Sucheta Dalal :Transparency must in sell-off process (17 March 2003)
Sucheta Dalal

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Transparency must in sell-off process (17 March 2003)  

Attorney General Soli Sorabjee’s legal opinions are no strangers to controversy. A couple of years ago there was an outcry about his legal advice to the Hindujas.

Then, in the telecom tangle, he famously reversed his earlier opinion to allow cellular phone operators who had committed to paying a fixed license fees and won their bids on that basis, to switch over to a revenue-sharing arrangement.

In the private corporate sector, his opinion helped Gujarat Ambuja and its advisors forge a smart takeover deal that enriched the Tatas, gave management control to the Seksaria-Neotia group and left retail investors out in the cold.

Still, there hasn’t been another case in recent memory where the Attorney General’s (AG) opinion is challenged and contested, not merely by a hundred of his peers, but also by four judges, a former law minister and the former Disinvestment Commission chairman.

The issue: Sorabjee’s advice to the Disinvestment Ministry that the government could divest its holding in the two oil companies, HPCL and BPCL without seeking consent from Parliament, even though both companies were created by parliamentary legislation.

Sorabjee’s considered opinion and the government’s handling of the sale of shares in public sector undertakings has shifted the controversy from that of politicians trying to hold on to their PSU fiefs, to one of transparency and honesty of government’s procedures and actions.

There are two aspects to sale of oil companies. The first, raised in a petition to the Prime Minister by nearly a hundred Supreme Court lawyers asks why the AG’s opinion was sought in the first place. They allege that Sorabjee’s predecessor Milon Banerjee had opined, as early as 1993, that companies created by parliamentary acts could not be privatised without parliamentary approval.

The lawyers suspect ‘malafide intention of the central government’ and ‘sinister design’ in obtaining the opinion. The AG’s view was refuted in detail by former Disinvestment Commission chairman G.V. Ramakrishna.

However, with the public statement from Justices V.R. Krishna Iyer, O. Chinappa Reddy, P.B.Sawant (all retired judges of the Supreme Court), Justice Rajinder Sachar (retired Chief Justice, Delhi High Court) and former Law Minister Shanti Bhushan, the government’s path seems to be properly blocked.

The jurists’ statement expresses surprise at the AG’s view that parliamentary enactments by which erstwhile private oil companies — ESSO, Burmah Shell and Caltex— were nationalised do not specifically prohibit the government from privatising them or selling government equity to private companies.

They say that the preamble of the original enactments taking over the assets of the oil companies clearly spelt out the legislative policy and the objective of nationalisation. It says that the companies ‘should be acquired in order to ensure that the ownership and control of the petroleum products are distributed and marketed in India by the said company are vested in the State and thereby so distributed as best to subserve the common good’.

The scheme of the enactments is clear. It mandates that the oil distribution business be vested in the State, although it could be through a government company.

The jurists say, ‘it would be absurd to suggest that the government could undo the parliamentary mandate by just selling the shares of the government company and thus privatising it.

In our opinion these oil PSUs could only be privatised by means of express parliamentary enactments, by either amending the earlier Acts or by bringing in a new Act and repealing the earlier enactments.

Any other way of doing it would run counter to our constitutional scheme in which the executive cannot go against the will of Parliament’.

According to them, ‘the government’s decision to bypass Parliament on a matter of such public importance also militates against Constitution a propriety and the supremacy of Parliament’ and go on to warn that ‘it shows an unhealthy contempt for Parliament and Constitutional norms’.

With such a strong view on the modality of disinvestment and the looming threat of war with Iraq, the oil company disinvestment is clearly on the back burner. But the controversy over disinvestment does not end here.

The sale of the Centaur Hotel has also taken a predictably ugly turn. A parliamentary standing committee has found several flaws in the Civil Aviation Ministry’s clearance of the bid by Batra Hospitality Services. Batra acquired Centaur Hotel by bidding through a Special Purpose Vehicle (SPV) and within weeks of the purchase sold the SPV to the Sahara Group at a hefty profit of Rs 32.5 crore.

The committee has found fault both with the evaluating the financial bids, the dilution of turnover fees payable to the Airport Authority of India and the transfer of a petrol pump along with the hotel.

In this case too, Batra Hospitality has reportedly issued a statement saying Sorabjee did not find fault with the deal and a change of the company’s name did not violate the sale agreement with the government.

A new dimension to the controversy may soon be provided with the Sahara Group deciding to ‘lease’ the other Centaur Hotel (Juhu) from Ajit Kerkar’s Tulip Hotels. Informed circles insist that the ‘lease’ is only a cover for Sahara’s acquisition of the hotel.

After all, the group cannot get a better management for the hotels than Kerkar, who is an internationally reputed hotelier. The oil company sale as well as the Centaur controversy has questioned the very transparency of government’s disinvestment procedures.

Add to this, the fact that Indian Petrochemicals Corporation (IPCL) is turning into exactly the monopoly that the erstwhile Disinvestment Commission had apprehended that it would be, and we have a extremely messy situation. Yet, India’s best minister heads the Disinvestment Ministry, and nobody surely is pointing fingers at him.

But doesn’t this mean that the Minister received some terrible advice? It is in national interest to find out how and why things went so wrong and who were the persons responsible. Moreover, if a Minister of unimpeachable reputation can become the victim of bad advice, they how much worse can things get with someone else in charge?

-- Sucheta Dalal