The Supreme Court dismissed Vedanta’s plea to direct the Centre to divest its 29.54% residual stake in Hindustan Zinc (HZL) in the open market, saying it cannot interfere with a “policy decision”.
A Bench led by Chief Justice DY Chandrachud, while rejecting Vedanta’s application, said the company giving up on its call option was not conditional on the government having agreed to sell its stake in the open market.
“We cannot compel/force them (govt). The Union can say the market is not good now, so cannot fetch the best price,” the CJI said.
The CJI’s response came after Vedanta argued that its offer to buy at the fair market value was based on the premise that the government would be selling its residual stake in HZL through “Offer For Sale” under the Sebi guidelines or any other agreed mode of dilution through a fair and transparent bidding process, and it was willing to participate in the same like any other eligible bidder.
Even the SC had recorded its undertaking in its November 18, 2021, order that the company would not insist on its contractual rights to acquire the shares at a pre-determined price as the government had decided to sell its residual stake in the open market, the company said.
“It was only on the strength of the undertaking given by UoI in its affidavit of April 12, 2021, and expecting the UoI to act in a reasonable manner, in compliance with the terms of the 2002 shareholders agreement, and within a reasonable time that the applicant conceded to not exercising its call option rights and sought to seek withdrawal of its claim before the arbitral tribunal,” Vedanta said.
The SC had on November 18, 2021 allowed the Centre to offload its residual 29.5% stake in HZL in the open market as HZL ceased to remain a government company after the sale of its majority stake in 2002. The 2002 disinvestment facilitated subsequent sale of controlling stake to the Anil Agarwal-led mining-to-metals conglomerate. However, the apex court directed registration of a regular case by CBI and to fully investigate the HZL disinvestment during 1997-2003.
The government had in fiscal 2013-14 planned to raise at least ₹15,000 crore through sale of residual stakes held in HZL and Balco. Vedanta Resources had acquired the majority shareholding of the two companies in the previous NDA regime in 2003. Vedanta now holds 64.92% in HZL. The government’s residual stake in HZL is close to ₹41,000 crore at current market prices.
While the Union cabinet had approved a stake sale in HZL in 2014, the National Confederation of Officers Association, an employee union, approached the SC seeking a CBI probe into the alleged irregularities in HZL’s stake sale to Vedanta (earlier called Sesa Sterlite) in 2002.
