# NATIONAL CONFEDERATION OF OFFICERS ASSOCIATION OF CENTRAL PUBLIC SECTOR ENTERPRISES AND ORS v. UNION OF INDIA AND ORS

- **Citation:** [2021] 10 S.C.R. 899
- **Court:** Supreme Court of India
- **Decided:** 2021-11-18
- **Bench:** Dr. Dhananjaya Y Chandrachud, B. V. Nagarathna
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/national-confederation-of-officers-association-of-central-public-sector-34736
- **Pages:** 56

## Headnote

Disinvestment: Policy of disinvestment - Union Government's
divestment of its residual shareholding of 29.54 % in HZL company
- Public interest litigation u/Art. 32, seeking mandamus directing
the Union Government to refrain from disinvestment without
amending the Nationalisation Act, 1976 - Held: Decision in Centre
for Public Interest Litigation's case, does not apply to the present
facts because HZL had ceased to be a government company, at the
stage of the disinvestment - Thus, the Union Government's decision
to disinvest 29.54 per cent of its residual shareholding in HZL is
not interdicted by the principles laid down by this Court in Centre
for Public Interest Litigation's case that when the acquisition takes
place under an Act of Parliament, any disinvestment by the Union
Government can be undertaken only with the approval of Parliament
or through its intervention -There is no challenge to the
disinvestment which took place in 1991-92 or in 2002, the latter
having resulted in HZL ceasing to retain its status as a government
company within the meaning of s. 617 of the Companies Act 1956 -
It would be inconsistent to read an implied limitation on the transfer
by the Union Government of its residual shareholding in HZL
representing 29.54 per cent of the equity capital - Thus, when a
decision is taken by the government as shareholder of a company
to sell its shares, it acts as any other shareholder in a company who
makes the decision on the basis of the financial and economic
exigencies - Furthermore, SOVL company does not seek to exercise
the second call option, in terms of the Share Purchase Agreement,
as such the Union Government took decision to sell its residuary
shareholding in the open market - Union Government being
amenable to Part III of the Constitution, would not impose a restraint
on its capacity to decide, as a shareholder, to disinvest its
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shareholding, the process of disinvestment being transparent
and which comports with law and results in the best price
being a shareholding - Metal Corporation (Nationalisation
and Miscellaneous) Provisions Act 1976 - Constitution of India -
Art. 32.
Constitution of India: Art. 32 - Writ petition under -
Disinvestment of the residual 29.54 per cent shareholding of the
Union Government challenged on the ground that the residual
disinvestment can occur only after the amendment of the
Nationalisation Act 1976 - Said prayer substantially similar to the
reliefs sought in Maton Mines Mazdoor Sangh's case, wherein they
challenged the disinvestment of 2002 and 2014, on the basis of the
decision in Centre for Public Interest Litigation - Petition, if barred
by the principles of res judicata, following the dismissal of the earlier
writ petition on the same issue - Held: The summary dismissal of an
earlier petition u/Art. 32 does not bar the instant writ petition on
grounds of res judicata as there has been no substantive decision
on the merits of the issues, thus, the instant writ petition not barred
by res judicata - Metal Corporation (Nationalisation and
Miscellaneous) Provisions Act 1976.
Code of Civil Procedure 1908: s. 11 - Principle of res
judicata - Determination of its applicability - Held: While determining
the applicability of the principle of res judicata u/s. 11, the grave
issues of public interest are not to be ignored merely because a
petition was initially filed and dismissed, without a substantial
adjudication on merits - There is a trend of poorly pleaded public
interest litigations being filed instantly following a disclosure in the
media, with a conscious intention to obtain a dismissal from the
Court and preclude genuine litigants from approaching the Court
in public interest - Court to be aware of the contemporary reality
and interpret the principles of res judicata or constructive res
judicata in a manner which does not debar access to justice -
Jurisdiction u/Art. 32 is a fundamental right in and of itse

## Text

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899
 [2021] 10 S.C.R. 899
899
NATIONAL CONFEDERATION OF OFFICERS ASSOCIATION
OF CENTRAL PUBLIC SECTOR ENTERPRISES AND ORS.
v.
UNION OF INDIA AND ORS.
(Writ Petition (C) No. 229 of 2014)
NOVEMBER 18, 2021
[DR. DHANANJAYA Y CHANDRACHUD
AND B. V. NAGARATHNA, JJ.]
Disinvestment: Policy of disinvestment - Union Government's
divestment of its residual shareholding of 29.54 % in HZL company
- Public interest litigation u/Art. 32, seeking mandamus directing
the Union Government to refrain from disinvestment without
amending the Nationalisation Act, 1976 - Held: Decision in Centre
for Public Interest Litigation's case, does not apply to the present
facts because HZL had ceased to be a government company, at the
stage of the disinvestment - Thus, the Union Government's decision
to disinvest 29.54 per cent of its residual shareholding in HZL is
not interdicted by the principles laid down by this Court in Centre
for Public Interest Litigation's case that when the acquisition takes
place under an Act of Parliament, any disinvestment by the Union
Government can be undertaken only with the approval of Parliament
or through its intervention -There is no challenge to the
disinvestment which took place in 1991-92 or in 2002, the latter
having resulted in HZL ceasing to retain its status as a government
company within the meaning of s. 617 of the Companies Act 1956 -
It would be inconsistent to read an implied limitation on the transfer
by the Union Government of its residual shareholding in HZL
representing 29.54 per cent of the equity capital - Thus, when a
decision is taken by the government as shareholder of a company
to sell its shares, it acts as any other shareholder in a company who
makes the decision on the basis of the financial and economic
exigencies - Furthermore, SOVL company does not seek to exercise
the second call option, in terms of the Share Purchase Agreement,
as such the Union Government took decision to sell its residuary
shareholding in the open market - Union Government being
amenable to Part III of the Constitution, would not impose a restraint
on its capacity to decide, as a shareholder, to disinvest its
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shareholding, the process of disinvestment being transparent
and which comports with law and results in the best price
being a shareholding - Metal Corporation (Nationalisation
and Miscellaneous) Provisions Act 1976 - Constitution of India -
Art. 32.
Constitution of India: Art. 32 - Writ petition under -
Disinvestment of the residual 29.54 per cent shareholding of the
Union Government challenged on the ground that the residual
disinvestment can occur only after the amendment of the
Nationalisation Act 1976 - Said prayer substantially similar to the
reliefs sought in Maton Mines Mazdoor Sangh's case, wherein they
challenged the disinvestment of 2002 and 2014, on the basis of the
decision in Centre for Public Interest Litigation - Petition, if barred
by the principles of res judicata, following the dismissal of the earlier
writ petition on the same issue - Held: The summary dismissal of an
earlier petition u/Art. 32 does not bar the instant writ petition on
grounds of res judicata as there has been no substantive decision
on the merits of the issues, thus, the instant writ petition not barred
by res judicata - Metal Corporation (Nationalisation and
Miscellaneous) Provisions Act 1976.
Code of Civil Procedure 1908: s. 11 - Principle of res
judicata - Determination of its applicability - Held: While determining
the applicability of the principle of res judicata u/s. 11, the grave
issues of public interest are not to be ignored merely because a
petition was initially filed and dismissed, without a substantial
adjudication on merits - There is a trend of poorly pleaded public
interest litigations being filed instantly following a disclosure in the
media, with a conscious intention to obtain a dismissal from the
Court and preclude genuine litigants from approaching the Court
in public interest - Court to be aware of the contemporary reality
and interpret the principles of res judicata or constructive res
judicata in a manner which does not debar access to justice -
Jurisdiction u/Art. 32 is a fundamental right in and of itself.
Investigation: CBI Crime Manual - Process of conducting
CBI's preliminary enquiries - Preliminary enquiry by CBI into the
suspected irregularities in the course of disinvestment of 26% equity
holding of the Union Government to SOVL company in 2002 -
Submission of status report by CBI - Held: There is no bar on the
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constitutional power of this Court to direct the CBI to register a
regular case, in spite of its decision to close a preliminary enquiry
- On facts, a prima facie case for a cognizable offence, as mandated
in para 9.1 of the CBI Manual, made out - Sufficient material for
registration of a regular case in relation to the 26 per cent
disinvestment of HZL by the Union Government in 2002 - Thus,
registration of a regular case, followed by a full-fledged
investigation must be conducted - Issuance of direction to CBI to
register a regular case and periodically submit status reports of its
investigation to this Court - Constitution of India - Art. 32.
Partly allowing the writ petition, the Court
HELD: 1.1 Section 11 of the Code of Civil Procedure 1908
embodies the principles of res judicata and bars the court from
deciding issues which have been directly or substantially in issue
in an earlier proceeding between the same parties or parties
claiming under the same title and have been finally decided.
[Para 30][925-E-F; 926-A]
1.2 The principles of res judicata and constructive res
judicata, which Section 11 of the Code of Civil Procedure 1908
embodies, have been applied to the exercise of the writ
jurisdiction, including public interest litigation. Yet courts have
been circumspect in denying relief in matters of grave
public importance, on a strict application of procedural rules.
[Para 31][926-B]
1.3 While determining the applicability of the principle of
res judicata under Section 11 of the Code of Civil Procedure 1908,
the Court must be conscious that grave issues of public interest
are not to be ignored merely because a petition was initially filed
and dismissed, without a substantial adjudication on merits. There
is a trend of poorly pleaded public interest litigations being filed
instantly following a disclosure in the media, with a conscious
intention to obtain a dismissal from the Court and preclude
genuine litigants from approaching the Court in public interest.
This Court must be alive to the contemporary reality of "ambush
Public Interest Litigations" and interpret the principles of res
judicata or constructive res judicata in a manner which does not
NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC
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debar access to justice. The jurisdiction under Article 32 is a
fundamental right in and of itself. [Para 34][928-G-H; 929-A-B]
1.4 In Maton Mines Mazdoor Singh's case, since the three
judge Bench of this Court rejected the petition filed by Maton
Mines Mazdoor Singh in limine, without a substantive adjudication
on the merits of their claim, the present writ petition is not barred
by res judicata. [Para 35][929-B-C]
Centre for Public Interest Litigation v. Union of India
(2003) 7 SCC 532 : [2003] 3 Suppl. SCR 746; Kantaru
Rajeevaru (Sabrimala Temple Review- 5J) v. Indian
Young Lawyers Association (2020) 2 SCC 1 : [2019]
17 SCR 599; State of U.P. v. Nawab Hussain (1977) 2
SCC 806 : [1977] 3 SCR 428; Sarguja Transport
Service v. State Transport Appellate Tribunal, M.P.,
Gwalior (1987) 1 SCC 5 : [1987] 1 SCR 200; Forward
Construction Co. v. Prabhat Mandal (Regd.) (1986) 1
SCC 100 : [1985] 3 Suppl. SCR 766; Rural Litigation
and Entertainment Kendra v. State of U.P. 1989 Supp
(1) SCC 504 : [1988] 2 Suppl. SCR 690; Daryao v.
State of U.P. (1962) 1 SCR 574; State of Karnataka v.
All India Manufacturers Organization (2006) 4 SCC
683 : [2006] 1 Suppl. SCR 86 - referred to.
2.1 The challenge in the petition under Article 32 is to the
proposal of the Union Government to sell its residual stake in
HZL, by the sale of the remaining 29.54 per cent equity. Neither
is the validity of the initial disinvestment of 24.08 per cent equity
which took place in 1991-92, nor is the subsequent disinvestment
of 26 per cent in terms of the Share Purchase Agreement,
challenged in these proceedings. As a matter of fact, if it were to
be challenged, the first objection would be to the delay of well
over two decades in challenging the disinvestment of 1991-92
and of nearly 12 years in challenging the sale of 2002 in pursuance
of the Share Purchase Agreement. Since the disinvestment of
1991-92 and of 2002 has attained finality. It becomes necessary
to assess the effect of the earlier disinvestment, in terms of the
status of HZL. As a consequence of the disinvestment on 27
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March 2002, HZL ceased to be a government company within
the meaning of Section 617 of the Companies Act 1956 since its
shareholding fell below 51 per cent. Then, the issue which arises
is whether Metal Corporation (Nationalisation and Miscellaneous)
Provisions Act 1976 interposes any bar on the sale of the
residual shareholding of the Union Government in HZL.
[Para 38][930-D-H]
2.2 The submission of the petitioners emphasises that the
purpose underlying the acquisition was that zinc and lead were
considered to be essential raw-materials for the economy of the
country and of considerable strategic importance, such that it
was necessary in public interest that the project which was
undertaken by Metal Corporation of India should be completed
expeditiously. The Statement of Objects and Reasons also
indicates that the erstwhile undertaking had a mining lease in
respect of zinc and lead deposits in the Zawar area and owned a
lead smelter in Bihar, besides which it had undertaken to expand
production from the mines and construct a smelter for producing
zinc and by-products near Udaipur. For various reasons, Metal
Corporation of India was not able to complete its projects;
construction had come to a standstill and the undertaking had
failed to meet its obligations to repay suppliers of machinery.
The Statement of Objects and Reasons emphasises the
importance of zinc and lead to the economy, which was undoubtedly
an important facet of the purpose of acquisition. Moreover, Metal
Corporation of India, the pre-nationalized entity, was unable to
complete its projects and its acquisition by an Act of Parliament
was envisaged for the expeditious completion of the projects.
The long title to the Nationalisation Act 1976 indicates that the
Act was enacted to enable the Central Government, in public
interest, to exploit to the fullest extent, the zinc and lead deposits
in and around the Zawar area of Rajasthan and "to utilize those
minerals in such manner as to sub-serve the common good".
Section 4(1) of the Nationalisation Act 1976 provided for the
taking over of the management of the undertaking of Metal
Corporation. As a consequence of the acquisition, Section 6(1)
envisages that so long as the management of the undertaking of
Metal Corporation remains vested in the Central Government,
NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC
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(i) it is not lawful for the shareholders to nominate or appoint a
director; (ii) no resolution by the shareholders would be given
effect to, unless approved by the Central government; and (iii)
no proceedings for winding up the acquired entity would lie in
any court, except with the consent of the Central government.
Section 7 provides for the vesting of the undertaking of the Metal
Corporation in the Central government. [Para 40][931-F-H;
932-A-D; 933-A-B]
2.3 Sections 4, 7 and 9 indicate that the undertaking of
Metal Corporation stood transferred to, and vested absolutely
in the Central Government. Section 9 further empowers the
Central Government to vest the undertaking in a government
company. Once the Metal Corporation stood vested in a
government company, the provisions of the then Companies Act
1956 and present Companies Act 2013 become applicable.
Thereupon, the government company would be entitled to
exercise all such powers and to do all such things as Metal
Corporation was authorized to effect, in relation to its
undertaking. [Para 43][935-G-H; 936-A-B]
2.4 The Nationalisation Act, 1976 contains no express
provision restraining the exercise of rights by the Union
Government upon the undertaking of Metal Corporation vesting
in it and thereupon, pursuant to a direction under Section 9(1),
being transferred to a government company. The shareholding
of the Union Government was divested initially in 1991-92 and
subsequently in 2002. After the disinvestment of 26 per cent of
the equity stake of the Union Government to SOVL, HZL ceased
to be a government company within the meaning of Section 617
of the Companies Act 1956. As a result of the divestment on 27
March 2002, HZL ceased to be a government company, with the
Union Government's shareholding falling to 49.92 per cent, below
the threshold of 51 per cent. [Para 44][936-B-D, E-F]
2.5 The petitioners seek to read an implicit limitation on
the transfer of the residual shareholding of 29 per cent held by
the Union Government in HZL, from the provisions of the
Nationalisation Act 1976. This submission is prefaced on the
object of the enactment which is to acquire control over the
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strategic mineral deposits of lead and zinc. This submission has
been met by the respondents by urging that after 16 March 1999,
the mining of zinc has ceased to retain a strategic character, given
the changes in industrial policy. The aspect which is of significance
is that there is no challenge to the disinvestment which took
place in 1991-92 or in 2002, the latter having resulted in HZL
ceasing to retain its status as a government company within the
meaning of Section 617 of the Companies Act 1956. That being
the position, it would be inconsistent to read an implied limitation
on the transfer by the Union Government of its residual
shareholding in HZL representing 29.54 per cent of the equity
capital. Hence, when a decision has been taken by the government
as shareholder of a company to sell its shares, it acts as any other
shareholder in a company who makes the decision on the basis
of the financial and economic exigencies. [Para 45][936-F-H;
937-A-B]
2.6 The issue which needs to be considered is whether the
decision of this Court in Centre for Public Interest Litigation would
result in a bar on the disinvestment of the residual shareholding.
This decision of a two-judge Bench was that 'the divestment of
the shareholding of the Union Government in HPCL and BPCL,
as a result of which the companies would cease to be government
companies could not be undertaken without amending the statutes
under which they were nationalized.' [Para 46][937-B-C; 940-B]
Centre for Public Interest Litigation v. Union of India
(2003) 7 SCC 532:[2003] 3 Suppl. SCR 746
- distinguished.
2.7 In the instant case, the disinvestment as a consequence
of which HZL ceased to be a government company took place in
March 2002. What is in question on the first relief sought is the
29.54 per cent residuary shareholding in HZL, after it has
admittedly ceased to be a government company within the
meaning of Section 617 of the Companies Act 1956 and the
corresponding provisions of the Section 2(45) of the Companies
Act 2013. In the Companies Act 2013, the expression
'government company' is defined in Section 2(45). [Para 47]
[940-F-H]
NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC
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2.8 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 per cent. The
shareholding of SOVL stood increased to 64.92 per cent after
the exercise of the first call option in 2002. During the course of
hearing, this Court has been apprised by SOVL that it does not
seek to exercise the second call option, in terms of the Share
Purchase Agreement. It is in this backdrop that a decision has
been taken by the Union Government to sell its residuary
shareholding in the open market. The Union Government, in its
capacity as a shareholder of HZL, is entitled to take such a decision.
The fact that the Union Government is amenable to the norms
set out in Part III of the Constitution would not impose a restraint
on its capacity to decide, as a shareholder, to disinvest its
shareholding, so long as the process of disinvestment is
transparent and the Union Government is following a process
which comports with law and results in the best price being a
shareholding. [Para 48][941-B-E]
Centre for Public Interest Litigation v. Union of India
(2003) 7 SCC 532 : [2003] 3 Suppl. SCR 746; Balco
Employees' Union (Regd.) v. Union of India (2002) 2
SCC 333 : [2001] 5 Suppl. SCR 511; Life Insurance
Corporation of India v. Escorts Ltd. (1986) 1 SCC
264 : [1985] 3 Suppl. SCR 909; ABL International Ltd.
v. Export Credit Guarantee Corporation of India (2004)
3 SCC 553;
Central Inland Water Transport
Corporation Limited v. Brojo Nath Ganguly (1986) 3
SCC 156 : [1986] 2 SCR 278 - referred to.
2.9 In the instant case, the Union Government is exercising
its rights as a shareholder and has taken a decision to disinvest
its residual shareholding of 29.54 per cent in HZL. HZL is no
longer a government company. In any event, the decision of the
Union Government, as an incident of its policy of disinvestment,
to sell its shares in the open market, cannot be questioned by
reading a bar on its powers to do so, from the provisions of the
Nationalisation Act 1976. No such express or implied bar exists,
failing the applicability of this Court's decision in Centre for Public
Interest Litigation. [Para 48]942-C-E]
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3.1 Chapter 9 of the CBI Crime Manual details the process
of conducting preliminary enquiries. Para 9.1 states that "a
Preliminary Enquiry may be converted into Regular Case as soon
as sufficient material becomes available to show that prima facie
there has been commission of a cognizable offence". The
Constitution Bench of this Court had underscored the duty of
the police to register an FIR when the information received prima
facie discloses the commission of a cognizable offence. However,
the decision recognizes that in certain cases, a preliminary enquiry
may be held. [Para 53][943-E-G]
3.2 There is no bar on the constitutional power of this Court
to direct the CBI to register a regular case, in spite of its decision
to close a preliminary enquiry. Analogously, this Court has
directed the police to register an FIR, once a cognizable offence
has been disclosed to it. [Para 56][947-E-F]
3.3 Upon perusal of the reports and recommendations, it is
the considered opinion that the disinvestment in 2002 evinces a
prime facie case for registration of a regular case. This Court is
desisting from commenting on some crucial facts and names of
individuals involved, so as to not cause prejudice to the
investigation of the matter. Some details in the CBI officials'
recommendations to register a regular case, which have not been
adequately addressed by the self- contained note closing the
preliminary enquiry, as regards irregularities in the decision to
disinvest 26 per cent, instead of 25 per cent, irregularities in the
bidding process, and irregularities in the valuation of 26 per cent
equity for disinvestment. [Para 57][948-G-H; 949-A, G; 951-C]
3.4 The said observations of the officials of the CBI, who
recommended the conversion of the preliminary enquiry into a
regular case, satisfy this Court's conscience for exercising its
exceptional powers to direct the CBI to conduct an investigation
into the matter. A prima facie case for a cognizable offence, as
mandated in para 9.1 of the CBI Manual, has been made out in
this case and warrants the registration of a regular case. The
registration of a regular case, followed by a full-fledged
investigation must be conducted. This Court shall be duly
apprised of the status of the investigation. [Para 58][953-C-D]
NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC
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Central Bureau of Investigation (CBI) v. Thommandru
Hannah Vijaylakshmi @ T.H. Vijaylakshmi and another
2021 SCC OnLine SC 923; Manohar Lal Sharma v.
Principal Secretary (2014) 2 SCC 532 : [2013] 17 SCR
1099; Shashikant v. Central Bureau of Investigation
(2007) 1 SCC 630 : [2006] 8 Suppl. SCR 474; Lalita
Kumari v. Government of Uttar Pradesh (2014) 2 SCC
1 : [2013] 14 SCR 713 - referred to.
3.5 The petitioner has alleged that the complainant, C P,
was the brother of petitioner No 3 which entitles them to a copy
of the report of the CBI closing the preliminary enquiry, in terms
of Para 120 (iii) of Lalita Kumari's case. However, the relief is
denied because the finding of the Constitution Bench of this Court
was with respect to the informant alone, and the original
complainant is not before this Court; and CBI has stated that the
preliminary enquiry was registered at the behest of source
information, much before C P's complaint. [Para 59][953-D-F]
4. It is held that
(i) The summary dismissal of an earlier petition under Article
32 of the Constitution does not bar the present writ petition on
grounds of res judicata as there has been no substantive decision
on the merits of the issues;
(ii) The decision in Centre for Public Interest Litigation's
case does not apply to the instant facts because HZL had ceased
to be a government company, at the stage of the disinvestment
which is in challenge. Hence, the Union Government's decision
to disinvest 29.54 per cent of its residual shareholding in HZL is
not interdicted by the principles laid down by this Court in Centre
for Public Interest Litigation's case;
(iii) SOVL has stated before the Court that it is not
exercising its second call option under the Share Purchase
Agreement;
(iv) The Union Government has stated through the Solicitor
General that the residual shareholding shall be divested in the
open market and shall take place in accordance with the rules
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and regulations of SEBI to ensure that the best price is realized
for the sale of the shareholding; and
(v) There is sufficient material for registration of a regular
case in relation to the 26 per cent disinvestment of HZL by the
Union Government in 2002. The CBI is directed to register a
regular case and periodically submit status reports of its
investigation to this Court. [Paras 60, 61][953-F-G; 954-A-E]
Union of India v. Metal Corporation of India Ltd (1967)
1 SCR 255 - referred to.
Case Law Reference
[1967] 1 SCR 255
referred to
Para 4
[2013] 14 SCR 713
referred to
Para 18
[2019] 17 SCR 599
referred to
Para 31
[1977] 3 SCR 428
referred to
Para 31
[1987] 1 SCR 200
referred to
Para 31
[1985] 3 Suppl. SCR 766
referred to
Para 31
[1988] 2 Suppl. SCR 690
referred to
Para 31
[1962] 1 SCR 574
referred to
Para 32
[2006] 1 Suppl. SCR 86
referred to
Para 33
[2001] 5 Suppl. SCR 511
referred to
Para 46
[2003] 3 Suppl. SCR 746
distinguished
Para 47
[1985] 3 Suppl. SCR 909
referred to
Para 48
(2004) 3 SCC 553
referred to
Para 48
[1986] 2 SCR 278
referred to
Para 48
[2013] 17 SCR 1099
referred to
Para 55
[2006] 8 Suppl. SCR 474
referred to
Para 56
CIVIL ORIGINAL JURISDICTION : Writ Petition (C) No. 229
of 2014.
(Under Article 32 of The Constitution of India)
NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC
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Prashant Bhushan, Pranav Sachdeva, Jatin Bhardwaj, Ms. Neha
Rathi, Lakshmi Raman Singh, Advs. for the Petitioners.
Tushar Mehta, SG, K. M. Nataraj, ASG, Harish Salve, Prashanto
Chandra Sen, Sr. Advs., Gurmeet Singh Makker, Rajat Nair, Kanu
Agrawal, Sridhar Potaraju, Arvind Kumar Sharma, P. S. Sudheer, Bharat
Sood, Ms. Shruti Jose, Ms. Anuradha Dutt, Anish Kapur, Ms. Ekta Kapil,
Ms. Nikhita Suri, Ms. Priyanka M. P., Ms. B. Vijayalakshmi Menon,
Manu Mridul, Surya Kant, Advs. for the Respondents.
The Judgment of the Court was delivered by
DR. DHANANJAYA Y CHANDRACHUD, J.
A
Introduction................................................................3
B
Submissions of Counsel..............................................9
C
Res Judicata and PILs..............................................22
D
The decision in Centre for Public Litigation................29
E
CBI's preliminary enquiry..........................................45
F
Conclusion...............................................................61
A Introduction
1. An organization called the National Confederation of Officers
Association1 has invoked the jurisdiction of this Court under Article 32
of the Constitution. The Confederation, which is a trade union registered
under the Trade Unions Act 1926, is joined in these proceedings by three
other petitioners, including a former employee of Hindustan Zinc Limited2.
The members of the Confederation are,or have been, employees of public
sector undertakings. Their grievance in these proceedings arises from
the Union Government's disinvestment of its shareholding in HZL, the
fourth respondent. According to the petitioners, HZL is not a loss incurring
unit and the disinvestment does not sub-servepublic interest. Parliament
acquired the undertaking by the Metal Corporation (Nationalisation and
Miscellaneous) Provisions Act 19763. In pursuance of its acquisition,
the undertaking came to be vested in a government company. HZL is
stated to be a 'mini-navratna'company with a cash liquidity resource of
over Rs 20,000 crores. According to the petitioners, the Union
1 "Confederation"
2 "HZL"
3 "Nationalisation Act 1976"
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Government's divestment of its shareholding in HZL is in violation of the
judgment of a two-judge Bench of this Court in Centre for Public
Interest Litigation v. Union of India4. In the proceedings as they
stand, the challenge is to the proposed disinvestment of the residual
shareholding of the Union Government in HZL, representing 29.54 per
cent (approx.) of the equity capital.
2. Metal Corporation of India Limited was incorporated in 1944
as a public limited company under the Companies Act 1913. It was the
sole producer of zinc and lead from its mines situated at Zawar in
Rajasthan. The company had established a lead smelter plant at Tundoo,
near Dhanbad, in the then State of Bihar for producing lead, silver and
other by-products. Subsequently it installed a zinc smelter at Debari,
near Udaipur. Given the strategic importance of zinc and lead, the Union
Government took a decision to acquire the company by a legislation.
3. On 22 October 1965, the President promulgated the Metal
Corporation of India (Acquisition of Undertaking) Ordinance for
acquisition of the undertaking by the Union Government. Possession,
control and administration was taken over by the Union Government on
23 October 1965. A petition under Article 226 of the Constitution was
instituted in 19655 by the corporation and its managing director before
the Circuit Bench in New Delhi of the then Punjab High Court, for
challenging the constitutional validity of the Ordinance. During the
pendency of the proceedings, the Ordinance was replaced by Act 44 of
1965 which led to the institution of another writ petition6 challenging its
validity. On 10 January 1966, HZL was incorporated as a public sector
company to develop the mining and smelting capacities, so as to
substantially fulfil the domestic demand for zinc and lead.
4. On 14 March 1966, the Punjab High Court held that the
Ordinance and the enactment that replaced it, violated Article 31 of the
Constitution and were void. The appeal by the Union of India was
dismissed by this Court on 5 September 1966, in Union of India v.
Metal Corporation of India Ltd7. On 13 September 1966 another
Ordinance, Ordinance No 10 of 1966, was promulgated by the President
for the acquisition of the undertaking of Metal Corporation of India
4 ["Centre for Public Interest Litigation"] (2003) 7 SCC 532
5 WP 631-D of 1965
6 WP 832-D of 1965
7 (1967) 1 SCR 255
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Limited. The Ordinance was replaced by an Act of Parliament (Act 36
of 1966) which came into forceon 3 December 1966. This led to another
round of proceedings under Article 226 of the Constitution8 before the
Calcutta High Court. The petition was dismissed by a Single Judge of
the Calcutta High Courton 1 April 19699 on the ground of res judicata.
5.On 2 August 1976, the President promulgated the Metal
Corporation (Nationalisation and Miscellaneous Provisions) Ordinance.
This Ordinance was replaced by Act No. 100 of 1976, on 7 September
1976.
6. The Union Government took steps for the disinvestment of its
shareholding in HZL. In 1991-92, in the first tranche, the Union
Government disinvested 24.08 per cent of its shareholding in the domestic
market. Of this, 12.54 per cent was acquired by financial institutions,
7.58 per cent by corporate bodies and non-resident Indians and 3.96 per
cent by Indian nationals. HZL was listed on stock exchanges. As a result
of the disinvestment, the Union Government was left with a 75.92 per
cent stake in HZL.
7. The second tranche of disinvestment of the Union Government's
shareholding in HZL took place in pursuance of the Union Government's
decisionto disinvest 26 per cent of its shareholding in HZL to a 'strategic
partner', by selling 10,98,58,294 fully paid-up equity shares of Rs 10
each, at Rs 40.51 per share, aggregating to Rs 445 crores (approx.). A
Shareholders'Agreement and a Share Purchase Agreement were
executed on 4 April 2002 with Sterlite Opportunities & Ventures Ltd.10,
the third respondent, who was chosen as the strategic partner. In terms
of these agreements, the Union Government disinvested 26 per cent of
its equity in HZL in favour of SOVL. Consequent to the sale of the
equity stake, the Union Government was left with an equity holding of
49.92 per cent.
8. On 5 November 2003, a public interest litigation, invoking the
jurisdiction under Article 226 of the Constitution, was instituted before
the Jodhpur Bench of the Rajasthan High Court11 by a person named
Rajendra Kumar Razdan, to challenge the second tranche of
disinvestment - of the 26 per cent equity holding of the Union Government
8 WP 551 of 1966
9 AIR 1970 Calcutta 15
10 "SOVL"
11 DB (C) Writ Petition No 6340 of 2003
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in HZL. After the petition was entertained by the High Court, the Union
Government moved a transfer petition12 before this Court under Article
139A(1) in which further proceedings were stayed on 9 February 2004
by a three-judge Bench of this Court. On 11 October 2004, this Court
allowed the transfer petition, together with other similar petitions seeking
a transfer of proceedings, also challenging the disinvestment by the Union
Government in other government companies. On 23 August 2006, a threejudge Bench of this Court dismissed writ petitions challenging the
disinvestment of the shareholding of the Union Government in other
government companies - namely, Engineers India Limited, National
Fertilizers Limited and Burn Standard Company Limited13.The dismissal
of these petitions followed upon affidavits filed on 14 December 2005,
27 July 2005 and 18 August 2005 stating that the Union Government
was reconsidering the sale of these companies, rendering the writs
infructuous.
9. While the challenge to the disinvestment of the 26 per cent
shareholding was pending before this Court, on 10 April 2002, SOVL
acquired 20 per cent of the equity in HZL from the open market by a
mandatory open offer, in compliance with the Securities and Exchange
Board of India's14 norms. As a consequence of the acquisition, the holding
of SOVL in HZL rose to 46 per cent. The Board of Directors of HZL
was reconstituted. Following this acquisition, the shareholding pattern in
HZL was as follows:
•
SOVL - 46 per cent (comprising 26 per cent shares
purchased from the Union Government and 20 per cent
acquired from the open market);
•
Union Government - 48.45 per cent; and
•
Public - 5.55 per cent.
10. On 13 May 2009, Rajendra Kumar Razdan's writ petition
challenging the disinvestment of the Union Government's 26 per cent
equity holding in HZL, was dismissed as withdrawn, following an
application for withdrawal by the petitioner.
11. The Shareholders'Agreement between the Union Government
and SOVL envisaged two call options. SOVL exercised its first call
12 Transfer Petition (C) No 830 of 2003
13 WP (C) Nos. 487, 569, 586 and 587 of 2003
14 "SEBI"
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option for 18.92 per cent of the equity holding in August 2003, which
was transferred in its favour in November 2003. Following this acquisition,
SOVL became a majority shareholder with a 64.92 per cent equity stake
in HZL.
12. In 2012, the Union Government announced its decision to
disinvest its residuary shareholding of 29.54 per cent in HZL15. On 31
October 2012, Maton Mines Mazdoor Sangh instituted a petition16 under
Article 32 of the Constitution before this Court challenging the proposed
disinvestment of the residuary shareholding of the Union Government.
This petition was summarily dismissed by a three-judge Bench of this
Court on 10 December 2002.
13. On 6 November 2013, the Central Bureau of Investigation17the fifth respondent - initiated a preliminary enquiry into suspected
irregularities in the course of the disinvestment of the 26 per cent of
equity holding of the Union Government to SOVL in 2002.
14. The present public interest litigation under Article 32, was
instituted on 14 February 2014. Two reliefs have been sought in these
proceedings: (i) A mandamus directing the Union Government and the
Department of Disinvestment to refrain from disinvesting the residual
shareholding of 29.54 per cent in HZL without amending the
NationalisationAct 1976; and (ii) a direction to the CBI to periodically
file status reports before this Court in respect of the investigation being
conducted by it, so that it can be monitored by this Court till the filing of
the charge-sheet in the appropriate court.
15. On 6 March 2017, CBI filed a closure report with reference
to the preliminary enquiry stating that it did not disclose facts which
would warrant the registration of a criminal case.
16. The filing of pleadings has been completed.
B Submissions of Counsel
17. Mr Prashant Bhushan, learned senior counsel appearing on
behalf of the petitioners has stressed upon the importance of the residual
29.54 per cent shareholding of the Union Government in HZL. Learned
senior counsel has clarified that the challenge is not to the policy of
disinvestment, but the manner in which it has taken place. The submissions
are summarized below:
15 Interchangeably referred as "29 per cent"
16 "Maton Mines Mazdoor Sangh" WP (C) 513 of 2012
17 "CBI"
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(i)
The decision to disinvest theresidualshareholding of the
Union Government in HZL cannot be undertaken without
amending the provisions of the Nationalisation Act 1976;
(ii)
Besides yielding profits, the 29 per cent shareholding of the
Union Government ensures that no decision which requires
the passage of a special resolution under the Companies
Act 2013 can be adopted without its support, which
effectively gives it a veto over key decisions concerning
HZL. The control of the Union Government is wieldedunder
the provisions of Section 134(2) and Section 47 of the
Companies Act 2013. Under the Companies Act 2013,
several matters requiring the passing of a SpecialResolution,
are tabulated below:
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(iii)
The Nationalisation Act was enacted in 1976, in pursuance
of the policy of the Union Government to acquire control
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over the deposits of lead and zinc, as a matter of strategic
national interest;
(iv)
The strategic importance of the deposits of lead and zinc is
underscored in the Statement of Objects and Reasons
accompanying the introduction of Bill in the Parliament, and
by the provisions of Sections 4, 7 and 9 of the Nationalisation
Act 1976, under which the acquired undertaking was vested
in a government company within the meaning of Section
617 of the Companies Act 1956;
(v)
In 2002, the Union Government acted in a manner contrary
to the express mandate of the statutewhen it disinvested its
26 per cent shareholding, in favour of a strategic partner.
The decision to offload 29 per cent of the residual
shareholding will compound the illegal act which was
committed in 2002;
(vi)
The Nationalisation Act 1976 prohibits the government from
taking any step by which the acquired undertaking ceases
to be a government company. Though HZL ceased to be a
government company in 2002 following the disinvestment
of 26 per cent of the equity shareholding of the Union
Government, yet the residual shareholding enables the
government to ensure that the strategic mineral deposits of
lead and zinc would be used for the common good. These
strategic considerations have been emphasized by the one
hundred and fifth Parliamentary Committee Report, 2002;
and
(vii)
The law on the subject has been enunciated in the judgment
of this Court in Centre for Public Interest Litigation
(supra). In view of this elucidation of legal principle, when
the acquisition has taken place under an Act of Parliament,
any disinvestment by the Union Government can be
undertaken only with the approval of Parliament or through
its intervention.
18. On the basis of the above propositions, the petitioners question
the decision of the Union Government to disinvest its residual shareholding
of 29.54 per cent. Besides the first limb of submissions noted above, the
second limb of submissions, seeks to question the decision of the CBI to
close the preliminary enquiry. In this context, it has been urged that:
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(i)
The decision of the Constitution Bench in Lalita Kumari
v.