Government Clarifies IDBI Bank Disinvestment Policy, Cites 2018 Delhi High Court Ruling

The government on Saturday clarified its position on the legislative developments of 2003 concerning its shareholding in IDBI Bank, stating that the legislative history of the IDBI (Repeal) Act, 2003, a Delhi High Court judgment and successive Union Budget speeches collectively demonstrate the evolution of its policy towards the bank’s strategic disinvestment.
The Finance Ministry issued the clarification after certain sections of the press and media published reports containing comments and views on the legislative developments in 2003 concerning the Government’s shareholding in IDBI Bank.
“It is reiterated that during the discussions of Union Budget, 2003 and the parliamentary debate on the IDBI (Repeal) Act, 2003, an amendment seeking to restrict the dilution of the Government’s stake was moved but was ultimately rejected and did not form part of the enacted legislation,” the ministry clarified.
The ministry’s statement also referred to the judicial examination of the matter by the Delhi High Court in All India IDBI Officers’ Association vs. Union of India and Others, decided on December 17, 2018.
The judgment clarified that the doctrine of promissory estoppel could not be invoked on the basis of statements made during parliamentary debates to restrict the Government’s power to dilute its shareholding in IDBI Bank Ltd. The court further held that the enacted legislation contained no prohibition against reducing the Government’s stake in the bank.
While dismissing the writ petition, the court addressed the issue in paragraphs 41 and 42 of its judgment.
Paragraph 41 stated, “This Court is of the view that the statements made before the House almost 15 years earlier, in a debate relating to a legislative activity, would not preclude the Central Government from diluting its stake in IDBI Ltd. Indisputably, the legislation enacted by the Parliament after the debate did not contain the amendment that was sought to be introduced. The statements made before the House cannot substitute or override the statue so enacted by the Parliament. Surely, the Parliament was conscious of the import of not including the proviso as proposed. The principles of promissory estoppel are wholly inapplicable in the aforesaid context. It is not possible to accept that the statements made in Parliament amounted to a representation made to the employees, and they had acted to their prejudice based on such representation. The statements made before the House were in the context of enacting a legislation (the IDBI Repeal Act, 2003), and the said Act has to be interpreted in conformity with the settled principles of statutory interpretation.”
Paragraph 42 further stated, “There is no ambiguity in the language of the IDBI Repeal Act, 2003 and there is no scope to read any provision into the said enactment which proscribes the Government from reducing or divesting its stake in IDBI Ltd.”
The official statement described the judgment as significant because it specifically addressed the doctrine of promissory estoppel, which had been relied upon to challenge the Government’s decision to dilute its shareholding.
“The aforesaid judgment is significant as it specifically addresses the doctrine of promissory estoppel, which was relied upon in challenging the Government’s decision to dilute its shareholding. The doctrine could not be invoked to prevent the Government from reducing or divesting its stake in IDBI Ltd,” the official statement said.
The Finance Ministry also cited successive Union Budget speeches to establish the evolution of the Government’s policy towards IDBI Bank’s strategic disinvestment.
In the Union Budget 2016–17 speech, then Finance Minister Arun Jaitley referred to the transformation of IDBI Bank and the possibility of reducing the Government’s stake below 50 per cent. Paragraph 93 of his speech stated, “Our Public Sector Banks will have to be strong and competitive. The Bank Board Bureau will be operationalised during 2016-17 and a roadmap for consolidation of Public Sector Banks will be spelt out. The process of transformation of IDBI Bank has already started. Government will take it forward and also consider the option of reducing its stake to below 50%.”
The Government subsequently reiterated its strategic disinvestment agenda in the Union Budget 2021–22. In paragraph 84 of her speech, then Finance Minister Nirmala Sitharaman stated, “In spite of COVID-19, we have kept working towards strategic disinvestment. A number of transactions namely BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans, Neelachal Ispat Nigam limited among others would be completed in 2021-22. Other than IDBI Bank, we propose to take up the privatization of two Public Sector Banks and one General Insurance company in the year 2021-22. This would require legislative amendments and I propose to introduce the amendments in this Session itself.”
The Finance Ministry’s clarification brings together the legislative history of the IDBI (Repeal) Act, 2003, the Delhi High Court’s December 17, 2018, judgment and the Government’s subsequent Budget announcements to explain the legal position on reducing or divesting its shareholding in IDBI Bank.