The facts of HZL transaction make it evident that it was completely transparent.

The Supreme Court’s directive to the Central Bureau of Investigation is to look into the alleged irregularities in the privatisation of Hindustan Zinc Ltd (HZL). This should not result in harassment of the officers concerned and the private parties involved in the process. This would act as a big disincentive for the government functionaries carrying out the ongoing sale of public sector undertakings (PSUs), now called the asset monetisation.
Thankfully, the bench of Justices D.Y. Chandrachud and B.V. Nagarathna did not stop the Centre from selling its 29.54% residual stake in HZL, which is now owned by the Anil Agarwal-controlled Sterlite Opportunities & Ventures Ltd (SOVL).
Justice Chandrachud said, “The Union Government is a shareholder of HZL. The control and management of HZL does not vest with the Union government which has a residual stake of 29.54%… The Union Government, in its capacity as a shareholder of HZL, is entitled to take such a decision.”
The National Confederation of Officers Association of Central Public Sector Enterprises and certain others in 2014 had challenged the government’s sale of its residual shareholding.
It is a well-known fact that a very large number of people, including PSU employees, are opposed to not just privatisation but also the economic philosophy behind it, the philosophy which is succinctly described as “the business of government is not business”. Their opposition to privatisation thus is based on incorrect premises in some cases and doctrinaire in others.
It looks as though facts of HZL transaction make it evident that it was completely transparent. After its 28 August 2000 decision to sells its 26% equity through strategic sale, the Atal Bihari Vajpayee government invited price bids from the qualified interested parties (QIPs). These were received on 11 August 2001.
However, there was only one QIP that submitted the bid; it was rejected as it was below the reserve price fixed. “In pursuance of Government directions, a renewed exercise was undertaken involving the original QIPs who had completed their due diligence,” a Finance Ministry document says.
BNP Paribas served as the advisor and Amarchand Mangaldas & A. Shroff as the legal advisor to the transaction. URS Corporation was appointed to conduct environmental, health, and safety due diligence review of the company. Among the modifications made in the transaction documents were the sequencing of call and put options and their pricing, the provision to have the chairman nominated by the strategic partner once it acquires 51% stake, unlimited environmental indemnity for pre-disinvestment actions, for a period of three years and a clear road map for the government to exit from the company.
On 28 February 2002, the government reduced the customs duty on the import of zinc from 35% to 25% to impact the profitability of the company.
Price bids were invited again from all the five QIPs—Glencore International, Binani Industries, Indo-Gulf Corporation, Sterlite, and Metdist. Two financial bids were received from Indo Gulf Corporation SOVL. The reserve price fixed was Rs 32.15 per share or Rs 353.17 crore for 26% stake. Both the price bids received were above the reserve price. The higher bid, that of SOVL, was Rs 445 crore or about Rs 40.50 per share. It was much higher than the first bid. The PE ratio at which HZL was sold was around 26. Quite evidently, HZL was sold by way of open competitive bidding, so there seems no question of favouritism or corruption.
Responding to the Supreme Court’s order, Arun Shourie, disinvestment minister in 2002, said: “If the SC has said register a case, let the case be registered. I am sure everyone concerned will cooperate fully. But here the point to see is this was challenged when it was disinvested. SC rejected the petition challenging the disinvestment. Now the SC has disregarded that order and asked the CBI to probe. CBI had filed a closure report in the matter. Now you say investigate again.”
While pointing out that the officers concerned “were very meticulous and cautious,” Shourie pointed out that this ruling may have a negative impact on the officers who are privatising now. “If after 20 years, you are going to say that even though the CBI has found nothing, even though the SC has rejected a similar petition earlier, still a case should be registered, then the officers better watch out.”
It needs to be mentioned here that action against privatisers is not new. Eighteen years after the public sector India Tourism Development Corporation’s Laxmi Vilas Palace Hotel in Udaipur was sold to a private company, a special CBI court in 2020 directed the premier investigative agency to file criminal cases against Shourie, the then disinvestment secretary Pradip Baijal, and three others. The Rajasthan High Court, however, came to their rescue, staying the proceedings against them in October 2020.
Privatisation, and economic policymaking in general, should not become a perilous exercise for politicians and bureaucrats, involving endless legal battles. The apex court must ensure this.

Ravi Shanker Kapoor is a freelance journalist.