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CBI goes after NDA now,looks into Hindustan Zinc stake sale

It is looking into the sale of HZL to Sterlite Opportunities & Ventures in 2002.

Written by Amitav Ranjan | New Delhi |
October 8, 2013 3:19:28 am

The CBI has launched an investigation into the strategic sale of Hindustan Zinc Ltd (HZL) to Anil Agarwal’s Sterlite Opportunities & Ventures Ltd.,by the NDA government in 2002.

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The probe,according to records the agency has sought from the mines ministry,is focused on how HZL was privatised without the approval of Parliament when it was created by acquiring Metal Corporation of India Ltd (MCIL) through a parliamentary statute — the Metal Corporation (Nationalisation) Act of 1976.

The CBI has called for the “entire record pertaining to HZL related to nationalisation of MCIL,disinvestment of HZL in favour of Sterlite Opportunities and the opinion of Attorney General on Sterlite’s call option”.

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It wrote to the mines ministry on August 20,seeking HZL records until 2007 as well as “details of officers who were associated with the process of disinvestment”.

CBI officers declined to comment on the nature of the probe but confirmed that they had asked the mines ministry for records to decide “the future course of action”.

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The formation of HZL was similar to that of Bharat Petroleum and Hindustan Petroleum,whose disinvestment process was stopped in 2003 by the Supreme Court saying that it could be done only after amending acts that nationalised them.

The sale of 26 per cent government shares in HZL along with management control was initiated in August 2000 when the BJP’s Arun Shourie was minister of state for disinvestment. The share sale was concluded in March 2002 and management control handed over to the sole bidder,Sterlite,the next month.

Subsequently,the government offloaded another 18.92 per cent equity in the firm in favour of Sterlite in November 2003,pursuant to the first call option.

But Sterlite delayed placing its second call option for the remaining 29.54 per cent equity which caused controversy and sparked the CBI’s interest.

Instead of making the second call option offer by April 2007,Sterlite made it in June 2009,following which the mines ministry sought the opinion of the then Attorney General. The call option was turned down as it violated section 111A of the Companies Act and the matter was placed before an arbitral tribunal.

However,before it could be resolved,advocate Prashant Bhushan wrote to then finance minister Pranab Mukherjee in March 2012,alleging that the sale of balance shares to Sterlite would be illegal as the 2002 disinvestment was against the law laid down by the Supreme Court.

He argued that the basis of the 1976 Metal Corporation (Nationalisation) Act was to “subserve the common good” and complained that the management of HZL,which was acquired through a statute,was handed over by an executive decision. He alleged that HZL,sold for Rs 445 crore,was undervalued as “ore reserves in various mining units were not considered in its fair valuation”.

The law ministry subsequently upheld that position and said that further disinvestment issues will have to be approved via amendment of the said act. After going through legal opinion,the mines ministry also agreed that residual shares could be sold only after Parliament amends the law.

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