In the bygone age of socialism, whenever the government set up a public sector company, it had to take Parliament’s approval for whatever expenditure was incurred from the Consolidated Fund of India. ‘‘If this is the background in which a new company is set up, can such a company be dismantled without some kind of parliamentary mandate?’’ Meaning, no sale of an asset acquired out of an approved expenditure can be allowed to take place without Parliament’s consent. A rather sweeping and baseless proposition, the kind you would expect to hear only from a bigoted opponent of economic reforms. But, unfortunately for the nation, this proposition was actually made by no less than the Supreme Court, while ruling earlier in the week that oil companies HPCL and BPCL cannot be disinvested without Parliament’s approval. As a result, the judgement does not just halt the sale of HPCL and BPCL but threatens to ground the whole disinvestment policy. Worse, it brings into question every disinvestment that has taken place in the country since the economic liberalisation of 1991. In fact, if the link made by the apex court between expenditure and sale is taken to its logical conclusion, no government organisation can dispose of anything, not even its raddi, without taking the consent of Parliament. This is no overstatement. Justice S. Rajendra Babu came up with this whole new twist to the executive’s accountability to Parliament while discussing the BPCL-HPCL matter from what he said was ‘‘a constitutional angle’’. When a judge embarks on the ambitious exercise of laying down a radical and path-breaking proposition, you expect him to provide constitutional and jurisprudential reasons, backed by precedents and other authorities. But Justice Babu did no such thing; he instead wrapped up his entire discussion on the constitutional angle in just one paragraph and, in the style of a demagogue, asked rhetorically how any company which received money from the Consolidated Fund of India could be ‘‘dismantled’’ without Parliament’s approval. The judgement not only uses the language of a political pamphlet, it also betrays a similar lack of rigour. The issue before Justice Babu’s two-judge bench was not the efficacy of the disinvestment policy. A three-judge bench headed by Justice B.N. Kirpal already upheld the policy last year in the context of the Balco case. For the record, Justice Babu even acknowledged at the end of the judgement that there was no challenge before him to the disinvestment policy as such. Yet, it did not refrain him from asking that rhetorical question which put a question mark over the entire policy and whatever disinvestments have so far taken place under it. Justice Babu has clearly overstepped his remit in suggesting that the government needs to take Parliament’s approval in each and every instance of disinvestment. The issue of Parliament’s approval arose only in the context of such an undertaking which had been acquired by the government by passing a law in Parliament. Justice Babu’s bench had to decide whether the reduction of the government’s stake in such a company to less than 51 per cent would violate the law under which that undertaking had been originally acquired. In the given case, the government set up HPCL and BPCL in the ’70s and transferred to them the assets it had acquired from three multinational oil companies, ESSO, Burma Shell and Caltex. Thus, the court had to examine the provisions of three acquisition laws to see if any of them was violated by the disinvestment process initiated by Arun Shourie in BPCL and HPCL. In the event, the court found that the three laws were identical and that Shourie’s action violated Section 7 in each. This is because Section 7 stipulates that the government can transfer the acquired assets only to a government company — that is, a company in which the government has at least 51 per cent shares. But then, as the government contended, Section 7 does not in any way bar it from selling its shares to a private party. This is a strong argument because when the government nationalised banks and coal mines earlier, the laws enacted for that purpose contained a bar expressly mandating that the government shall always maintain a 51 per cent stake in those companies. The court nevertheless read an ‘‘implied’’ bar in Section 7 on the basis of the preamble to the law. This is specious reasoning because the preamble does not in any way insist that the business should remain with a government company. The thrust of the preamble is that the acquired assets should be ‘‘so distributed as best to subserve the common good’’. This should have persuaded the court to keep away because what that ‘‘common good’’ should be is a matter of policy for the government to decide. The courts have repeatedly said that they will not sit in judgement over the economic policy of the government. Justice Babu rushed in where other judges feared to tread. The nation has to pay a price because he is driven by his conviction that no government asset can be sold without Parliament’s assent.
