The government will disqualify any company convicted for fraud and serious corporate offences from participating in the privatisation of state-owned enterprises, according to new disinvestment guidelines.
Any firm facing a conviction by a court of law or indictment/adverse order by a regulatory authority or has faced market regulator Sebi orders relating to fraud will be disqualified, said the guidelines.
While selecting bidders earlier, the government used to look into the criteria like net worth and experience. It has now decided to look into these additional criteria for qualification or disqualification of parties seeking to acquire stakes in CPSEs.
"The government has examined the issue of framing comprehensive and transparent guidelines defining the criteria for bidders interested in CPSE disinvestment so that the parties selected through competitive bidding could inspire public confidence," the Department of Investment and Public Asset Management (DIPAM) said in a recent office memorandum.
Any conviction by a Court of law or indictment or adverse order by a regulatory authority that casts a doubt on the ability of the bidder to manage the PSU when it is disinvested or which relates to a 'grave offence' would constitute disqualification, it added.
'Grave offence' for this purpose would include orders passed by market regulator Sebi which directly relate to 'fraud' as defined in Sebi Act or regulations.
Also those orders of Sebi that cast a doubt on the ability of the bidder to manage the PSU and any conviction by a Court of law would be considered as 'grave offence'.
"In cases where Sebi passes a prosecution order, disqualification of the bidder should arise only on conviction by the Court of law," said the latest DIPAM guidelines.
A bidder disqualified from participating in the disinvestment process would not be allowed to remain associated with it or get associated merely because it has preferred an appeal against the order, based on which it has been disqualified, DIPAM said.
The government has set a target of Rs 15,000 crore to be raised from strategic disinvestment of PSUs in the current fiscal.
It has selected a host of companies, including Air India, for strategic stake sale and has fast-tracked appointment of asset valuers and legal firms who would manage the process.
The other Public Sector Units (PSUs) which have got approvals include BEML, Scooters India, Pawan Hans, Central Electronics, Bharat Pumps & Compressors Ltd Bridge & Roof Co, Projects & Development, Hindustan Newsprint and Hindustan Prefab.
Besides, PSUs like National Project Construction Corporation, Engineering Projects India and Hospital Services Consultancy Corporation are planned to be merged with similarly placed state-owned firms.