SC restrains govt from disinvestment in Hindustan Zinc

The Supreme Court on Tuesday restrained the government from selling the residual stake in Hindustan Zinc Ltd, the management of which is under the control of a Vedanta subsidiary.

Attorney general Mukul Rohatgi, however, told the court that the government has already lost its majority stake after the 2002 divestment and does not require parliamentary sanction.

A bench led by Chief Justice T S Thakur questioned the “hurry” being shown by the government in offloading its remaining stake in the public sector unit and said it can not be done without the court’s permission. Why are you in a hurry?

As senior counsel C.A.Sundaram appearing for Vedanta Resources told the court that when it took over the company 14 years back, it was a loss making entity but now it is running into profits, the court said: “You have no right to demand anything”.

The National Confederation of Officers’ Association and an employees union, which is against the divestment, filed a petition challenging the previous sale of 26%, when assets were sold to Vedanta for Rs4,450m in 2002. While the government is way below the asking rate, the residual stake sale in HZL and Balco was not part of the budgeted disinvestment target. He cited an earlier apex court ruling that government stake in a company acquired through a law enacted by Parliament can not be divested without an amendment in the Act.

Rohatgi contended that HZL had ceased to be a government company after the 2002 disinvestment and the government was no longer interested in continuing with it. “We will not allow you to sell”, he said.

Billionaire Anil Agarwal-controlled mining conglomerate Vedanta Resources Plc holds 64.92 percent of Hindustan Zinc’s shares, while the government is the second-biggest owner with 29.54 percent, according to Thomson Reuters data.

The petitioner has challenged the proposed disinvestment, saying the decision is “irrational, illogical, illegal, unreasonable, mala fide and arbitrary”.