IMPORTANT POINT
Method adopted by the Government in exercising its executive powers to disinvest two oil companies, Hindustan Petroleum Corporation Limited (HPCL) and Bharat Petroleum Corporation Limited (BPCL), without repealing or amending the law and without taking Parliamentary approval or sanction is not permissible.

Headnote:Constitution of India-Articles 32, 39(b) and 113-ESSO (Acquisition of Undertaking in India) Act, 1974-Burma Shell (Acquisition of Undertaking in India) Act, 1976-Caltex (Acquisition of Shares of Caltex Oil Refining India Limited and all the Undertakings in India for Caltex India Limited) Act, 1977-Disinvestment of two Oil Companies, HPCL and BPCL, Government Companies-Method required to be followed-Decision of Government to sell majority of shares in Hindustan Petroleum Corporation Limited (HPCL) and Bharat Petroleum Corporation Limited (BPCL) to private parties without Parliamentary approval or sanction-Challenged as being contrary to and violative of provisions of the Acquisition Acts-Object of the Act is that ownership and control of petroleum products is distributed and marketed in India by State or Government Company-Whether the undertaking can change its character from a Government company to ordinary company without Parliamentary clearance-(No)-Method adopted by the Government in exercising its executive powers to disinvest HPCL and BPCL without repealing or amending the law is not permissible-Central Government restrained from proceeding with disinvestment resulting in HPCL and BPCL ceasing to be Government Companies without appropriately amending the statutes concerned.
       Held : Setting up a new public sector company is defined as a new instrument of service for which approval of Parliament is required for expenditure 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? In this background we will now consider the case on hand. (Para 6)
       It is no doubt true that the two companies are Government companies and being instrumentalities of the State, they can enter into contracts among other things, but question is whether this power is circumscribed by any statute either expressly or by necessary implication. It is also clear that there is no provision in the Act expressly stating that the Government shall, at all times, hold not less than 51 of the paid-up capital of each corresponding new company, as has been stated in the Banking Companies (Acquisition & Transfer of Undertakings) Act. Nor is there any provision as in the Coal Mines Nationalisation Act, 1973 to the effect that "no person, other than the Central Government or a Government company or a corporation owned, managed, or controlled by the Central Government shall carry on coal mining operation, in India, in any form." (Para 7)
       There is no challenge before this Court as to the policy of disinvestment. The only question raised before us whether the method adopted by the Government in exercising its executive powers to disinvest HPCL and BPCL without repealing or amending the law is permissible or not. We find that on the language of the Act such a course is not permissible at all. (Para 20)

JUDGMENT

Rajendra Babu, J.-In these two writ petitions filed in public interest the petitioners are calling in question the decision of the Government to sell majority of shares in Hindustan Petroleum Corporation Limited (HPCL) and Bharat Petroleum Corporation Limited (BPCL) to private parties without Parliamentary approval or sanction as being contrary to and violative of the provisions of the ESSO (Acquisition of Undertaking in India) Act, 1974, the Burma Shell (Acquisition of Undertaking in India) Act, 1976 and Caltex (Acquisition of Shares of Caltex Oil Refining India Limited and all the Undertakings in India for Caltex India Limited) Act, 1977.

2. The petitioners contended that in the Preamble to these enactments it is provided that oil distribution business be vested in the State so that the distribution subserves the common general good; that, further, the enactments mandate that the assets and the oil distribution business must vest in the State or in Government companies; that, they are not opposed to the policy of disinvestment but they are only challenging the manner in which the policy of disinvestment is being given effect to in respect of HPCL and BPCL; that, unless the enactments are repealed or amended appropriately, the Government should be restrained from proceeding with the disinvestment resulting in HPCL and BPCL ceasing to be Government companies. It is further submitted that disinvestment in HPCL and BPCL could result in the State losing control over their assets and oil distribution business and, therefore, it is contrary to the object of the enactments.

3. It is the submission of the learned counsel for the petitioners that acquisition of HPCL and BPCL has taken place in pursuance of Article 39(b) of the Constitution; that, Article 39(b) subserves the object of building a welfare State and an egalitarian social order; that, therefore, these enactments have been passed with the object of giving effect to Article 39(b) of the Constitution and the provisions of the enactment provide for vesting of these undertakings in the State or in a Government company; that, it is not open to the Government to disinvest the same without first changing the law in this regard either by repealing the enactments or by making appropriate changes by way of amendments in the enactments. The learned counsel further relied upon a decision of Superior Court of Justice of Ontario between Brian Payne vs. James Wilson and Her Majesty the Queen in Right of Ontario dated April 19, 2002. In that decision the Superior Court of Justice of Ontario declared that any sale of the common shares of Hydro One Inc. held in the name of Her Majesty in right of Ontario, whether pursuant to an initial public offering of common shares or by way of a secondary offering, or otherwise, contravenes sub-section 48(1) of the Electricity Act, 1998. In that enactment Section 48(1) provides that the Lieutenant Governor in Council may cause two corporations to be incorporated under the Business Corporations Act and shares in those corporations may be acquired and held in the name of Her Majesty in right of Ontario by a member of the Executive Council designated by the Lieutenant Governor in Council. That order was appealed to the Court of Appeal of Ontario. During pendency of the appeal the Electricity Act, 1998 was amended by replacing Section 48(1) thereof which expressly authorises the Minister of Environment and Energy to dispose or otherwise deal with the shares of the Hydro One Inc. and on that basis, disposed of the appeal. It was further noticed in that decision that the reasons given by the Superior Court of Justice cannot be read as a general pronouncement on the rights of the Crown to deal with its assets; that, the learned Judge purported to analyse a specific provision in a specific Act; that, he did so in the context of the entirety of the Electricity Act, 1998, the specific circumstances surrounding its enactment and the comments of the Minister

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2003 Supreme(SC) 901

Cases Referred (4)