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These days a big development is progressing rapidly on the front of Indian banking sector and government disinvestment. Recently, after the Cabinet Committee on Economic Affairs (CCEA) approved the proposal to sell a major stake of the government and LIC in IDBI Bank to Canadian giant Fairfax Financial Holdings, a debate broke out in the political and economic circles of the country. At many places questions were being raised regarding this authority of the government. Meanwhile, the Union Finance Ministry has issued an official clarification stating bluntly that the government has full legal right to reduce its stake in IDBI Bank or sell it completely. The Finance Ministry has cited a historic decision of the Delhi High Court of 2018 and parliamentary history in support of this.
Complete matter of IDBI Bank stake sale and CCEA approval
Under this recent major economic decision, CCEA has approved the total loan amount of IDBI Bank. 60.72% stake Canadian company Fairfax Financial Holdings received approximately Rs 52,878.08 crore Has put his seal of approval on the proposal to sell. After this mega deal came to light, discussion started in various circles whether the government has the legal right to sell its majority stake in the bank or not.
Putting an end to all these speculations and debates, the Finance Ministry completely clarified the situation on Saturday, October 17. The Ministry clarified that this step taken by the Government is completely within the legal ambit and is fully supported by legislative and court decisions.
What does the law and history of the IDBI (Repeal) Act, 2003 say?
According to a detailed clarification issued by the Finance Ministry, the legislative developments of 2003 were being cited for the right to reduce the government’s stake in IDBI Bank. The Ministry clarified that while the Union Budget 2003 was under discussion and in the Parliament IDBI (Repeal) Act, 2003 While the debate was taking place, an amendment was moved with the aim of limiting the process of reducing the government’s stake.
However, that amendment could not be passed in Parliament and was rejected during debate. Therefore, it did not become part of the final law made by the Parliament. It is clear from the original language of the law and its history that no restrictive provision was included in it to prevent the government from selling its stake.
Reference was made to the 2018 decision of Delhi High Court.
To completely clarify the legal position in this entire matter, the Finance Ministry ‘All India IDBI Officers Association vs Union of India and Others’ In the case of Delhi High Court 17 December 2018 An important decision of has been specifically mentioned.
The Delhi High Court, in its decision while dismissing the petition, had clearly stated that certain statements made about 15 years ago during the legislative process in Parliament cannot prevent the Central Government from reducing or disinvesting its stake in IDBI Limited. The court had remarked in paragraphs 41 and 42 of its judgment that the debates or statements made in Parliament cannot be given the status of law. There is no ambiguity in the language of the Act and it does not contain any provision that would prevent the government from reducing its stake in the bank. The court had also made it clear that in this case the claim of stopping the government from disinvestment by taking advantage of the ‘Principle of Undertaking’ (Promissory Estoppel) cannot stand legally.
The policy of strategic disinvestment was also there in the previous Union Budget speeches.
Supporting this policy of the government, the Finance Ministry has also referred to the previous Union Budgets. The Ministry reminded how various Finance Ministers had, from time to time, clearly stated in Parliament the restructuring and strategic disinvestment of IDBI Bank.
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Union Budget 2016-17: The then Finance Minister Arun Jaitley had clarified in his budget speech that the process of restructuring of IDBI Bank has started and the government will consider all options to bring down its stake in the bank below 50 percent in the coming times.
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Union Budget 2021-22: Finance Minister Nirmala Sitharaman, during her budget speech, had included IDBI Bank in the list of key strategic institutions whose proposal to complete the disinvestment transaction was on top of the government’s agenda.
From all these budget speeches and government policies, it becomes clear that selling stake in IDBI Bank is not a sudden decision, but it is a part of a well-thought-out economic policy that has been going on for many years.
Clear conclusion of Finance Ministry
At the end of its official clarification, the Finance Ministry reiterated that the legislative history of the IDBI (Repeal) Act, 2003, the clear judgment of the Delhi High Court and the consistent policies of the Central Government are strong evidence that the Government has the full right to undertake strategic disinvestment in its undertakings in the national interest and in line with financial reforms. After this big clarification, it is now clear that this mega deal with Fairfax Financial Holdings is going ahead completely within the ambit of legal and constitutional provisions.