The finance ministry on Saturday said the legislative history of the IDBI (Repeal) Act, 2003, a Delhi High Court judgement and successive Union Budget speeches reflect the evolution of its policy towards the strategic disinvestment of IDBI Bank.
The Cabinet earlier this week approved strategic disinvestment of IDBI Bank by selling 60.72 per cent stake to Canada's Fairfax Financial Holdings for about Rs 53,000 crore (USD 5.5 billion). The deal is the largest foreign investment in India's financial sector so far and a major milestone in the country's banking privatisation drive.
In a clarification on the legislative developments regarding reduction in government holding in IDBI Bank, the ministry said the Delhi High Court on December 17, 2018, held that the IDBI (Repeal) Act, 2003, contained no prohibition against reducing the government's stake in IDBI Bank Ltd.
It may be recalled that during the Union Budget, 2003, discussions and the parliamentary debate on the IDBI (Repeal) Act, 2003, the government had moved an amendment seeking to restrict the dilution of the government's stake. But, the amendment was rejected and did not form part of the enacted legislation.
Following that, the Delhi High Court in the All India IDBI Officers' Association v. Union of India & Others, case decided on December 17, 2018, that "there is no ambiguity in the language of the IDBI Repeal Act, 2003 and there is no scope to read any provision into the said enactment which proscribes the government from reducing or divesting its stake in IDBI Ltd."
The judgment also addressed the doctrine of promissory estoppel, which was relied upon in challenging the government's decision to dilute its shareholding. The court said that the doctrine could not be invoked to prevent the government from reducing or divesting its stake in IDBI Ltd.
The government's policy towards the transformation and strategic disinvestment of IDBI Bank was reiterated in successive Union Budget speeches in Parliament.
In Union Budget 2016-17, the then Finance Minister Arun Jaitley said the process of transformation of IDBI Bank has already started. "Government will take it forward and also consider the option of reducing its stake to below 50 per cent," he said.
In 2021-22 Union Budget, Finance Minister Nirmala Sitharaman had said that the government has worked on strategic disinvestment of IDBI Bank and other PSUs despite Covid-19.
"The legislative history of the IDBI (Repeal) Act, 2003, the judicial pronouncement of the Delhi High Court and successive Union Budget speeches collectively demonstrate the evolution of the government's policy towards the strategic disinvestment of IDBI Bank.
"The judgment dated December 17, 2018 clarifies beyond doubt that the doctrine of promissory estoppel cannot be invoked on the basis of statements made during parliamentary debates to restrict the government's power to dilute its shareholding in IDBI Bank Ltd.The court further held that the enacted legislation contained no prohibition against reducing the government's stake in IDBI Bank Ltd," the ministry said.