IDBI Bank stake sale: FinMin cites High Court ruling, Budget speeches to reject irregularity claims

The Finance Ministry on Saturday clarified that there was no illegality in the approval process for the stake sale in IDBI Bank.

“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 Ministry said in a statement. On Wednesday, the Cabinet Committee on Economic Affairs (CCEA) approved 10955230 Canada Inc. as the Strategic Buyer for this Transaction for a purchase consideration of over Rs 52800 crore for the acquisition of a 60.72 per cent stake in IDBI Bank Ltd, comprising 30.48 per cent equity shareholding held by the GoI and 30.24 per cent equity shareholding held by the LIC.

After the decision, there has been a lot of criticism and allegations of irregularities in the decision-making process.

The Ministry said that the Delhi High Court, in its ruling dated December 17, 2018, clarified 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 the IDBI Bank Ltd.” The doctrine of promissory estoppel implies that when a person, intending to create a lawful relationship, makes a promise to another person and that person acts on it, the promise becomes an obligation on the person making it.

The Court said that it was of the view that the statements made before the House almost 15 years earlier, in a debate relating to a legislative activity, would not preclude the Central Government from diluting its stake in IDBI Ltd. Indisputably, the legislation enacted by the Parliament after the debate did not contain the amendment that was sought to be introduced. “The statements made before the House cannot substitute or override the statue so enacted by the Parliament. Surely, the Parliament was conscious of the import of not including the proviso as proposed,” the court said.

Further, the Court held that the enacted legislation contained no prohibition against reducing the Government’s stake in the IDBI Bank Ltd. “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 Ministry quoted a paragraph from the ruling.

The Ministry also said the Government’s policy on the transformation and strategic disinvestment of IDBI Bank was reiterated in successive Union Budget Speeches in Parliament. Then Finance Minister (now late) Arun Jaitley had said in his FY17 budget speech: “The process of transformation of IDBI Bank has already started. Government will take it forward and consider the option of reducing its stake to below 50 per cent.”

Then, Finance Minister Nirmala Sitharaman, in her FY22 budget speech, highlighted that despite COVID-19, the government had kept working towards strategic disinvestment. “A number of transactions, namely BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans, Neelachal Ispat Nigam limited among others, would be completed in 2021-22,” she said.

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