of the Banking Companies (Acquisition and Transfer of Undertakings) Ordinance, 1969, it is not for the court to consider the relative merits of different political theories or economic policies. This maxim would apply to even executive actions of the State as much as it does to an enactment made by the parliament or a State legislature. But there is a difference. As the Supreme Court noted in BALCO Employees Union (Regd.) vs. Union of India3 , the executive decision may not be placed on as high a pedestal as legislative judgement insofar as judicial deference is concerned. Though the scope for judicial interference even in matters of executive decisions may be limited, yet there are well-recognized parameters within which, and the extent to which, such decisions are amenable to judicial review and we shall presently consider them.19. With the parameters and extent of judicial review thus made clear, let us now focus on the facts of our case to see if the Unions executive decision of disinvestment in our case can be faulted on any of the principles set out above.20. The foregoing material clearly indicates that the impugned disinvestment decision, as of now only at an in-principle stage, has already undergone an elaborate process of consideration at the hands of experts and key Government functionaries. Further steps for actual disinvestment would also involve a thorough consideration and robust checks and balances and further expert inputs. The policy decision of acquiring the undertakings of Burmah Shell was based on a particular economic theory and socio-economic policy. The Union of India then considered it to be in public interest. Those considerations have made way for new considerations, informed by a new economic theory and socioeconomic policy of efficiency improvement in the market place and consumer benefit resulting from making of the current oligopoly of petroleum producers and marketers competitive through a private or nongovernment player. The present governing dispensation is well within its powers to take such decision. The successive Governments have over the last few years moved in the direction of privatisation. Niti Ayog, which is an expert body of economic policy advisors to the Union, has made a comparative assessment of Central Public Sector Enterprises for strategic disinvestment and identified BPCL as an ideal candidate for it. Whilst overruling the representations of the Ministry of Petroleum and Natural Gas to the Country, the Niti Ayog noted as follows:(i) The oil marketing companies are profitable entities in a state controlled oligopoly that has a significant investment cycle ahead. Indian Oil Corporation, the largest, controls about half the market, with BPCL and HPCL controlling a quarter each. Despite deregulation of oil retail, attempts over the past decade of private enterprise to compete have been unsuccessful. Pricing at the pump has moved much closer to market since the last time private sector participated. It would vastly improve efficiency in the market place and provide benefit to consumers if the oligopoly became more competitive with the material presence of a private sector participant that would compete to enhance its share while bringing best practices to the industry. As HPCL is owned by ONGC in a vertical integration strategy and Indian Oil may be too large for the market to absorb. NITI Ayogs analysis suggests that BPCL would be the ideal participant to consider for privatization.(ii) It was also noted that business activities of BPCL are not in priority sectors and appropriate policy intervention can enable private sector to play a role in implementation of Government flagsheet programmes.After detailed deliberations, it was recommended that all of GoI equity holding in BPCL should be strategically disinvested along with transfer of control, as per the approved procedure.The recommendations of Niti Ayog were deliberated by the Core Group of Secretaries on Disinvestment (CGD). The CGD, after taking into account various inputs from expert bodies and different ministries, recommended strategic disinvestment in BPCL. The Cabinet Committee on Economic Affairs (CCEA) thereafter accorded approval to in-principle disinvestment. All this can only lead to a conclusion that the policy decision is an informed decision; it cannot be termed as an arbitrary or capricious decision; and it does not offend any constitutional or statutory provisions. If that is so, it is no remit of this Court to interfere with it in its writ or PIL jurisdiction.In the first place, we are today at the stage of in-principle approval of disinvestment; the nittigritties of operational needs including implementation of specific Government programmes catering to other policy issues are yet to be assessed and formulated. Some of the issues raised by Mr. Ramamurthy belong to these aspects. Secondly, and at any rate, there is no concrete challenge formulated as of now based on violation of any fundamental or constitutional right of the Petitioner or members of public whose interest they champion. There is no fundamental or constitutional right for insisting on continuation of the Unions strategic stake in BPCL. As submitted by Mr. Khambata, learned Senior Counsel for BPCL, subsidies are a matter between the Government and the consumers; these may well continue whatever be the character of BPCL, whether public or private. As for reservations for MSMEs, women entrepreneurs, physically handicapped and war widows, apart from the fact that they are operational matters yet to be assessed and formulated, there is no fundamental or even statutory right to insist on any such reservation and, in any event, these are all incidental fall-outs and the economic policy itself can never be faulted on their basis. Same goes for the extant job reservations in favour of SC, ST, OBCs in BPCL as a Government company which would be lost after a change in its public character as a result of disinvestment. Whilst dealing with similar points raised in BALCO Employees Union (supra) concerning rights of employees, the Supreme Court held that if abolition of a post pursuant to a policy decision did not attract the provisions of Article 311 of the Constitution, on the same parity of reasoning, the policy of disinvestment could not be faulted if, as a result thereof, employees lost their rights or protection under Articles 14 and 16 of the Constitution. The Court held that the existence of rights of protection under Articles 14 and 16 could not possibly have the effect of vetoing the Governments right to disinvest. In any event, these are, at best, some negative aspects of the policy. They anyway have to be contrasted and balanced with the positives of the policy such as consumer benefit due to competition in the oligopoly and overall benefit to the economy, not to speak of the immense value which may be unlocked as a result of disinvestment and become available to the Government for its programmes and policies. And, after all, as we have already noted above, the Government is the best judge of such balancing act. As for the allegation of non-application of mind to these aspects, there is no such case. Some of these aspects have already been considered and some would be by way of appropriate policy intervention, as Niti Ayog itself has hinted, towards implementation of Government flagship programmes. These aspects could well be addressed by the Union Government even whilst framing the Shareholders Agreement and Share Purchase Agreement. Some of these aspects really concern business continuity, employee protection and incidental matters. In fact, Government of India, as part of Preliminary Information Memorandum For Inviting Expression of Interest For Strategic Disinvestment of Bharat Petroleum Corporation Limited, has specifically provided (Clause No.5.3) that Confirmed Selected Bidder (CSB) could be required to undertake certain obligations. Clause No.5.3 is reproduced hereinbelow:5.3 Lock in of shares and other restrictionsThe CSB could be required to undertake certain obligations relating to certain matters, such as, employee protection, asset stripping, business continuity, lock-in of the shares acquired in the Proposed Transaction, and/or shareholding of consortium members in the Investment Vehicle. These conditions, and those relating to the respective responsibilities and liabilities of the CSB and the consortium members (if any), shall be specified in the RFP/SPA.22. Mr. Ramamurthy also cursorily refers to some aspects of valuation of BPCL. As of today, there is no valuation on the table. That would obviously come after EOIs are received from prospective buyers. Any discussion in that behalf would be strictly premature today and we are, therefore, not indulging in it.