SC orders CBI to take forward probe in Hindustan Zinc disinvestment

Allows Centre to shed residual stake

The Central Bureau of Investigation (CBI) will register a regular case to probe the disinvestment of Hindustan Zinc (HZL) that was conducted during the Atal Bihari Vajpayee-led government. The Centre had shed controlling stake in HZL to Sterlite Opportunities and Ventures (SOVL), a unit of Anil Agarwal-controlled Vedanta Resources, for about Rs 769 crore.

After multiple transactions, SOVL’s stake in HZL stood at 64.92 per cent while the Centre’s stake was 29.53 per cent. Agarwal has been eyeing this stake for long and wants to exert absolute control of HZL that ceased to be a government company from March 2002.

The apex court allowed the Centre to shed this residual stake, noting that HZL is not a public sector undertaking company, so curbs on the sale of public sector undertakings (PSUs) do not apply.  The Union government in its affidavit had earlier said the residual shareholding of 29.54 per cent would be sold in the open market.

Though the sale of the residual stake in the company has not been questioned, the court directed the CBI to investigate the initial transaction under which the Centre had sold 26 per cent stake in HZL and enabled its eventual privatisation. “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,” the order said.

“The CBI is directed to register a regular case and periodically submit status reports of its investigation to this court,” the order added. This information was conveyed by Vedanta to the stock exchanges in a regulatory filing as well.

On November 6, 2013, the CBI had registered a preliminary enquiry on the basis of “confidential source information” in relation to the HZL disinvestment during 1997-2003.

The CBI additional director had recommended conversion of the preliminary enquiry (PE) into a regular case on August 22, 2014. The PE concluded that assets of HZL were not valued properly, accusing government officials and private individuals of being involved in the undervaluation and subsequent sale.

But the CBI did not go ahead with filing the case after the special prosecutor, CBI head office, New Delhi (on July 31, 2014), Director of Prosecution (on October 16, 2014), and special director (on March 21, 2016) stated their reasons for recommending the closure of the preliminary inquiry without registering a regular case. It is alleged that HZL was sold to Agarwal without properly evaluating the iron-ore mines and other assets of the PSU.