Jessop sale nullified by HC

In a setback to the Centre's divestment policy, the Calcutta high court nullified the sale of Jessop and Co Ltd to Ruia Cotex Ltd, saying the decision-making process for the sale of the ailing public sector company was bad in law and directed BIFR to prepare a fresh revival scheme.

Justice Kalyan Jyoti Sengupta, in his order said that the decision-making process for divestment of Jessop and Co Ltd was not in accordance with law.

The court directed the BIFR to prepare a fresh revival scheme in accordance with law within three months from the date of communication of his order.

The judge, however, did not accept the contention of the workers of the company that Jessop could not be sold to a private company as it fell in the strategic sector.

The court also criticised the role of the operating agency (State Bank of India) in the Jessop divestments process saying it had not acted in terms of guidelines on divestment and that it ought to have advertised prior to divestment.

On a prayer by the counsel for Ruia Cotex, Abhrajit Mitra, the judge stayed the operation of today's order for a fortnight.

Jessop and Co, a subsidiary of the Bharat Bhari Udyog Nigam Ltd, has been engaged in design and manufacture of a diversified range of products like railway rolling stock and earth moving equipments.

The Centre as part of its divestment policy had in February 2002 decided to sell 72 per cent of its stake in Jessop and Co Ltd to the highest bidder Ruia Cotex for only Rs18.18 crore (Rs 181 million).

The move faced strong criticism from several quarters including the left parties in West Bengal, which claimed that the company was sold at a 'throwaway' price as the assets of Jessop would be worth over Rs 250 crores (Rs 2.5 billion).

The Centre's decision was challenged in the court by the Jessop & Co Staff Association within a month of the government's decision.

The high court in an order on March 7, 2002, directed the BIFR not to give effect to the decision taken by the government.