SC order leaves valuation cloud over HZL

The Supreme Court's rapping of the central government over the planned sale of the latter's 29 per cent residual stake in Hindustan Zinc Ltd (HZL) has brought focus on the valuation of the company and whether the government ensured proper returns for the exchequer.

On Tuesday, the apex court restrained the government from divesting its 29 per cent stake in HZL till further orders, which is likely to delay the bid by Vedanta Resources Plc to take full control of the company.

Pulling up the government, a bench of Chief Justice T S Thakur, A K Sikri and R Banumathi asked: "What is the compulsion to divest now? Why are you in a hurry? You have already committed a violation when you divested in 2002 and this does not mean we will allow you to sell the remainder of the stake without changing the law (Metal Corporation (Nationalisation and Miscellaneous Provisions) Act, 1976)."

Noting that the government still held important rights in HZL, the bench said that the petitioner, National Confederation of Officers Association, was not questioning the policy of disinvestment but the manner the entire thing was being done.

The petitioner had filed a public interest suit two years ago, challenging the proposed disinvestment, saying the decision was "irrational, illogical, illegal, unreasonable, mala fide, and arbitrary".

During the National Democratic Alliance regime in 2003, Vedanta Resources had acquired majority stakes in HZL and Balco. The valuation of the transfer of these stakes from the government to Vedanta Resources had led to a Central Bureau of Investigation probe in 2013.

Over 2002-03 and 2003-04, the government realised Rs 769 crore from its sale of majority stake in HZL, and a majority stake in Balco was sold in 2000-01 for Rs 551.5 crore, according to information available on the department of disinvestment's website.