The Supreme Court, on Thursday, permitted sale of the government’s residual stake in Hindustan Zinc. At the same time, it has also ordered probe by the Central Bureau of Investigation into the 2002 strategic disinvestment of the company.

“The Union government, in the present case, is exercising its rights as a shareholder and has taken a decision to disinvest its residual shareholding of 29.54 per cent in HZL.

“HZL is no longer a government company. In any event, the decision of the Union government, as an incident of its policy of disinvestment, to sell its shares in the open market, cannot be questioned by reading a bar on its powers to do so, from the provisions of the Nationalisation Act 1976,” said a Division Bench comprising Justices Dhananjaya Y Chandrachud and BV Nagarathna.

Centre’s stake

Once a Central Sector Pubic Enterprises, Hindustan Zinc is now owned by Vedanta group companies. However, the Centre still holds 29.54 per cent in the company, which it could not sell due to stay and long pending litigations. Sale of this stake will help the government add more in disinvestment target of ₹1.75-lakh crore in the current fiscal.

The Bench noted that the Union government has stated through the Solicitor General that the residual shareholding shall be divested in the open market, and shall take place in accordance with the rules and regulations of SEBI to ensure that the best price is realised for the sale of the shareholding

On investigation, the Bench said: “There is sufficient material for registration of a regular case in relation to the 26 per cent disinvestment of HZL by the Union government in 2002. The CBI is directed to register a regular case and proceed in accordance with law.”

Further, it directed the CBI to periodically submit status reports of its investigation to this Court. The aforesaid reports shall be submitted every quarter, or as otherwise directed by this Court. The Bench said the earlier probe on Hindustan Zinc divestment was closed before it went into merits.

The Supreme Court was hearing a plea by the National Confederation of Officers Association of CPSEs, opposing the government’s move to sell residual stake in the company and seeking probe into the divestment in 2002.

In 2002, Vedanta’s predecessor Sterlite acquired a 26 per cent stake in Hindustan Zinc from the government for ₹440 crore and another 20 per cent through an open market offer for ₹337 crore. In 2003, Sterlite exercised two call options offered by the government and acquired an additional 18.9 per cent for ₹320 crore.

In 2012, the company made an offer of ₹16,000 crore for residual shares of the company.