A close reading of the Supreme Court judgment on Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd indicates that it does not put a full-stop on the divestment policy.
The Supreme Court makes a delicate distinction among different government companies. There is one type, registered under the Companies Act, in which the central or state government holds major shares.
In the Balco judgment, the court has allowed freedom to the government to divest the shares of such companies.
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However, in such a situation the court was guided by the object of the enactment, which is to distribute petroleum products to subserve the common good in the best way possible.
The apex court emphasised that the only question before it was whether the method adopted by the government while exercising its executive powers was permissible or not.
"We find that on the language of the Acts, such a course is not possible at all," they said.
The three laws that stand in the way of divestment are 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 in India Ltd and all the Undertakings in India for Caltex India Ltd) Act, 1977.
There is another category of government companies which are established or acquired under legislation. In some such statutes, there is a provision which expressly states that the government shall, at all times, hold not less than 51 per cent of the paid-up capital.
The Banking Companies [Acquisition & Transfer of Undertakings] Act is one such. Another is the Coal Mines Nationalisation Act which specifically states 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."
Such government companies cannot be divested without parliamentary sanction.
There are some other government companies established or acquired under the law, which do not contain a clause barring divestment and are silent on this aspect.
HPCL and BPCL fall this category. In such cases, the judgment says, one has to read the preamble to the Act to find the intention of the law-makers.
In the case of the oil companies, the acquisition was intended to "ensure that the ownership and control of petroleum products, distributed and marketed in India by the said company are vested in the state, thereby so distributed as best to subserve the common good."
This was interpreted by the Supreme Court to mean that there is an "implicit" bar on divestment, just as in the cases of banks and mines.
Such interpretation can change from case to case, and in the case of another PSU, depending upon the provisions of the Act and the object of the legislation as reflected in the preamble.
The court also reviewed the latest legislation, judgments and trends obtaining in other countries regarding privatisation.
"We have an overview of the position the world over on whether there is any need for a law regarding privatisation or what routes are to be adopted for achieving the same. Irrespective of those considerations, we base our decision on the statutes with which we are concerned," the judgment explained.