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Selloff okay comes with strings attached

New Delhi, Jan 20: Attorney general Soli Sorabjee today handed over his final opinion on whether there is a need to repeal Acts of Parliament nationalising companies like Esso and Burma Shell (now renamed Hindustan Petroleum Corporation Ltd and Bharat Petroleum Corporation Ltd) before the government divests its stake in them.

Disinvestment minister Arun Shourie told The Telegraph that he had received the attorney general's reply but he “would have to report the contents to the Prime Minister first and the Cabinet Committee on Disinvestment after that.”

Sources said the reply allowed denationalisation without parliamentary approval but carried riders on the manner in which this could be done. However, Acts nationalising those companies where the government was giving away management control and where it no longer retained the promoter status may still have to be repealed under certain circumstances. Sources added that the CCD meeting on this issue was likely to be held on January 25.

Previously, on advice from the law ministry, the government had repealed the Act nationalising the 125-year-old Indian Iron and Steel Company in 1972, before going ahead with a bidding process for the Burnpur-based steel maker. This had set a precedent, hard to ignore.

But the Maruti selloff, which had been earlier cited by Shourie in talks with Sorabjee as an example of a disinvestment where the government had made no such repeal of the Act, was also taken as a precedent.

Last week, Sorabjee had sent a three-line note seeking clarifications which flowed from these two precedents and arguments made by the disinvestment ministry, the crux of which was whether the government had issued or could issue gazette notifications de-nationalising a company without the need to repeal Acts of nationalisation.

The portion of the Companies Act on which Shourie directed his attention was Section 620 which allows the government to do away with the need to have accounts of a government company scrutinised by the Comptroller and Auditor General of India or its annual results tabled in the Houses of Parliament through the simple expedient of a gazette notification without any reference to Parliament. Both these issues are two important aspects of the functioning of a nationalised company.

Through this notification, the government could also also do away with another section which has in any case been eliminated from the Companies Act through an amendment in 2000, which debarred the government from appointing managing agents to run these companies.

Read together all this means the government could get over the problem of denationalisation without reference to Parliament under certain legal circumstances but nevertheless a lot would depend on the original wording of the Act of nationalisation, said sources.

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