IDBI-Fairfax deal: Finance ministry cites Delhi HC to counter objections over stake dilution

 

The Union Ministry of Finance under Nirmala Sitharaman on Saturday defended the Centre’s authority to reduce its stake in IDBI Bank, citing a 2018 Delhi High Court judgment after several media reports questioned the implications of parliamentary discussions dating back to 2003.

The clarification came at the heels of Wednesday’s Union Cabinet approving a subsidiary of Fairfax Financial Holdings as the buyer of a 60.72 per cent stake in IDBI Bank Ltd for around ₹52,878 crore.

As per the terms of the deal, the Centre is set to sell 30.48 per cent and LIC 30.24 per cent, leaving holdings of 15 per cent and 19 per cent, respectively.

The ministry, in its clarification, said an amendment seeking to restrict dilution of the government’s stake was moved during the 2003 legislative discussions but rejected in Parliament. It therefore did not become part of the enacted law. It also cited the Delhi High Court in the All India IDBI Officers’ Association v. Union of India & Others, decided on December 17, 2018, where the writ petition was dismissed.

Quoting the judgment, the Centre said: “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 court also rejected reliance on promissory estoppel, a legal principle concerning promises relied upon to someone’s detriment. In this case, it found that parliamentary statements could not establish the claimed restriction.

“The principles of promissory estoppel are wholly inapplicable in the aforesaid context,” the court judgment read, revealed the ministry. This HC order came after the officers’ association challenged LIC’s acquisition of control in 2018.

The ministry also cited successive Budget speeches, even mentioning the 2021 Budget identifying IDBI among planned strategic disinvestment transactions.