SC lists irregularities in Centres HZLs stake sale in 2002 says prima facie case made out
New Delhi Nov 18 PTI The Supreme Court on Thursday said that reports and recommendations of CBI officials and prosecutors on the disinvestment of Hindustan Zinc Ltd in 2002 evince a prima facie case for registration of a regular case by the probe agency which will conduct a full-fledged investigation It said that some details in the CBI officials recommendations to register a regular case have not been adequately addressed by the self-contained note closing the preliminary enquiryThe top court noted that a Preliminary Enquiry PE based on confidential source information concerning the HZL disinvestment during 1997-2003 was registered by the CBI on November 6 2013 and was closed on March 6 2017A bench of Justices DY Chandrachud and BV Nagarathna said There is sufficient material for registration of a regular case in relation to the 26 per cent disinvestment of HZL by the Union Government in 2002 The CBI is directed to register a regular case and proceed in accordance with lawIt highlighted three major heads of irregularities that have not been addressed are– Irregularities in the decision to disinvest 26 per cent instead of 25 per cent Irregularities in the bidding process and irregularities in the valuation of 26 per cent equity for disinvestment Dealing with the Irregularities in the decision to disinvest 26 per cent instead of 25 per cent it said that at the time when the Governments share was 7592 per cent in the HZL the Disinvestment Commission in its sixth report of December 1997 had categorized HZL as a non-core PSU and had recommended its disinvestment but not beyond 25 per cent of the equity to retain controlOn July 6 1999 the Cabinet Committee on Disinvestment CCD had allegedly taken note of the recommendations of the Disinvestment Commission regarding disinvestment of 25 per cent and accepted the same However the Core Group of Secretaries on Disinvestment on February 17 2000 had allegedly disregarded this recommendation and proposed a sale of 26 per cent without any justification it saidThe top court said that yet the CCD approved the Core Group of Secretaries on Disinvestments proposal of disinvestment of 26 per cent equity to a strategic partner with management control and appointment of an advisor instead of a 25 per cent sale This was allegedly done on the basis of a senior government officials note dated August 27 2000 without further details or reasoning This decision of disinvesting 26 per cent equity reduced the Union Governments share in HZL to 4992 per cent it noted Dealing with the irregularities in the bidding process the bench said that during the first bidding in 2001 the Evaluation Committee had fixed the reserve price at Rs 3590 per share and nine parties had submitted an expression of interest for the process of disinvestment of which six were considered as qualified biddersHowever only one bid of Sterlite Opportunities and Ventures Ltd SOVL was received for Rs 2922 per share on November 8 2001 much below the reserve price of Rs 3590 per share In view of the unsuccessful bid the Evaluation Committee had recommended the delaying of the tender process until the global markets stabilized However this recommendation was initially accepted but rejected the very next day- on November 10 2001 without furnishing any reasons Second bids were invited soon after in March 2002 it saidIt noted that on March 2002 bids were again invited with the reserve price being reduced from Rs 3590 per share to Rs 3215 per share and the rationale justifying the reduction of the reserve price has not been mentioned in the self-contained noteFinal price bids were invited only from the earlier six qualified interested parties instead of a competitive open bidding process in view of the reduced share price Only two qualified interested parties SOVL and Ms Indo Gulf Corporation submitted their bids The sale was made to SOVL at Rs 4051 per share totalling Rs 445 crores approx Allegedly at least three bidders were required to process the matter No justification has been furnished to rebut this it saidIt noted that the CAGs Report 17 of 2006 indicated that the Asset Valuer and Global Advisor had not valued the assets of the company properly and the subsequent sale of 1892 per cent equity to SOVL in 2002 at the old rate of Rs 4051 per share was not in line with the Share Purchase Agreement as the prevailing rate then was Rs 11910 per share resulting in a loss of about Rs 650 croresOn irregularities in the valuation of 26 per cent equity for disinvestment it said Ms BNP Paribas was appointed as the Global Advisor on January 9 2002 but during the preliminary enquiry the CBI was allegedly unable to trace these officials representing the Global AdvisorThe bench said that some of these observations of the officials of the CBI who recommended the conversion of the preliminary enquiry into a regular case satisfy this Courts conscience for exercising its exceptional powers to direct the CBI to investigate the matterA prima facie case for a cognizable offence as mandated in the CBI Manual has been made out in this case and warrants the registration of a regular case The registration of a regular case followed by a full-fledged investigation must be conducted This Court shall be duly apprised of the status of the investigation it said PTI MNL MNL RKS RKS
New Delhi Nov 18 PTI The Supreme Court on Thursday said that reports and recommendations of CBI officials and prosecutors on the disinvestment of Hindustan Zinc Ltd in 2002 evince a prima facie case for registration of a regular case by the probe agency which will conduct a full-fledged investigation It said that some details in the CBI officials recommendations to register a regular case have not been adequately addressed by the self-contained note closing the preliminary enquiryThe top court noted that a Preliminary Enquiry PE based on confidential source information concerning the HZL disinvestment during 1997-2003 was registered by the CBI on November 6 2013 and was closed on March 6 2017A bench of Justices DY Chandrachud and BV Nagarathna said There is sufficient material for registration of a regular case in relation to the 26 per cent disinvestment of HZL by the Union Government in 2002 The CBI is directed to register a regular case and proceed in accordance with lawIt highlighted three major heads of irregularities that have not been addressed are– Irregularities in the decision to disinvest 26 per cent instead of 25 per cent Irregularities in the bidding process and irregularities in the valuation of 26 per cent equity for disinvestment Dealing with the Irregularities in the decision to disinvest 26 per cent instead of 25 per cent it said that at the time when the Governments share was 7592 per cent in the HZL the Disinvestment Commission in its sixth report of December 1997 had categorized HZL as a non-core PSU and had recommended its disinvestment but not beyond 25 per cent of the equity to retain controlOn July 6 1999 the Cabinet Committee on Disinvestment CCD had allegedly taken note of the recommendations of the Disinvestment Commission regarding disinvestment of 25 per cent and accepted the same However the Core Group of Secretaries on Disinvestment on February 17 2000 had allegedly disregarded this recommendation and proposed a sale of 26 per cent without any justification it saidThe top court said that yet the CCD approved the Core Group of Secretaries on Disinvestments proposal of disinvestment of 26 per cent equity to a strategic partner with management control and appointment of an advisor instead of a 25 per cent sale This was allegedly done on the basis of a senior government officials note dated August 27 2000 without further details or reasoning This decision of disinvesting 26 per cent equity reduced the Union Governments share in HZL to 4992 per cent it noted Dealing with the irregularities in the bidding process the bench said that during the first bidding in 2001 the Evaluation Committee had fixed the reserve price at Rs 3590 per share and nine parties had submitted an expression of interest for the process of disinvestment of which six were considered as qualified biddersHowever only one bid of Sterlite Opportunities and Ventures Ltd SOVL was received for Rs 2922 per share on November 8 2001 much below the reserve price of Rs 3590 per share In view of the unsuccessful bid the Evaluation Committee had recommended the delaying of the tender process until the global markets stabilized However this recommendation was initially accepted but rejected the very next day- on November 10 2001 without furnishing any reasons Second bids were invited soon after in March 2002 it saidIt noted that on March 2002 bids were again invited with the reserve price being reduced from Rs 3590 per share to Rs 3215 per share and the rationale justifying the reduction of the reserve price has not been mentioned in the self-contained noteFinal price bids were invited only from the earlier six qualified interested parties instead of a competitive open bidding process in view of the reduced share price Only two qualified interested parties SOVL and Ms Indo Gulf Corporation submitted their bids The sale was made to SOVL at Rs 4051 per share totalling Rs 445 crores approx Allegedly at least three bidders were required to process the matter No justification has been furnished to rebut this it saidIt noted that the CAGs Report 17 of 2006 indicated that the Asset Valuer and Global Advisor had not valued the assets of the company properly and the subsequent sale of 1892 per cent equity to SOVL in 2002 at the old rate of Rs 4051 per share was not in line with the Share Purchase Agreement as the prevailing rate then was Rs 11910 per share resulting in a loss of about Rs 650 croresOn irregularities in the valuation of 26 per cent equity for disinvestment it said Ms BNP Paribas was appointed as the Global Advisor on January 9 2002 but during the preliminary enquiry the CBI was allegedly unable to trace these officials representing the Global AdvisorThe bench said that some of these observations of the officials of the CBI who recommended the conversion of the preliminary enquiry into a regular case satisfy this Courts conscience for exercising its exceptional powers to direct the CBI to investigate the matterA prima facie case for a cognizable offence as mandated in the CBI Manual has been made out in this case and warrants the registration of a regular case The registration of a regular case followed by a full-fledged investigation must be conducted This Court shall be duly apprised of the status of the investigation it said PTI MNL MNL RKS RKS
