Holding

The Union Government may dispose of its residual 29.54% shareholding in Hindustan Zinc Ltd without parliamentary amendment, and the CBI must register a regular case to investigate the 2002 disinvestment.

Summary

The petitioners, a trade union and former employees of Hindustan Zinc Ltd (HZL), challenged the Union Government's plan to sell its remaining 29.54% stake in HZL, arguing that the Nationalisation Act, 1976 required a parliamentary amendment for any such disinvestment. The Court examined whether the earlier decision in Centre for Public Interest Litigation, which barred disinvestment of government‑owned companies without legislative approval, applied to HZL, which had ceased to be a government company after the 2002 sale of 26% equity. It also considered whether the earlier dismissal of a similar petition barred the present writ under the doctrine of res judicata, and whether the CBI should be directed to register a regular case on alleged irregularities in the 2002 disinvestment. The Court held that HZL was no longer a government company, so the Centre for Public Interest Litigation precedent did not apply, and the earlier dismissal did not create res judicata. Consequently, the Union Government may sell its residual shares in the open market, but the CBI must register a regular case and report periodically. The petition was therefore partially allowed.

Issues considered

The applicability of the Centre for Public Interest Litigation decision to the present disinvestment of HZL.
Whether the summary dismissal of an earlier petition bars the present writ under res judicata.
Whether the Nationalisation Act, 1976 imposes an implicit restriction on the sale of the residual 29.54% shareholding in HZL.
The jurisdiction of the Court to direct the CBI to register a regular case despite its closure of a preliminary enquiry.

Legislation cited

CBI Crime Manual
Code of Civil Procedures. 11
Companies Acts. 2(45) (2013), s. 617 (1956)
Indian Penal Code, 1860s. 120B, s. 420
Metal Corporation (Nationalisation and Miscellaneous) Provisions Acts. 4, s. 6, s. 7, s. 9
Prevention of Corruption Acts. 13(1)(d), s. 13(2)

Subjects

disinvestmentgovernment companyres judicatapublic interest litigationCBI investigationArticle 32Nationalisation Actshareholdingstrategic mineralspreliminary enquiryregular case

Judgment

[2021] 10 S.C.R. 899 899

NATIONAL CONFEDERATION OF OFFICERS ASSOCIATION A
OF CENTRAL PUBLIC SECTOR ENTERPRISES AND ORS.
v.
UNION OF INDIA AND ORS.
(Writ Petition (C) No. 229 of 2014)
B
NOVEMBER 18, 2021
[DR. DHANANJAYA Y CHANDRACHUD
AND B. V. NAGARATHNA, JJ.]
Disinvestment: Policy of disinvestment – Union Government’s
divestment of its residual shareholding of 29.54 % in HZL company C
– Public interest litigation u/Art. 32, seeking mandamus directing
the Union Government to refrain from disinvestment without
amending the Nationalisation Act, 1976 – Held: Decision in Centre
for Public Interest Litigation’s case, does not apply to the present
facts because HZL had ceased to be a government company, at the
stage of the disinvestment – Thus, the Union Government’s decision D
to disinvest 29.54 per cent of its residual shareholding in HZL is
not interdicted by the principles laid down by this Court in Centre
for Public Interest Litigation’s case that when the acquisition takes
place under an Act of Parliament, any disinvestment by the Union
Government can be undertaken only with the approval of Parliament E
or through its intervention –There is no challenge to the
disinvestment which took place in 1991-92 or in 2002, the latter
having resulted in HZL ceasing to retain its status as a government
company within the meaning of s. 617 of the Companies Act 1956 –
It would be inconsistent to read an implied limitation on the transfer
by the Union Government of its residual shareholding in HZL F
representing 29.54 per cent of the equity capital – Thus, when a
decision is taken by the government as shareholder of a company
to sell its shares, it acts as any other shareholder in a company who
makes the decision on the basis of the financial and economic
exigencies – Furthermore, SOVL company does not seek to exercise G
the second call option, in terms of the Share Purchase Agreement,
as such the Union Government took decision to sell its residuary
shareholding in the open market – Union Government being
amenable to Part III of the Constitution, would not impose a restraint
on its capacity to decide, as a shareholder, to disinvest its
H
899
900 SUPREME COURT REPORTS [2021] 10 S.C.R.

A shareholding, the process of disinvestment being transparent
and which comports with law and results in the best price
being a shareholding – Metal Corporation (Nationalisation
and Miscellaneous) Provisions Act 1976 – Constitution of India –
Art. 32.
B Constitution of India: Art. 32 – Writ petition under –
Disinvestment of the residual 29.54 per cent shareholding of the
Union Government challenged on the ground that the residual
disinvestment can occur only after the amendment of the
Nationalisation Act 1976 – Said prayer substantially similar to the
reliefs sought in Maton Mines Mazdoor Sangh’s case, wherein they
C challenged the disinvestment of 2002 and 2014, on the basis of the
decision in Centre for Public Interest Litigation – Petition, if barred
by the principles of res judicata, following the dismissal of the earlier
writ petition on the same issue – Held: The summary dismissal of an
earlier petition u/Art. 32 does not bar the instant writ petition on
D grounds of res judicata as there has been no substantive decision
on the merits of the issues, thus, the instant writ petition not barred
by res judicata – Metal Corporation (Nationalisation and
Miscellaneous) Provisions Act 1976.
Code of Civil Procedure 1908: s. 11 – Principle of res
E judicata – Determination of its applicability - Held: While determining
the applicability of the principle of res judicata u/s. 11, the grave
issues of public interest are not to be ignored merely because a
petition was initially filed and dismissed, without a substantial
adjudication on merits – There is a trend of poorly pleaded public
interest litigations being filed instantly following a disclosure in the
F media, with a conscious intention to obtain a dismissal from the
Court and preclude genuine litigants from approaching the Court
in public interest – Court to be aware of the contemporary reality
and interpret the principles of res judicata or constructive res
judicata in a manner which does not debar access to justice –
G Jurisdiction u/Art. 32 is a fundamental right in and of itself.
Investigation: CBI Crime Manual – Process of conducting
CBI’s preliminary enquiries – Preliminary enquiry by CBI into the
suspected irregularities in the course of disinvestment of 26% equity
holding of the Union Government to SOVL company in 2002 –
H Submission of status report by CBI – Held: There is no bar on the
NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC 901
SECTOR ENT. v. UOI

constitutional power of this Court to direct the CBI to register a A
regular case, in spite of its decision to close a preliminary enquiry
– On facts, a prima facie case for a cognizable offence, as mandated
in para 9.1 of the CBI Manual, made out – Sufficient material for
registration of a regular case in relation to the 26 per cent
disinvestment of HZL by the Union Government in 2002 – Thus,
B
registration of a regular case, followed by a full-fledged
investigation must be conducted – Issuance of direction to CBI to
register a regular case and periodically submit status reports of its
investigation to this Court – Constitution of India – Art. 32.
Partly allowing the writ petition, the Court
C
HELD: 1.1 Section 11 of the Code of Civil Procedure 1908
embodies the principles of res judicata and bars the court from
deciding issues which have been directly or substantially in issue
in an earlier proceeding between the same parties or parties
claiming under the same title and have been finally decided.
[Para 30][925-E-F; 926-A] D

1.2 The principles of res judicata and constructive res
judicata, which Section 11 of the Code of Civil Procedure 1908
embodies, have been applied to the exercise of the writ
jurisdiction, including public interest litigation. Yet courts have
been circumspect in denying relief in matters of grave E
public importance, on a strict application of procedural rules.
[Para 31][926-B]
1.3 While determining the applicability of the principle of
res judicata under Section 11 of the Code of Civil Procedure 1908,
the Court must be conscious that grave issues of public interest F
are not to be ignored merely because a petition was initially filed
and dismissed, without a substantial adjudication on merits. There
is a trend of poorly pleaded public interest litigations being filed
instantly following a disclosure in the media, with a conscious
intention to obtain a dismissal from the Court and preclude G
genuine litigants from approaching the Court in public interest.
This Court must be alive to the contemporary reality of “ambush
Public Interest Litigations” and interpret the principles of res
judicata or constructive res judicata in a manner which does not

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902 SUPREME COURT REPORTS [2021] 10 S.C.R.

A debar access to justice. The jurisdiction under Article 32 is a
fundamental right in and of itself. [Para 34][928-G-H; 929-A-B]
1.4 In Maton Mines Mazdoor Singh’s case, since the three
judge Bench of this Court rejected the petition filed by Maton
Mines Mazdoor Singh in limine, without a substantive adjudication
B on the merits of their claim, the present writ petition is not barred
by res judicata. [Para 35][929-B-C]
Centre for Public Interest Litigation v. Union of India
(2003) 7 SCC 532 : [2003] 3 Suppl. SCR 746; Kantaru
Rajeevaru (Sabrimala Temple Review- 5J) v. Indian
C Young Lawyers Association (2020) 2 SCC 1 : [2019]
17 SCR 599; State of U.P. v. Nawab Hussain (1977) 2
SCC 806 : [1977] 3 SCR 428; Sarguja Transport
Service v. State Transport Appellate Tribunal, M.P.,
Gwalior (1987) 1 SCC 5 : [1987] 1 SCR 200; Forward
Construction Co. v. Prabhat Mandal (Regd.) (1986) 1
D SCC 100 : [1985] 3 Suppl. SCR 766; Rural Litigation
and Entertainment Kendra v. State of U.P. 1989 Supp
(1) SCC 504 : [1988] 2 Suppl. SCR 690; Daryao v.
State of U.P. (1962) 1 SCR 574; State of Karnataka v.
All India Manufacturers Organization (2006) 4 SCC
E 683 : [2006] 1 Suppl. SCR 86 – referred to.
2.1 The challenge in the petition under Article 32 is to the
proposal of the Union Government to sell its residual stake in
HZL, by the sale of the remaining 29.54 per cent equity. Neither
is the validity of the initial disinvestment of 24.08 per cent equity
F which took place in 1991-92, nor is the subsequent disinvestment
of 26 per cent in terms of the Share Purchase Agreement,
challenged in these proceedings. As a matter of fact, if it were to
be challenged, the first objection would be to the delay of well
over two decades in challenging the disinvestment of 1991-92
and of nearly 12 years in challenging the sale of 2002 in pursuance
G of the Share Purchase Agreement. Since the disinvestment of
1991-92 and of 2002 has attained finality. It becomes necessary
to assess the effect of the earlier disinvestment, in terms of the
status of HZL. As a consequence of the disinvestment on 27

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NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC 903
SECTOR ENT. v. UOI

March 2002, HZL ceased to be a government company within A
the meaning of Section 617 of the Companies Act 1956 since its
shareholding fell below 51 per cent. Then, the issue which arises
is whether Metal Corporation (Nationalisation and Miscellaneous)
Provisions Act 1976 interposes any bar on the sale of the
residual shareholding of the Union Government in HZL.
B
[Para 38][930-D-H]
2.2 The submission of the petitioners emphasises that the
purpose underlying the acquisition was that zinc and lead were
considered to be essential raw-materials for the economy of the
country and of considerable strategic importance, such that it
was necessary in public interest that the project which was C
undertaken by Metal Corporation of India should be completed
expeditiously. The Statement of Objects and Reasons also
indicates that the erstwhile undertaking had a mining lease in
respect of zinc and lead deposits in the Zawar area and owned a
lead smelter in Bihar, besides which it had undertaken to expand D
production from the mines and construct a smelter for producing
zinc and by-products near Udaipur. For various reasons, Metal
Corporation of India was not able to complete its projects;
construction had come to a standstill and the undertaking had
failed to meet its obligations to repay suppliers of machinery.
The Statement of Objects and Reasons emphasises the E
importance of zinc and lead to the economy, which was undoubtedly
an important facet of the purpose of acquisition. Moreover, Metal
Corporation of India, the pre-nationalized entity, was unable to
complete its projects and its acquisition by an Act of Parliament
was envisaged for the expeditious completion of the projects. F
The long title to the Nationalisation Act 1976 indicates that the
Act was enacted to enable the Central Government, in public
interest, to exploit to the fullest extent, the zinc and lead deposits
in and around the Zawar area of Rajasthan and “to utilize those
minerals in such manner as to sub-serve the common good”.
Section 4(1) of the Nationalisation Act 1976 provided for the G
taking over of the management of the undertaking of Metal
Corporation. As a consequence of the acquisition, Section 6(1)
envisages that so long as the management of the undertaking of
Metal Corporation remains vested in the Central Government,
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904 SUPREME COURT REPORTS [2021] 10 S.C.R.

A (i) it is not lawful for the shareholders to nominate or appoint a
director; (ii) no resolution by the shareholders would be given
effect to, unless approved by the Central government; and (iii)
no proceedings for winding up the acquired entity would lie in
any court, except with the consent of the Central government.
Section 7 provides for the vesting of the undertaking of the Metal
B
Corporation in the Central government. [Para 40][931-F-H;
932-A-D; 933-A-B]
2.3 Sections 4, 7 and 9 indicate that the undertaking of
Metal Corporation stood transferred to, and vested absolutely
in the Central Government. Section 9 further empowers the
C Central Government to vest the undertaking in a government
company. Once the Metal Corporation stood vested in a
government company, the provisions of the then Companies Act
1956 and present Companies Act 2013 become applicable.
Thereupon, the government company would be entitled to
D exercise all such powers and to do all such things as Metal
Corporation was authorized to effect, in relation to its
undertaking. [Para 43][935-G-H; 936-A-B]
2.4 The Nationalisation Act, 1976 contains no express
provision restraining the exercise of rights by the Union
E Government upon the undertaking of Metal Corporation vesting
in it and thereupon, pursuant to a direction under Section 9(1),
being transferred to a government company. The shareholding
of the Union Government was divested initially in 1991-92 and
subsequently in 2002. After the disinvestment of 26 per cent of
the equity stake of the Union Government to SOVL, HZL ceased
F to be a government company within the meaning of Section 617
of the Companies Act 1956. As a result of the divestment on 27
March 2002, HZL ceased to be a government company, with the
Union Government’s shareholding falling to 49.92 per cent, below
the threshold of 51 per cent. [Para 44][936-B-D, E-F]
G 2.5 The petitioners seek to read an implicit limitation on
the transfer of the residual shareholding of 29 per cent held by
the Union Government in HZL, from the provisions of the
Nationalisation Act 1976. This submission is prefaced on the
object of the enactment which is to acquire control over the
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NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC 905
SECTOR ENT. v. UOI

strategic mineral deposits of lead and zinc. This submission has A
been met by the respondents by urging that after 16 March 1999,
the mining of zinc has ceased to retain a strategic character, given
the changes in industrial policy. The aspect which is of significance
is that there is no challenge to the disinvestment which took
place in 1991-92 or in 2002, the latter having resulted in HZL
B
ceasing to retain its status as a government company within the
meaning of Section 617 of the Companies Act 1956. That being
the position, it would be inconsistent to read an implied limitation
on the transfer by the Union Government of its residual
shareholding in HZL representing 29.54 per cent of the equity
capital. Hence, when a decision has been taken by the government C
as shareholder of a company to sell its shares, it acts as any other
shareholder in a company who makes the decision on the basis
of the financial and economic exigencies. [Para 45][936-F-H;
937-A-B]
2.6 The issue which needs to be considered is whether the D
decision of this Court in Centre for Public Interest Litigation would
result in a bar on the disinvestment of the residual shareholding.
This decision of a two-judge Bench was that ‘the divestment of
the shareholding of the Union Government in HPCL and BPCL,
as a result of which the companies would cease to be government
companies could not be undertaken without amending the statutes E
under which they were nationalized.’ [Para 46][937-B-C; 940-B]
Centre for Public Interest Litigation v. Union of India
(2003) 7 SCC 532:[2003] 3 Suppl. SCR 746
– distinguished.
F
2.7 In the instant case, the disinvestment as a consequence
of which HZL ceased to be a government company took place in
March 2002. What is in question on the first relief sought is the
29.54 per cent residuary shareholding in HZL, after it has
admittedly ceased to be a government company within the
meaning of Section 617 of the Companies Act 1956 and the G
corresponding provisions of the Section 2(45) of the Companies
Act 2013. In the Companies Act 2013, the expression
‘government company’ is defined in Section 2(45). [Para 47]
[940-F-H]
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906 SUPREME COURT REPORTS [2021] 10 S.C.R.

A 2.8 The Union Government is a shareholder of HZL. The
control and management of HZL does not vest with the Union
Government which has a residual stake of 29.54 per cent. The
shareholding of SOVL stood increased to 64.92 per cent after
the exercise of the first call option in 2002. During the course of
hearing, this Court has been apprised by SOVL that it does not
B
seek to exercise the second call option, in terms of the Share
Purchase Agreement. It is in this backdrop that a decision has
been taken by the Union Government to sell its residuary
shareholding in the open market. The Union Government, in its
capacity as a shareholder of HZL, is entitled to take such a decision.
C The fact that the Union Government is amenable to the norms
set out in Part III of the Constitution would not impose a restraint
on its capacity to decide, as a shareholder, to disinvest its
shareholding, so long as the process of disinvestment is
transparent and the Union Government is following a process
which comports with law and results in the best price being a
D
shareholding. [Para 48][941-B-E]
Centre for Public Interest Litigation v. Union of India
(2003) 7 SCC 532 : [2003] 3 Suppl. SCR 746; Balco
Employees’ Union (Regd.) v. Union of India (2002) 2
SCC 333 : [2001] 5 Suppl. SCR 511; Life Insurance
E Corporation of India v. Escorts Ltd. (1986) 1 SCC
264 : [1985] 3 Suppl. SCR 909; ABL International Ltd.
v. Export Credit Guarantee Corporation of India (2004)
3 SCC 553; Central Inland Water Transport
Corporation Limited v. Brojo Nath Ganguly (1986) 3
F SCC 156 : [1986] 2 SCR 278 – referred to.
2.9 In the instant case, the Union Government is exercising
its rights as a shareholder and has taken a decision to disinvest
its residual shareholding of 29.54 per cent in HZL. HZL is no
longer a government company. In any event, the decision of the
G Union Government, as an incident of its policy of disinvestment,
to sell its shares in the open market, cannot be questioned by
reading a bar on its powers to do so, from the provisions of the
Nationalisation Act 1976. No such express or implied bar exists,
failing the applicability of this Court’s decision in Centre for Public
Interest Litigation. [Para 48]942-C-E]
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NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC 907
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3.1 Chapter 9 of the CBI Crime Manual details the process A
of conducting preliminary enquiries. Para 9.1 states that “a
Preliminary Enquiry may be converted into Regular Case as soon
as sufficient material becomes available to show that prima facie
there has been commission of a cognizable offence”. The
Constitution Bench of this Court had underscored the duty of
B
the police to register an FIR when the information received prima
facie discloses the commission of a cognizable offence. However,
the decision recognizes that in certain cases, a preliminary enquiry
may be held. [Para 53][943-E-G]
3.2 There is no bar on the constitutional power of this Court
to direct the CBI to register a regular case, in spite of its decision C
to close a preliminary enquiry. Analogously, this Court has
directed the police to register an FIR, once a cognizable offence
has been disclosed to it. [Para 56][947-E-F]
3.3 Upon perusal of the reports and recommendations, it is
the considered opinion that the disinvestment in 2002 evinces a D
prime facie case for registration of a regular case. This Court is
desisting from commenting on some crucial facts and names of
individuals involved, so as to not cause prejudice to the
investigation of the matter. Some details in the CBI officials’
recommendations to register a regular case, which have not been E
adequately addressed by the self- contained note closing the
preliminary enquiry, as regards irregularities in the decision to
disinvest 26 per cent, instead of 25 per cent, irregularities in the
bidding process, and irregularities in the valuation of 26 per cent
equity for disinvestment. [Para 57][948-G-H; 949-A, G; 951-C]
F
3.4 The said observations of the officials of the CBI, who
recommended the conversion of the preliminary enquiry into a
regular case, satisfy this Court’s conscience for exercising its
exceptional powers to direct the CBI to conduct an investigation
into the matter. A prima facie case for a cognizable offence, as
mandated in para 9.1 of the CBI Manual, has been made out in G
this case and warrants the registration of a regular case. The
registration of a regular case, followed by a full-fledged
investigation must be conducted. This Court shall be duly
apprised of the status of the investigation. [Para 58][953-C-D]
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908 SUPREME COURT REPORTS [2021] 10 S.C.R.

A Central Bureau of Investigation (CBI) v. Thommandru
Hannah Vijaylakshmi @ T.H. Vijaylakshmi and another
2021 SCC OnLine SC 923; Manohar Lal Sharma v.
Principal Secretary (2014) 2 SCC 532 : [2013] 17 SCR
1099; Shashikant v. Central Bureau of Investigation
(2007) 1 SCC 630 : [2006] 8 Suppl. SCR 474; Lalita
B
Kumari v. Government of Uttar Pradesh (2014) 2 SCC
1 : [2013] 14 SCR 713 – referred to.
3.5 The petitioner has alleged that the complainant, C P,
was the brother of petitioner No 3 which entitles them to a copy
of the report of the CBI closing the preliminary enquiry, in terms
C of Para 120 (iii) of Lalita Kumari’s case. However, the relief is
denied because the finding of the Constitution Bench of this Court
was with respect to the informant alone, and the original
complainant is not before this Court; and CBI has stated that the
preliminary enquiry was registered at the behest of source
D information, much before C P’s complaint. [Para 59][953-D-F]
4. It is held that
(i) The summary dismissal of an earlier petition under Article
32 of the Constitution does not bar the present writ petition on
grounds of res judicata as there has been no substantive decision
E on the merits of the issues;
(ii) The decision in Centre for Public Interest Litigation’s
case does not apply to the instant facts because HZL had ceased
to be a government company, at the stage of the disinvestment
which is in challenge. Hence, the Union Government’s decision
F to disinvest 29.54 per cent of its residual shareholding in HZL is
not interdicted by the principles laid down by this Court in Centre
for Public Interest Litigation’s case;
(iii) SOVL has stated before the Court that it is not
exercising its second call option under the Share Purchase
G Agreement;
(iv) The Union Government has stated through the Solicitor
General that the residual shareholding shall be divested in the
open market and shall take place in accordance with the rules

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NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC 909
SECTOR ENT. v. UOI

and regulations of SEBI to ensure that the best price is realized A
for the sale of the shareholding; and
(v) 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 periodically submit status reports of its B
investigation to this Court. [Paras 60, 61][953-F-G; 954-A-E]
Union of India v. Metal Corporation of India Ltd (1967)
1 SCR 255 – referred to.
Case Law Reference
C
[1967] 1 SCR 255 referred to Para 4
[2013] 14 SCR 713 referred to Para 18
[2019] 17 SCR 599 referred to Para 31
[1977] 3 SCR 428 referred to Para 31
D
[1987] 1 SCR 200 referred to Para 31
[1985] 3 Suppl. SCR 766 referred to Para 31
[1988] 2 Suppl. SCR 690 referred to Para 31
[1962] 1 SCR 574 referred to Para 32 E
[2006] 1 Suppl. SCR 86 referred to Para 33
[2001] 5 Suppl. SCR 511 referred to Para 46
[2003] 3 Suppl. SCR 746 distinguished Para 47
[1985] 3 Suppl. SCR 909 referred to Para 48 F
(2004) 3 SCC 553 referred to Para 48
[1986] 2 SCR 278 referred to Para 48
[2013] 17 SCR 1099 referred to Para 55
[2006] 8 Suppl. SCR 474 referred to Para 56 G
CIVIL ORIGINAL JURISDICTION : Writ Petition (C) No. 229
of 2014.
(Under Article 32 of The Constitution of India)
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910 SUPREME COURT REPORTS [2021] 10 S.C.R.

A Prashant Bhushan, Pranav Sachdeva, Jatin Bhardwaj, Ms. Neha
Rathi, Lakshmi Raman Singh, Advs. for the Petitioners.
Tushar Mehta, SG, K. M. Nataraj, ASG, Harish Salve, Prashanto
Chandra Sen, Sr. Advs., Gurmeet Singh Makker, Rajat Nair, Kanu
Agrawal, Sridhar Potaraju, Arvind Kumar Sharma, P. S. Sudheer, Bharat
B Sood, Ms. Shruti Jose, Ms. Anuradha Dutt, Anish Kapur, Ms. Ekta Kapil,
Ms. Nikhita Suri, Ms. Priyanka M. P., Ms. B. Vijayalakshmi Menon,
Manu Mridul, Surya Kant, Advs. for the Respondents.
The Judgment of the Court was delivered by
DR. DHANANJAYA Y CHANDRACHUD, J.
C
A Introduction................................................................3
B Submissions of Counsel..............................................9
C Res Judicata and PILs..............................................22
D The decision in Centre for Public Litigation................29
D
E CBI’s preliminary enquiry..........................................45
F Conclusion...............................................................61
A Introduction

E 1. An organization called the National Confederation of Officers
Association1 has invoked the jurisdiction of this Court under Article 32
of the Constitution. The Confederation, which is a trade union registered
under the Trade Unions Act 1926, is joined in these proceedings by three
other petitioners, including a former employee of Hindustan Zinc Limited2.
The members of the Confederation are,or have been, employees of public
F sector undertakings. Their grievance in these proceedings arises from
the Union Government’s disinvestment of its shareholding in HZL, the
fourth respondent. According to the petitioners, HZL is not a loss incurring
unit and the disinvestment does not sub-servepublic interest. Parliament
acquired the undertaking by the Metal Corporation (Nationalisation and
G Miscellaneous) Provisions Act 19763. In pursuance of its acquisition,
the undertaking came to be vested in a government company. HZL is
stated to be a ‘mini-navratna’company with a cash liquidity resource of
over Rs 20,000 crores. According to the petitioners, the Union
1
“Confederation”
2
“HZL”
3
H “Nationalisation Act 1976”
NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC 911
SECTOR ENT. v. UOI [DR. DHANANJAYA Y CHANDRACHUD, J.]

Government’s divestment of its shareholding in HZL is in violation of the A
judgment of a two-judge Bench of this Court in Centre for Public
Interest Litigation v. Union of India4. In the proceedings as they
stand, the challenge is to the proposed disinvestment of the residual
shareholding of the Union Government in HZL, representing 29.54 per
cent (approx.) of the equity capital.
B
2. Metal Corporation of India Limited was incorporated in 1944
as a public limited company under the Companies Act 1913. It was the
sole producer of zinc and lead from its mines situated at Zawar in
Rajasthan. The company had established a lead smelter plant at Tundoo,
near Dhanbad, in the then State of Bihar for producing lead, silver and
other by-products. Subsequently it installed a zinc smelter at Debari, C
near Udaipur. Given the strategic importance of zinc and lead, the Union
Government took a decision to acquire the company by a legislation.
3. On 22 October 1965, the President promulgated the Metal
Corporation of India (Acquisition of Undertaking) Ordinance for
acquisition of the undertaking by the Union Government. Possession, D
control and administration was taken over by the Union Government on
23 October 1965. A petition under Article 226 of the Constitution was
instituted in 19655 by the corporation and its managing director before
the Circuit Bench in New Delhi of the then Punjab High Court, for
challenging the constitutional validity of the Ordinance. During the E
pendency of the proceedings, the Ordinance was replaced by Act 44 of
1965 which led to the institution of another writ petition6 challenging its
validity. On 10 January 1966, HZL was incorporated as a public sector
company to develop the mining and smelting capacities, so as to
substantially fulfil the domestic demand for zinc and lead.
F
4. On 14 March 1966, the Punjab High Court held that the
Ordinance and the enactment that replaced it, violated Article 31 of the
Constitution and were void. The appeal by the Union of India was
dismissed by this Court on 5 September 1966, in Union of India v.
Metal Corporation of India Ltd7. On 13 September 1966 another
Ordinance, Ordinance No 10 of 1966, was promulgated by the President G
for the acquisition of the undertaking of Metal Corporation of India
4
[“Centre for Public Interest Litigation”] (2003) 7 SCC 532
5
WP 631-D of 1965
6
WP 832-D of 1965
7
(1967) 1 SCR 255 H
912 SUPREME COURT REPORTS [2021] 10 S.C.R.

A Limited. The Ordinance was replaced by an Act of Parliament (Act 36
of 1966) which came into forceon 3 December 1966. This led to another
round of proceedings under Article 226 of the Constitution8 before the
Calcutta High Court. The petition was dismissed by a Single Judge of
the Calcutta High Courton 1 April 19699 on the ground of res judicata.
B 5.On 2 August 1976, the President promulgated the Metal
Corporation (Nationalisation and Miscellaneous Provisions) Ordinance.
This Ordinance was replaced by Act No. 100 of 1976, on 7 September
1976.
6. The Union Government took steps for the disinvestment of its
C shareholding in HZL. In 1991-92, in the first tranche, the Union
Government disinvested 24.08 per cent of its shareholding in the domestic
market. Of this, 12.54 per cent was acquired by financial institutions,
7.58 per cent by corporate bodies and non-resident Indians and 3.96 per
cent by Indian nationals. HZL was listed on stock exchanges. As a result
of the disinvestment, the Union Government was left with a 75.92 per
D cent stake in HZL.
7. The second tranche of disinvestment of the Union Government’s
shareholding in HZL took place in pursuance of the Union Government’s
decisionto disinvest 26 per cent of its shareholding in HZL to a ‘strategic
partner’, by selling 10,98,58,294 fully paid-up equity shares of Rs 10
E each, at Rs 40.51 per share, aggregating to Rs 445 crores (approx.). A
Shareholders’Agreement and a Share Purchase Agreement were
executed on 4 April 2002 with Sterlite Opportunities & Ventures Ltd. 10,
the third respondent, who was chosen as the strategic partner. In terms
of these agreements, the Union Government disinvested 26 per cent of
F its equity in HZL in favour of SOVL. Consequent to the sale of the
equity stake, the Union Government was left with an equity holding of
49.92 per cent.
8. On 5 November 2003, a public interest litigation, invoking the
jurisdiction under Article 226 of the Constitution, was instituted before
G the Jodhpur Bench of the Rajasthan High Court11 by a person named
Rajendra Kumar Razdan, to challenge the second tranche of
disinvestment - of the 26 per cent equity holding of the Union Government
8
WP 551 of 1966
9
AIR 1970 Calcutta 15
10
“SOVL”
11
H DB (C) Writ Petition No 6340 of 2003
NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC 913
SECTOR ENT. v. UOI [DR. DHANANJAYA Y CHANDRACHUD, J.]

in HZL. After the petition was entertained by the High Court, the Union A
Government moved a transfer petition12 before this Court under Article
139A(1) in which further proceedings were stayed on 9 February 2004
by a three-judge Bench of this Court. On 11 October 2004, this Court
allowed the transfer petition, together with other similar petitions seeking
a transfer of proceedings, also challenging the disinvestment by the Union
B
Government in other government companies. On 23 August 2006, a three-
judge Bench of this Court dismissed writ petitions challenging the
disinvestment of the shareholding of the Union Government in other
government companies – namely, Engineers India Limited, National
Fertilizers Limited and Burn Standard Company Limited13.The dismissal
of these petitions followed upon affidavits filed on 14 December 2005, C
27 July 2005 and 18 August 2005 stating that the Union Government
was reconsidering the sale of these companies, rendering the writs
infructuous.
9. While the challenge to the disinvestment of the 26 per cent
shareholding was pending before this Court, on 10 April 2002, SOVL D
acquired 20 per cent of the equity in HZL from the open market by a
mandatory open offer, in compliance with the Securities and Exchange
Board of India’s14 norms. As a consequence of the acquisition, the holding
of SOVL in HZL rose to 46 per cent. The Board of Directors of HZL
was reconstituted. Following this acquisition, the shareholding pattern in
HZL was as follows: E

• SOVL – 46 per cent (comprising 26 per cent shares
purchased from the Union Government and 20 per cent
acquired from the open market);
• Union Government – 48.45 per cent; and F
• Public – 5.55 per cent.
10. On 13 May 2009, Rajendra Kumar Razdan’s writ petition
challenging the disinvestment of the Union Government’s 26 per cent
equity holding in HZL, was dismissed as withdrawn, following an
application for withdrawal by the petitioner. G
11. The Shareholders’Agreement between the Union Government
and SOVL envisaged two call options. SOVL exercised its first call
12
Transfer Petition (C) No 830 of 2003
13
WP (C) Nos. 487, 569, 586 and 587 of 2003
14
“SEBI” H
914 SUPREME COURT REPORTS [2021] 10 S.C.R.

A option for 18.92 per cent of the equity holding in August 2003, which
was transferred in its favour in November 2003. Following this acquisition,
SOVL became a majority shareholder with a 64.92 per cent equity stake
in HZL.
12. In 2012, the Union Government announced its decision to
B disinvest its residuary shareholding of 29.54 per cent in HZL15. On 31
October 2012, Maton Mines Mazdoor Sangh instituted a petition 16 under
Article 32 of the Constitution before this Court challenging the proposed
disinvestment of the residuary shareholding of the Union Government.
This petition was summarily dismissed by a three-judge Bench of this
Court on 10 December 2002.
C 13. On 6 November 2013, the Central Bureau of Investigation17-
the fifth respondent - initiated a preliminary enquiry into suspected
irregularities in the course of the disinvestment of the 26 per cent of
equity holding of the Union Government to SOVL in 2002.
14. The present public interest litigation under Article 32, was
D instituted on 14 February 2014. Two reliefs have been sought in these
proceedings: (i) A mandamus directing the Union Government and the
Department of Disinvestment to refrain from disinvesting the residual
shareholding of 29.54 per cent in HZL without amending the
NationalisationAct 1976; and (ii) a direction to the CBI to periodically
E file status reports before this Court in respect of the investigation being
conducted by it, so that it can be monitored by this Court till the filing of
the charge-sheet in the appropriate court.
15. On 6 March 2017, CBI filed a closure report with reference
to the preliminary enquiry stating that it did not disclose facts which
would warrant the registration of a criminal case.
F
16. The filing of pleadings has been completed.
B Submissions of Counsel
17. Mr Prashant Bhushan, learned senior counsel appearing on
behalf of the petitioners has stressed upon the importance of the residual
29.54 per cent shareholding of the Union Government in HZL. Learned
G
senior counsel has clarified that the challenge is not to the policy of
disinvestment, but the manner in which it has taken place. The submissions
are summarized below:
15
Interchangeably referred as “29 per cent”
16
"Maton Mines Mazdoor Sangh” WP (C) 513 of 2012
17
H “CBI”
NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC 915
SECTOR ENT. v. UOI [DR. DHANANJAYA Y CHANDRACHUD, J.]

(i) The decision to disinvest theresidualshareholding of the A
Union Government in HZL cannot be undertaken without
amending the provisions of the Nationalisation Act 1976;
(ii) Besides yielding profits, the 29 per cent shareholding of the
Union Government ensures that no decision which requires
the passage of a special resolution under the Companies B
Act 2013 can be adopted without its support, which
effectively gives it a veto over key decisions concerning
HZL. The control of the Union Government is wieldedunder
the provisions of Section 134(2) and Section 47 of the
Companies Act 2013. Under the Companies Act 2013,
several matters requiring the passing of a SpecialResolution, C
are tabulated below:

D

E

F

G

H
916 SUPREME COURT REPORTS [2021] 10 S.C.R.

A

B

C

D

E

F

G

(iii) The Nationalisation Act was enacted in 1976, in pursuance
H of the policy of the Union Government to acquire control
NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC 917
SECTOR ENT. v. UOI [DR. DHANANJAYA Y CHANDRACHUD, J.]

over the deposits of lead and zinc, as a matter of strategic A
national interest;
(iv) The strategic importance of the deposits of lead and zinc is
underscored in the Statement of Objects and Reasons
accompanying the introduction of Bill in the Parliament, and
by the provisions of Sections 4, 7 and 9 of the Nationalisation B
Act 1976, under which the acquired undertaking was vested
in a government company within the meaning of Section
617 of the Companies Act 1956;
(v) In 2002, the Union Government acted in a manner contrary
to the express mandate of the statutewhen it disinvested its
C
26 per cent shareholding, in favour of a strategic partner.
The decision to offload 29 per cent of the residual
shareholding will compound the illegal act which was
committed in 2002;
(vi) The Nationalisation Act 1976 prohibits the government from
taking any step by which the acquired undertaking ceases D
to be a government company. Though HZL ceased to be a
government company in 2002 following the disinvestment
of 26 per cent of the equity shareholding of the Union
Government, yet the residual shareholding enables the
government to ensure that the strategic mineral deposits of E
lead and zinc would be used for the common good. These
strategic considerations have been emphasized by the one
hundred and fifth Parliamentary Committee Report, 2002;
and
(vii) The law on the subject has been enunciated in the judgment
of this Court in Centre for Public Interest Litigation F
(supra). In view of this elucidation of legal principle, when
the acquisition has taken place under an Act of Parliament,
any disinvestment by the Union Government can be
undertaken only with the approval of Parliament or through
its intervention. G
18. On the basis of the above propositions, the petitioners question
the decision of the Union Government to disinvest its residual shareholding
of 29.54 per cent. Besides the first limb of submissions noted above, the
second limb of submissions, seeks to question the decision of the CBI to
close the preliminary enquiry. In this context, it has been urged that: H
918 SUPREME COURT REPORTS [2021] 10 S.C.R.

A (i) The decision of the Constitution Bench in Lalita Kumari
v. Government of Uttar Pradesh18 stipulates that if an
FIR is not registered following a preliminary enquiry (a class
of cases was carved out where a preliminary enquiry may
be held before the registration of an FIR involving
acognizable offence), the complainant must be furnished
B
with a copy of the reasons for closing the enquiry;
(ii) Normally, the informant at whose behest an FIR is registered
can challenge the final report under Section 173 of the CrPC,
but this avenue is not available in a case where the CBI
decides not to register a regular case after a preliminary
C enquiry;
(iii) CBI’s submission to the effect that the preliminary enquiry
was conducted not on the basis of the complaint which was
lodged by the brother of one of the petitioners, but on the
basis of source information is an attempt to obviate
D compliance with the mandate of the decision in Lalita
Kumari (supra);
(iv) The decision to close the preliminary enquiry disregarded
the advice tendered to the CBI by several of its officers
that a regular case should be registered; and
E
(v) A disclosure of the circumstances which have led to the
closure of the preliminary enquiry should be made to the
petitioner, particularly in the context of the allegations which
have been levelled against the then Attorney General in
respect of an opinion tendered by him.
F
19. Opposing the above submissions, Mr Tushar Mehta, learned
Solicitor General appearing on behalf of the Union Government submitted
that:
(i) The petition is barred by the principles of res judicata since
this Court had dismissed Maton Mines Mazdoor Sangh’s
G
writ petition on 10 December 2012 on the very issue which
has been pressed in the present proceedings;
(ii) The disinvestment of the equity shareholding of the Union
Government in public sector corporations commenced after
18
H [“Lalita Kumari”] (2014) 2 SCC 1
NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC 919
SECTOR ENT. v. UOI [DR. DHANANJAYA Y CHANDRACHUD, J.]

the Industrial Policy Statement of 24 July 1991. In 1991-92, A
the minority shareholding of the Union Government in thirty
central public sector enterprises was sold to selected
financial institutions – the Life Insurance Corporation,
General Insurance Corporation and Union Trust of India.
The Union Government sold 24.08 per cent of its
B
shareholding in HZL in 1991-92 to these financial institutions;
(iii) According to the White Paper on Disinvestment of Public
Sector Enterprises dated 31 July 2007, the policy of
disinvestment has evolved through the Budget Speeches of
Union Finance Ministers;
C
(iv) Inspite of the policy of disinvestment, the following industries
were proposed to be reserved for the public sector in terms
of the industrial policy statement dated 24 July 1991:
“(i) Arms and Ammunitions and Allied items of defence
equipment, defenceaircraft and warships. D
(ii) Atomic Energy
(iii) Coal and Lignite
(iv) Mineral Oils
(v) Mining of iron ore, manganese ore, chrome ore, gypsum, E
sulphur, gold and diamond.
(vi) Mining of copper, lead, zinc, tin, molybdenum and
wolfram.
(vii) Minerals specified in the Schedule to the Atomic Energy
(Control of Production arid Use) Order, 1953. F

(viii) Railway transport.”
(v) After the establishment of the Public Sector Disinvestment
Commission on 23 August 1996, the Union Government on
16 March 1999 classified public sector enterprises into G
‘strategic’ and ‘non-strategic areas’ for the purpose of
disinvestment. Strategic industrial public sector enterprises
were those functioning in the areas of
“(i) Arms and Ammunition and the allied items of defence
equipment, defence aircrafts and warships;
H
920 SUPREME COURT REPORTS [2021] 10 S.C.R.

A (ii) Atomic Energy (except in the area related to the
generation of nuclear power and applications of radiation
and radio-isotopes to agriculture medicine and non-strategic
Industries);
(iii) Railway Transport.”
B (vi) The Union Government disinvested 26 per cent of its
shareholding through a strategic sale to SOVL, through a
Share Purchase Agreement on 27 March 2002. It also
executed a Shareholders’Agreement dated 4 April 2002 with
SOVL. The Union Government also sold 1.47 per cent of
C its shareholding to employees of HZL in November 2002.
In November 2003, SOVL exercised its first call option
under Article 5.8 of the Shareholders’ Agreement and
acquired 18.92 per cent of the shareholding. Prior to this,
SOVL acquired 20 per cent of the share capital of HZL
from the public in an open offer. As a cumulative
D consequence, the shareholding of SOVL had risen to 64.92
per cent in 2003. HZL ceased to be a government company
from March 2002;
(vii) Significantly, the executive decisions to disinvest the
shareholding of the Union Government until 2002 have not
E been challenged by the petitioners and only the proposed
sale of the residual shareholding of 29.54 per cent is raised
in these proceedings;
(viii) The decision in Centre for Public Interest Litigation
(supra) would have no application for the reason that HZL
F had ceased to be a government company following the
process of disinvestment which took place in 1991-92 and
2002;
(ix) The Union Government cannot be restrained from
disinvesting its shareholding in a company which is listed as
G a limited company, especially since the process of
disinvestment by which the company ceased to be a
government company within the meaning of Section 617 of
the Companies Act 1956 has not been challenged;
(x) The Union Government has stated on affidavit that the
H residual shareholding of 29.54 per cent will be sold in the
NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC 921
SECTOR ENT. v. UOI [DR. DHANANJAYA Y CHANDRACHUD, J.]

open market, strictly in accordance with SEBI rules and A
regulations; and
(xi) The assumption that zinc is a strategic asset whose control
must continue to remain with the Union Government is no
longer valid.
20. As regards the second limb of submissions, relating to the B
preliminary enquiry by CBI, an affidavit dated 4 March 2020 has been
filed in these proceedings stating that (i) the former Attorney General
had not advised SOVL at any stage in regard to the process of
disinvestment in HZL; and (ii) CBI had, after considering the entire
material which has been obtained during the course of the preliminary C
enquiry, decided to close the preliminary enquiry. In any event, the sale
of the residual 29.54 per cent shareholding cannot be interdicted on the
basis of a CBI enquiry into what transpired nearly two decades ago in
2002, in respect of an earlier disinvestment.
21. The Solicitor General submitted that it is estimated that the D
29.54 per cent residual shareholding has a value of about Rs 40,000
crores and a considered decision has been taken by the Union
Government to offload it in the open market so as to strengthen revenues
for public purposes.
22. Mr Harish Salve, learned Senior Counsel appearing on behalf E
of SOVL, has urged the following submissions:
(i) The first prayer which seeks to challenge the disinvestment
of the residual 29.54 per cent shareholding of the Union
Government is barred by the principles of res judicata,
following the dismissal on 10 December 2012, of the earlier F
writ petition instituted by Maton Mines Mazdoor Sangh;
(ii) At the time of privatization in 2002, a contract was entered
into in the form of a Shareholders’Agreement which
conferred SOVL with a call option to acquire shares in HZL,
upon fulfilling certain parameters, including the residual
G
29.54 per cent shares;
(iii) Since the disinvestment of 70.5 per cent shares in the first
instance is not under challenge, HZL has ceased to be a
government company governed by the Nationalisation Act
1976. Effective management and control stand transferred
H
922 SUPREME COURT REPORTS [2021] 10 S.C.R.

A to SOVL. The transfer of 29.54 per cent of the residual
equity shareholding by the Union Government of a company
in which it has no surviving control would only raise finances
for the government and does not impact management or
control;
B (iv) Following the disinvestment in HZL in 1991-92, 24.08 per
cent of its equity shareholding was sold by the Union
Government in the domestic market, reducing its stake to
75.92 per cent. In April 2002, when the government
transferred another 26 per cent in favour of SOVL, its
shareholding was reduced to 49.92 per cent. SOVL further
C acquired 20 per cent of equity from the open market, by an
open offer, which raised its holding in HZL to 46 per cent;
(v) In August 2003, SOVL exercised its first call option to
acquire 18.92 per cent equity shares from the government,
increasing its shareholding in HZL to 64.92 per cent; and
D
(vi) HZL is a listed public company whose shares are traded on
the Bombay Stock Exchange and National Stock Exchange.
There is no prohibition in the judgment of this Court in
Centre for Public Interest Litigation (supra) on the sale
of shares held by the government in such a company. The
E earlier disinvestment in 2002 took place as a result of
competitive bidding and there is not a tittle of evidence before
the Court to show that the valuation was incorrect.
23. In compliance with an interim direction, CBI has submitted an
affidavit dated 4 March 2020, detailing its submissions with respect to
F the allegations regarding the irregularity in the disinvestment of the 26
per cent shareholding of the Union Government in HZL, in 2002. It has
stated:
(i) A preliminary enquiry was registered on 6 November 2013,
on the basis of “source information” received. C P Babel,
G the brother of the third petitioner, is not the original
complainant. The memo of parties (sic) does not mention
his name;
(ii) The CBI Manual details a decision-making process where
opinions of various authorities in the administrative hierarchy
H
NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC 923
SECTOR ENT. v. UOI [DR. DHANANJAYA Y CHANDRACHUD, J.]

are recorded and a final decision is taken by the competent A
authority;
(iii) The subjectwas never placed before the Attorney General,
and he has had no occasion to opine on the matter; and
(iv) Based on the preliminary enquiry conducted in accordance
with the CBI Manual, a self-contained note dated 6 March B
2017 was submitted, closing the preliminary enquiry, without
registering a regular case.
24. In rejoinder, Mr Prashant Bhushan, submitted that:
(i) HLZ holds 80 per cent of the national deposits of zinc;
C
(ii) HZL is the largest producer of zinc, which is used in the
defence sector;
(iii) Parliamentary legislation, the Nationalisation Act 1976 in
the present case, cannot be overridden by the executive
arm of the government;
D
(iv) 26 per cent of the equity holding of the government was
sold in 2002 for a paltry consideration of Rs 400 crores;
and
(v) There is no document or material before this Court to indicate
that the value of the residual shareholding of the Union
E
Government stands at Rs 40,000 crores.
25. The rival submissions come up for analysis.
C Res Judicata and PILs
26. The Union Government and SOVL have objected to the
maintainability of the present writ petition, and sought its dismissal at the F
threshold on the ground of res judicata. It has been contended that the
reliefs sought in the petition overlap with the reliefs sought by the
petitioners in the earlier petition instituted by Maton Mines Mazdoor
Sangh, which was dismissed by a three-judge Bench of this Court on 10
December 2012. The reliefs sought in the earlier petition were in the
G
following terms:
“(i) To appoint a High Powered Committee comprising of such
individuals of technical / financial expertise whom this Hon’ble
Court deems fit to assess the net worth of Hindustan Zinc Ltd. at
the time of initial disinvestment in the year 2002 and therefore,
H
924 SUPREME COURT REPORTS [2021] 10 S.C.R.

A declare the initial disinvestment of 2002 to be void ab initio and
against the law of land laid down by this Hon’ble Court in the
case of ‘Centre of Public Interest Litigation Vs. Union of India’
reported in (2003) 7 SCC 532 as per the Judgment dated 16.09.2003
and issue consequential directions in that regard;
B (ii) Direct the Respondent No. l to refrain from further sale of the
remaining equity of 29.54% to SOVL or any other party and
thereby swindling of properties, Plant & Machineries and other
valuable assets for all times to come, as reported in the Newspapers
and quoted in the preceding paragraphs:
(iii) Direct the Respondent No.1 to retake the 18.92% equity sold
C to SOVL and manage 3% more equity either from open market
or from SOVL so as to make it a total of more than 51% in the
light of Apex Court Judgment dated 16.09.2003 to retain the:
structure of the Company as a Government Company thereby
restoring the Government control over the Company;
D (iv) Direct the Respondents No.1 & 2 through Government of
lndia - or otherwise to put a halt for further expansion of capacities
of various Lead/ Zinc Plants including Silver I Zinc Refineries
installed in Uttaranchal so that perpetual revenue loss to Central
Government in Income Tax and Sales Tax loss to Government of
E Rajasthan can be stopped;
(v) Direct the SOVL through Government of India or otherwise
to put a halt for further expansion of mining activities and produce
these critical base metals to the extent of requirement for the
existing plants as the base metals are critical for the future
requirement of the nation and defence requirement also;
F
(vi) Recruit workmen in workmen cadre for regular nature of
jobs in all the units as per practices stood prior to disinvestment in
2002 and give due preference as per law to ST/SC, physically
handicapped and other socially backwards classes as per law and
refrain the company from further violation of Contract Labor
G Abolition & Regulation Act;
(vii) Direct the SOVL through Government of India to stop export
of the critical base metals like lead and Zinc etc. either in the
form of concentrated or as finished products; and
(viii) Pass any such other order or order(s) which Your Lordships
H may deem fit in the interest of justice.”
NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC 925
SECTOR ENT. v. UOI [DR. DHANANJAYA Y CHANDRACHUD, J.]

27. The petition was summarily dismissed by this Court on 10 A
December 2002 in the following terms:
“[…]we are not inclined to entertain the writ petition, which is
accordingly dismissed.”
28. The present writ petition was filed seeking the following reliefs:
“(i) Issue a writ of mandamus directing the respondents 1 & 2 B
herein from disinvesting the residual shareholding of the Govt. of
India to the extent of 29.5% in the respondent no. 4 without
amending the Metal Corporation (Nationalisation and
Miscellaneous Provisions) Act, 1976,
(ii) Direct the Central Bureau of Investigation to file status report C
in this Hon’ble Court from time to time in respect of investigation
being carried by it and this Hon’ble Court monitor the investigation
till filing of the charge-sheet in appropriate court; and
(iii) Pass any other order or orders which this Hon’ble Court may
think fit and proper in the facts and circumstances of the case as
D
well as in the interest of justice.”
29. The first relief which has been sought in the petition in the
present case- that the residual disinvestment can occur only after the
amendment of the Nationalisation Act 1976- is substantially similar to
the first and second reliefs sought by Maton Mines Mazdoor Sangh,
when they challenged the disinvestment of 2002 and 2014,on the basis E
of the decision in Centre for Public Interest Litigation (supra).
30. Section 1119 of the Code of Civil Procedure 1908 embodies
the principles of res judicata and bars the court from deciding issues
which have been directly or substantially in issue in an earlier proceeding
F
19
“11. Res judicata.—No Court shall try any suit or issue in which the matter directly
and substantially in issue has been directly and substantially in issue in a former suit
between the same parties, or between parties under whom they or any of them claim,
litigating under the same title, in a Court competent to try such subsequent suit or the
suit in which such issue has been subsequently raised, and has been heard and finally
decided by such Court.
[…] G
Explanation IV.—Any matter which might and ought to have been made ground of
defence or attack in such former suit shall be deemed to have been a matter directly and
substantially in issue in such suit.
Explanation V.—Any relief claimed in the plaint, which is not expressly granted by the
decree, shall, forthe purposes of this section, be deemed to have been refused.
[…]”
H
926 SUPREME COURT REPORTS [2021] 10 S.C.R.

A between the same parties or parties claiming under the same title and
have been finally decided.
31. The principles of res judicata and constructive res judicata,
which Section 11 of the Code of Civil Procedure 1908 embodies, have
been applied to the exercise of the writ jurisdiction20, including public
B interest litigation21.Yet courts have been circumspect in denying relief in
matters of grave public importance, on a strict application of procedural
rules. In Rural Litigation and Entertainment Kendra v. State of
U.P.22, this Court observed:
“16. The writ petitions before us are not inter-partes disputes and
C have been raised by way of public interest litigation and the
controversy before the court is as to whether for social safety
and for creating a hazardless environment for the people to live
in, mining in the area should be permitted or stopped. We may
not be taken to have said that for public interest litigations,
procedural laws do not apply. At the same time it has to be
D remembered that every technicality in the procedural law
is not available as a defence when a matter of grave public
importance is for consideration before the court. Even if it
is said that there was a final order, in a dispute of this type
it would be difficult to entertain the plea of res judicata. As
E we have already pointed out when the order of 12-3-1985, was
made, no reference to the Forest (Conservation) Act of 1980 had
been done. We are of the view that leaving the question open for
examination in future would lead to unnecessary multiplicity of
proceedings and would be against the interests of society. It is
meet and proper as also in the interest of the parties that the
F entire question is taken into account at this stage.”
(emphasis supplied)
23
32. In Daryao v. State of U.P. , a Constitution Bench of this
Court has held that orders dismissing writ petitions in limine will not
20
Kantaru Rajeevaru (Sabrimala Temple Review- 5J) v. Indian Young Lawyers
G
Association, (2020) 2 SCC 1 (Constitution Bench); State of U.P. v. Nawab Hussain,
(1977) 2 SCC 806 (three-judge Bench); Sarguja Transport Service v. State Transport
Appellate Tribunal, M.P., Gwalior, (1987) 1 SCC 5 (two-judge Bench)
21
Forward Construction Co. v. Prabhat Mandal (Regd.), (1986) 1 SCC 100 (three-
judge Bench)
22
1989 Supp (1) SCC 504
23
H (1962) 1 SCR 574
NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC 927
SECTOR ENT. v. UOI [DR. DHANANJAYA Y CHANDRACHUD, J.]

constitute res judicata. The Court noted that while a summary dismissal A
may be considered as a dismissal on merits, it would be difficult to
determine what weighed with the Court without a speaking order. Justice
PB Gajendragadkar (as the learned Chief Justice then was), observed:
“26...If the petition is dismissed in limine without passing a speaking
order then such dismissal cannot be treated as creating a bar of B
res judicata. It is true that, prima facie, dismissal in limine even
without passing a speaking order in that behalf may strongly
suggest that the Court took the view that there was no substance
in the petition at all; but in the absence of a speaking order it
would not be easy to decide what factors weighed in the mind of
the Court and that makes it difficult and unsafe to hold that such C
a summary dismissal is a dismissal on merits and as such constitutes
a bar of res judicata against a similar petition filed under Article
32…”
33. In State of Karnataka v. All India Manufacturers
Organization24, a three judge Bench has also held that res judicata D
would be applicable to a public interest litigation if it was bona fide.
Justice B N Srikrishna held:
“35. As a matter of fact, in a public interest litigation, the petitioner
is not agitating his individual rights but represents the public at
large. As long as the litigation is bona fide, a judgment in a E
previous public interest litigation would be a judgment in rem. It
binds the public at large and bars any member of the public from
coming forward before the court and raising any connected issue
or an issue, which had been raised or should have been raised on
an earlier occasion by way of a public interest litigation. It cannot
be doubted that the petitioner in Somashekar Reddy [(1999) F
1 KLD 500 : (2000) 1 Kant LJ 224 (DB)] was acting bona
fide. Further, we may note that, as a retired Chief Engineer,
Somashekar Reddy had the special technical expertise to
impugn the Project on the grounds that he did and so, he
cannot be dismissed as a busybody. Thus, we are satisfied in
G
principle that Somashekar Reddy [(1999) 1 KLD 500 : (2000)
1 Kant LJ 224 (DB)] , as a public interest litigation, could
bar the present litigation.
[…]
24
(2006) 4 SCC 683 H
928 SUPREME COURT REPORTS [2021] 10 S.C.R.

A 47. All of these unequivocally show that the issue of excess land
(and connected issues) was specifically raised by the petitioner
in Somashekar Reddy [(1999) 1 KLD 500 : (2000) 1 Kant LJ 224
(DB)] and was also forcefully denied by the State. In fact, the
decision in Somashekar Reddy [(1999) 1 KLD 500 : (2000) 1 Kant
LJ 224 (DB)] , went further with the High Court according its
B
imprimatur to the land requirements under the FWA amounting to
20,193 acres, which in no small measure, resulted from the State’s
successful defence that it had provided the “bare minimum of
land” for the Project calculated by a “scientific method”. The
judgment also contains copious references to the issue of
C land (including the acreage), the types of land to be acquired,
the land requirement for different aspects of the Project,
the scientific techniques involved in identifying the land
and road alignment, etc. In these circumstances, it cannot
be doubted that Explanation III to Section 11 squarely
applies. It is clear that the issue of excess land under the
D
FWA was “directly and substantially in issue”
in Somashekar Reddy [(1999) 1 KLD 500 : (2000) 1 Kant LJ
224 (DB)] and hence, the findings recorded therein having
reached finality, cannot be reopened in this case.
[…]
E 50. As we have pointed out, the cause of action, the issues raised,
the prayers made, the relief sought in Somashekar Reddy’s petition
and the findings in Somashekar Reddy [(1999) 1 KLD 500 : (2000)
1 Kant LJ 224 (DB)] and the claims and arguments in the present
petitions were substantially the same. Therefore, it is not possible
F to accept the contention of the appellants before us that the
judgment in Somashekar Reddy [(1999) 1 KLD 500 : (2000) 1
Kant LJ 224 (DB)] does not operate as res judicata for the
questions raised in the present petitions.”
(emphasis supplied)
G 34. While determining the applicability of the principle of res
judicata under Section 11 of the Code of Civil Procedure 1908, the
Court must be conscious that grave issues of public interest are not lost
in the woods merely because a petition was initially filed and dismissed,
without a substantial adjudication on merits.There is a trend of poorly
pleaded public interest litigations being filed instantly following a
H disclosure in the media, with a conscious intention to obtain a dismissal
NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC 929
SECTOR ENT. v. UOI [DR. DHANANJAYA Y CHANDRACHUD, J.]

from the Court and preclude genuine litigants from approaching the Court A
in public interest. This Court must be alive to the contemporary reality of
“ambush Public Interest Litigations” and interpret the principles of res
judicata or constructive res judicata in a manner which does not debar
access to justice. The jurisdiction under Article 32 is a fundamental right
in and of itself.
B
35. In this case, since the three judge Bench of this Court rejected
the petition filed by Maton Mines Mazdoor Singh in limine, without a
substantive adjudication on the merits of their claim, the present writ
petition is not barred by res judicata.
D The decision in Centre for Public Litigation
C
36. In order to place the controversy in perspective, it would be
worthwhile to reproduce a tabulated statement of the shareholding pattern
in HZL, as submitted by the Solicitor General. The statement is
reproduced below:

D

E

F

G

H
930 SUPREME COURT REPORTS [2021] 10 S.C.R.

A 37. As the above statement indicates, prior to 27 March 2002,
75.92 per cent of the shareholding of HZL was with the Union
Government, the public shareholding being the balance 24.08 per cent.
Pursuant to the Share Purchase Agreement, 26 per cent of the
shareholding was sold to SOVL as a strategic partner on 27 March
2002, which brought down the Union Government’s shareholding to 49.92
B
per cent. SOVL’s shareholding stood at 26 per cent. In addition, SOVL
acquired 20 per cent from the public, after furnishing an open offer in
terms of SEBI’s regulations which raised its equity shareholding to 46
per cent. In November 2002, the Union Government sold 1.47 per cent
of its shareholding to the employees of HZL which further brought down
C its holding to 48.45 per cent. As a result of the exercise of the first call
option for SOVL in terms of the Shareholders’Agreement, SOVL
acquired another 18.92 per cent of the equity holding of the Union
Government in November 2003. As a consequence, the shareholding of
the Union Government stood reduced to 29.53 per cent while SOVL’s
holding increased to 64.92 per cent.
D
38. While considering the ambit of the present controversy, it is
necessary to note that the challenge in the petition under Article 32 is to
the proposal of the Union Government to sell its residual stake in HZL,
by the sale of the remaining 29.54 per cent equity. Neither is the validity
of the initial disinvestment of 24.08 per cent equity which took place in
E 1991-92, nor is the subsequent disinvestment of 26 per cent in terms of
the Share Purchase Agreement, challenged in these proceedings. As a
matter of fact, if it were to be challenged, the first objection would be to
the delay of well over two decades in challenging the disinvestment of
1991-92 and of nearly12 years in challenging the sale of 2002 in pursuance
F of the Share Purchase Agreement. Since the disinvestment of 1991-92
and of 2002 has attained finality, it becomes necessary to assess the
effect of the earlier disinvestment, in terms of the status of HZL. As a
consequence of the disinvestment on 27 March 2002, HZL ceased to be
a government company within the meaning of Section 617 of the
Companies Act 1956 since its shareholding fell below 51 per cent. As a
G matter of fact, Mr Prashant Bhushan, learned Counsel appearing on
behalf of the petitioners does not dispute this factual position. Then, the
issue which arises is whether the Nationalisation Act 1976 interposes
any bar on the sale of the residual shareholding of the Union Government
in HZL.
H
NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC 931
SECTOR ENT. v. UOI [DR. DHANANJAYA Y CHANDRACHUD, J.]

39. When the Nationalisation Act was enacted in 1976, the object A
and purpose of the enactment was spelt out in the Statement of Objects
and Reasons accompanying the introduction of the Bill in Parliament.
Insofar as is material, the objects are spelt out in the following extract:
“The Metal Corporation of India Limited a company had a mining
lease in respect of zinc-lead deposits in Zawar area in Rajasthan B
and owned a lead smelter at Tundoo in Bihar. It had undertaken
to expand production from the Zawar mines and to construct a
Zinc Smelter near Udaipur for producing electrolytic grade zinc
and bye-products. However, for various reasons, the Corporation
was not able to complete the projects it had undertaken.The
construction work came to a standstill and the corporation failed C
to meet its repayment obligations to the suppliers of machinery
and others.
2. As zinc and lead are essential raw materials for the economy
of the country and are of considerable strategic importance to the
country, it was necessary to the public interest that the project D
undertaken by the Corporation should becompleted as soon as
possible. In the circumstances, for the speedy development and
expansion of the zinc lead deposits, the undertaking of the Metal
Corporation of India was acquired by the Central Government
with effect from 22nd October, 1965 by a Parliamentary legislation, E
enacted in 1965. The said act, having been struck down was
replaced by the Metal Corporation of India (Acquisition of
Undertaking) Act, 1966 (36 of 1966). The undertaking of the
Corporation was later vested in the Hindustan Zinc Ltd., Udaipur,
a Government company with effect from 10th January, 1966.”
F
40. The submission of the petitioners emphasises that the purpose
underlying the acquisition was that zinc and lead were considered to be
essential raw-materials for the economy of the country and of
considerable strategic importance, such that it was necessary in public
interest that the project which was undertaken by Metal Corporation of
India should be completed expeditiously. The Statement of Objects and G
Reasons also indicates that the erstwhile undertaking had a mining lease
in respect of zinc and lead deposits in the Zawar area and owned a lead
smelter in Bihar, besides which it had undertaken to expand production
from the mines and construct a smelter for producing zinc and by-products
near Udaipur. For various reasons, Metal Corporation of India was not H
932 SUPREME COURT REPORTS [2021] 10 S.C.R.

A able to complete its projects; construction had come to a standstill and
the undertaking had failed to meet its obligations to repay suppliers of
machinery. The Statement of Objects and Reasons emphasises the
importance of zinc and lead to the economy, which was undoubtedly an
important facet of the purpose of acquisition. Moreover, Metal
Corporation of India, the pre-nationalized entity, was unable to complete
B
its projects and its acquisition by an Act of Parliament was envisaged
for the expeditious completion of the projects. The long title to the
Nationalisation Act 1976 indicates that the Act was enacted to enable
the Central Government, in public interest, to exploit to the fullest extent,
the zinc and lead deposits in and around the Zawar area of Rajasthan
C and “to utilize those minerals in such manner as to sub-serve the
common good”. Section 4(1)25 of the Nationalisation Act 1976 provided
for the taking over of the management of the undertaking of Metal
Corporation. As a consequence of the acquisition, Section 6(1) 26
envisages that so long as the management of the undertaking of Metal
D 25
"4. Taking over of management of the undertaking of the Metal Corporation.—(1) On
the commencement of this Act, the Metal Corporation of India (Acquisition of
Undertaking) Act, 1966 (36 of 1966), shall stand repealed, and on such repeal, the
undertaking of the Metal Corporation, which had been transferred to, and vested in, the
Central Government by virtue of the provisions of Section 3 of the Act so repealed, and
the undertaking of the Metal Corporation together with all its properties, assets,
liabilities and obligations specified in sub-section (1) of Section 4 of that Act and such
E other properties, assets, liabilities and obligations, acquired or incurred, for the purposes
of its undertaking, after the 22nd day of October, 1965, which stood, by virtue of the
provisions of Section 12 of the said Act, transferred to, and vested in, the Government
company formed in pursuance of the provisions of Section 12 of the Act aforesaid
shall, by virtue of the provisions of this Act, be deemed to have been retransferred to,
and re-vested in, the Metal Corporation, and, immediately thereafter, the management
F of the undertaking of the Metal Corporation shall be deemed to have been transferred
to, and vested in, the Central Government.”
26
“6. Application of Act 1 of 1956.—(1) Notwithstanding anything contained in the
Companies Act, 1956, or in the memorandum or articles of association of the Metal
Corporation, so long as the management of the undertaking of the Metal Corporation
remains vested in the Central Government,—
(a) it shall not be lawful for the shareholders of the Metal Corporation or any other
G person to nominate or appoint any person to be a director of the Metal Corporation:
(b) no resolution passed at any meeting of the shareholders of the Metal Corporation
on or after the commencement of this Act shall be given effect to unless approved by
the Central Government;
(c) no proceeding for the winding up of the Metal Corporation or for the appointment
of liquidator or receiver in respect of the undertaking thereof shall lie in any court
except with the consent of the Central Government.”
H
NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC 933
SECTOR ENT. v. UOI [DR. DHANANJAYA Y CHANDRACHUD, J.]

Corporation remains vested in the Central Government, (i) it is not lawful A
for the shareholders to nominate or appoint a director; (ii) no resolution
by the shareholders would be given effect to, unless approved by the
Central government; and (iii) no proceedings for winding up the acquired
entity would lie in any court, except with the consent of the Central
government. Section 7 provides for the vesting of the undertaking of the
B
Metal Corporation in the Central government, in the following terms:
“7. Vesting of the undertaking of the Metal Corporation in the
Central Government.—
(1) On the appointed day, the undertaking of the Metal Corporation,
and the right, title and interest of the Metal Corporation in relation C
to its undertaking, shall stand transferred to, and shall vest
absolutely in, the Central Government.
(2) Subject to the other provisions contained in this Act, all property
included in the undertaking of the Metal Corporation which has
vested in the Central Government under sub-section (1) shall, by D
force of such vesting, be freed and discharged from any trusts,
obligations, mortgages, charges, liens and other incumbrances
affecting it, and any attachment, injunction or any decree or order
of a court, tribunal or other authority restricting the use of such
property in any manner shall be deemed to have been withdrawn.
E
Explanation.—For the removal of doubts, it is hereby declared
that the mortgagee of any property included in the undertaking of
the Metal Corporation, or any other person holding any charge,
lien or other interest in, or in relation to, any such property, shall
be entitled to claim, in accordance with his rights and interests,
payment of the mortgage money or other dues, in whole or in F
part, from the Central Government but no such mortgage, charge,
lien or other interest shall be enforceable against any property
which has vested in the Central Government.
(3) Subject to the other provisions contained in this Act, all contracts
and working arrangements which are subsisting immediately before G
the appointed day and affecting the Metal Corporation shall, in so
far as they relate to the undertaking of the Metal Corporation,
cease to have effect or be enforceable against the Metal
Corporation or any person who was surety or had guaranteed the
performance thereof and shall be of as full force and effect against
H
934 SUPREME COURT REPORTS [2021] 10 S.C.R.

A or in favour of the Central Government and enforceable as fully
and effectually as if, instead of the Metal Corporation, the Central
Government had been named therein or had been a party thereto.
(4) Subject to the other provisions contained in this Act, any
proceeding or cause of action pending or existing immediately
B before the appointed day by or against the Metal Corporation or
the Central Government or the Government company referred to
in Section 12 of the Metal Corporation of India (Acquisition of
Undertaking) Act, 1966 (36 of 1966), in relation to the undertaking
of the Metal Corporation may, as from that day, be continued and
enforced by or against the Central Government or the Government
C company referred to in Section 9, as it might have been enforced
by or against the Metal Corporation, the Central Government or
the Government company, as the case may be, if this Act had not
been enacted, and shall cease to be enforceable by or against the
Metal Corporation, its surety or guarantor.”
D 41. Section 9 empowers the Central government to direct the
vesting of the undertaking of Metal Corporation in a government
company:
“9. Power of Central Government to direct vesting of the
undertaking of the Metal Corporation in a Government company.—
E
(1) Notwithstanding anything contained in Section 7, the Central
Government may, if it is satisfied that a Government company is
willing to comply, or has complied, with such terms and conditions
as that Government may think fit to impose, direct, by an order in
writing, that the undertaking of the Metal Corporation and the
F right, title and interest of the Metal Corporation in relation to such
undertaking shall, instead of continuing to vest in the Central
Government, vest in the Government company either on the date
of publication of the direction or on such earlier or later date (not
being a date earlier than the appointed day), as may be specified
G in the direction.
(2) Where the right, title and interest of the Metal Corporation in
relation to its undertaking vest in a Government company under
sub-section (1), the Government company shall, on and from the
date of such vesting, be deemed to have become the lessee in
relation to the mines of which the Metal Corporation was the
H
NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC 935
SECTOR ENT. v. UOI [DR. DHANANJAYA Y CHANDRACHUD, J.]

lessee as if a mining lease in respect of such mines had been A
granted to the Government company, and the period of such lease
shall be the entire period for which such lease could have been
granted under the Mineral Concession Rules; and all the rights
and liabilities of the Central Government in relation to such mines
shall, on and from the date of such vesting, be deemed to have
B
become the rights and liabilities, respectively of the Government
company.
(3) The provisions of sub-section (2) of Section 8 shall apply to a
lease which vests in a Government company as they apply to a
lease which has vested in the Central Government and any
reference therein to the Central Government shall be construed C
as a reference to the Government company.
(4) Any reference hereafter in this Act to the Government
company shall be construed as a reference to the Government
company which is appointed as the Administrator under sub-section
(1) of Section 5, or, as the case may be, the Government company D
referred to in the direction made under sub-section (1).”
42. Section 4 of the Nationalisation Act 1976 provides for the
vesting of all assets, liabilities and the management of the undertaking in
the Central Government. Section 5 provides for the appointment of an
administrator to take over the management of the undertaking, for and E
on behalf of the Central Government. Section 7 clarifies that on the
appointed day, the undertaking of the Metal Corporation, and the right,
title, and interest of the said Corporation in relation to its undertaking,
stood transferred to and vested absolutely in the Central Government.
In pursuance of Section 9, the undertaking of Metal Corporation came F
to be vested in HZL, as a government company, within the meaning of
Section 617 of the Companies Act 1956. Section 13 provides that the
general superintendence, direction control and management of the affairs
and business of the undertaking of Metal Corporation of which the right,
title and interest is vested in the Central government under Section 7,
shall vest in the government company specified in the direction made G
under Section 9(1).
43. Sections 4, 7 and 9 indicate that the undertaking of Metal
Corporation stood transferred to, and vested absolutely in the Central
Government. Section 9 further empowers the Central Government to
H
936 SUPREME COURT REPORTS [2021] 10 S.C.R.

A vest the undertaking in a government company. Once the Metal
Corporation stood vested in a government company, the provisions of
the then Companies Act 1956 and present Companies Act 2013 become
applicable. Thereupon, the government company would be entitled to
exercise all such powers and to do all such things as Metal Corporation
was authorized to effect, in relation to its undertaking.
B
44. The Nationalisation Act 1976 contains no express provision
restraining the exercise of rights by the Union Government upon the
undertaking of Metal Corporation vesting in it and thereupon, pursuant
to a direction under Section 9(1), being transferred to a government
company. As already noted earlier, the shareholding of the Union
C Government was divested initially in 1991-2 and subsequently in 2002.
After the disinvestment of 26 per cent of the equity stake of the Union
Government to SOVL, HZL ceased to be a government company within
the meaning of Section 617 of the Companies Act 1956. Section 617
defined the expression government company in the following terms:
D “617. Definition of “Government Company”.—For the purposes
of this Act, Government company means any company in which
not less than fifty-one per cent of the paid-up share capital is held
by the Central Government, or by any State Government or
Governments, or partly by the Central Government and partly by
E one or more State Governments and includes a company which is
a subsidiary of a Government company as thus defined.”
As a result of the disinvestment on 27 March 2002, HZL ceased
to be a government company, with the Union Government’s
shareholding falling to 49.92 per cent, below the threshold of 51
F per cent.
45. The petitioners seek to read an implicit limitation on the transfer
of the residual shareholding of 29 per cent held by the Union Government
in HZL, from the provisions of the Nationalisation Act 1976. This
submission is prefaced on the object of the enactment which is to acquire
G control over the strategic mineral deposits of lead and zinc. This
submission has been met by the respondents by urging that after 16
March 1999, the mining of zinc has ceased to retain a strategic character,
given the changes in industrial policy. The aspect which is of significance
is that there is no challenge to the disinvestment which took place in
1991-92 or in 2002, the latter having resulted in HZL ceasing to retain its
H
NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC 937
SECTOR ENT. v. UOI [DR. DHANANJAYA Y CHANDRACHUD, J.]

status as a government company within the meaning of Section 617 of A
the Companies Act 1956. That being the position, it would be inconsistent
to read an implied limitation on the transfer by the Union Government of
its residual shareholding in HZL representing 29.54 per cent of the equity
capital. Hence, when a decision has been taken by the government as a
shareholder of a company to sell its shares, it acts as any other
B
shareholder in a company who makes the decision on the basis of financial
and economic exigencies.
46. The issue which needs to be considered is whether the decision
of this Court in Centre for Public Interest Litigation (supra) would
result in a bar on the disinvestment of the residual shareholding. This
decision of a two-judge Bench is dated 16 September 2003. In that case, C
petitions were filed in the public interest invoking the jurisdiction of this
Court under Article 32, to challenge the decision of the Union Government
to sell a majority of its shares in Hindustan Petroleum Corporation
Limited27 and Bharat Petroleum Corporation Limited28 to private parties
without parliamentary approval or sanction, as being contrary to and D
violative of the provisions of the ESSO (Acquisition of Undertakings in
India) Act 1974; the Burmah Shell (Acquisition of Undertakings in India)
Act 1976; and Caltex [Acquisition of Shares of Caltex Oil Refining (India)
Limited and of the Undertakings in India of Caltex (India) Limited] Act
1977. The erstwhile companies were nationalized as a result of these
enactments. The Union Government had proposed a disinvestment of E
the shares of the companies comprised in the public sector, after the
policy of disinvestment had been upheld by this Court in Balco
Employees’ Union (Regd.) v. Union of India29. After considering
the provisions of the legislation under which the undertakings were
nationalized, Justice Rajendra Babu speaking for the two judge Bench F
held:
“12. In order to interpret the enactments in question it is necessary
to look at the preamble to the Act. The preamble to the Act clearly
stated that acquisition is done
“in order to ensure that the ownership and control of the G
petroleum products distributed and marketed in India by
27
“HPCL”
28
“BPCL”
29
(2002) 2 SCC 333
H
938 SUPREME COURT REPORTS [2021] 10 S.C.R.

A the said company are vested in the State and thereby so
distributed as best to subserve the common good”.
(emphasis supplied)
Preamble, though does not control the statute, is an
admissible aid to construction thereof. The Act sets out that
B the assets of the undertaking shall vest in the Government as
provided under Section 3 of the Act. However, Section 7 of the
Act enables the Government to transfer the undertaking to a
government company as defined under Section 617 of the
Companies Act, 1956. If the Act intended that the undertaking
C so vested in the government company can be transferred,
wholly or partly, to any company other than a government
company, there certainly would have been an indication to
that effect in the Act itself. The question, therefore, is whether
absence of specific provision as contained in the Banking
Companies (Acquisition and Transfer of Undertakings) Act or in
D the Coal Mines Nationalisation Act, 1973 that the shareholding
shall always be held by the Government, will give a different
complexion to these provisions. When the provisions of the
Act provide for vesting of the property of the undertaking
in the Government or a government company, it cannot
E mean that it enables the same being held by any other
person, particularly in the context that the object of the
Act is that the ownership and control of the petroleum
products is distributed and marketed in India by the State
or a government company and that products thereby so
distributed as best to subserve the common good. The
F argument that there is no specific provision in the Act as
contained in the Banking Companies (Acquisition and
Transfer of Undertakings) Act or in the Coal Mines
Nationalisation Act, 1973 does not carry the matter any
further because the idea embedded in those provisions are
G implicit in the provisions of this enactment, as explained
earlier. If disinvestment takes place and the company ceases
to be a government company as defined under Section 617
of the Companies Act, to say that it is still a government
company as contemplated under Section 7 of the Act will
be a fallacy.What is contemplated under Section 7 of the
H
NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC 939
SECTOR ENT. v. UOI [DR. DHANANJAYA Y CHANDRACHUD, J.]

Act is only a government company and no other. In relation A
to a government company Sections 224 to 233 are substituted and
the audit of the company takes place under the supervision and
control of the Comptroller and Auditor General of India who shall
give effect to Section 224(1-B) and (1-C). The Auditors shall
submit a report to the Comptroller and Auditor General of India
B
and even when audit takes place, subject to his instructions, the
Comptroller and Auditor General of India may also conduct
supplementary audit and a test audit. Under Section 19(1) of the
Comptroller and Auditor General’s (Duties, Powers and Conditions
of Service) Act, 1971 audit of companies is to be conducted by
him in terms of the Companies Act. Annual reports on the working C
of affairs of the company are laid before Parliament under Section
619-A(1)(b) of the Companies Act. Such control will be lost if
a company ceases to be a government company.
13. Argument of Shri Harish Salve that a simple amendment of
Section 617 of the Companies Act unrelated to the acquisition D
can alter the position in law is only perceived but not attained and
hence does not require any examination. He contended that to
facilitate disinvestment of the shares the public sector enterprises
are allowed to list the shares on stock exchanges, irrespective of
the percentage of shares disinvested by the Government and,
therefore, submitted that there is no need for the Government to E
obtain parliamentary approval. Sales of shares of these
companies, though uninhibited, cannot be to such an extent
so that the substratum of the character of the government
companies is allowed to be lost and converted into an
ordinary company without being approved by the general F
body of shareholders and, in this case, the Government.
The Government, in turn, is subject to the statutory
limitations, to which we have adverted to now. Hence, the
argument begs the question which is put in issue before us.
14. Again accretions to the government company’s assets G
subsequent to acquisition of the undertaking is an irrelevant factor
in the context of the question we are considering. Here what is
required to be seen is, not which asset can be transferred
or not, but whether the undertaking can change its character
from a government company to ordinary company without
H
940 SUPREME COURT REPORTS [2021] 10 S.C.R.

A parliamentary clearance in the light of the statute of
acquisition.”
(emphasis supplied)
The view of this Court was that the divestment of the shareholding
of the Union Government in HPCL and BPCL, as a result of which the
B companies would cease to be government companies, could not be
undertaken without amending the statutes under which they were
nationalized. This Court noted the following:
“20. There is no challenge before this Court as to the policy of
disinvestment. The only question raised before us is whether the
C method adopted by the Government in exercising its executive
powers to disinvest HPCL and BPCL without repealing or
amending the law is permissible or not. We find that on the
language of the Act such a course is not permissible at all.”
The Court distinguished the previous precedents of this Court on
D challenges to disinvestment, in the following terms:
19. In the case of BALCO, executive action to disinvest was not
challenged probably due to the fact that there was no statutory
backing of the nature with which we are concerned in the present
case. In the case of Maruti Udyog Limited though acquired under
E an enactment, there was no challenge to the same to disinvest
merely by executive action. Thus, these cases stand on a different
footing.
47. The decision in Centre for Public Interest Litigation
(supra) is distinguishable for the reason that HPCL and BPCL were
F government companies when the disinvestment action was challenged
before this Court. In the present case, the disinvestment as a consequence
of which HZL ceased to be a government company took place in March
2002. What is in question on the first relief sought is the 29.54 per cent
residuary shareholding in HZL, after it has admittedly ceased to be a
government company within the meaning of Section 617 of the Companies
G
Act 1956 and the corresponding provisions of the Section 2(45) of the
Companies Act 2013. In the Companies Act 2013, the expression
‘government company’ is defined in Section 2(45) in similar terms:
“2….(45) “Government company” means any company in which
not less than fifty-one per cent of the paid-up share capital is held
H
NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC 941
SECTOR ENT. v. UOI [DR. DHANANJAYA Y CHANDRACHUD, J.]

by the Central Government, or by any State Government or A
Governments, or partly by the Central Government and partly by
one or more State Governments, and includes a company which
is a subsidiary company of such a Government company;”
48. The Union Government is a shareholder of HZL. The control
and management of HZL does not vest with the Union Government B
which has a residual stake of 29.54 per cent. The shareholding of SOVL
stood increased to 64.92 per cent after the exercise of the first call
option in 2002. During the course of hearing, this Court has been apprised
by SOVL that it does not seek to exercise the second call option, in
terms of the Share Purchase Agreement. It is in this backdrop that a
decision has been taken by the Union Government to sell its residuary C
shareholding in the open market. The Union Government, in its capacity
as a shareholder of HZL, is entitled to take such a decision. The fact
that the Union Government is amenable to the norms set out in Part III
of the Constitution would not impose a restraint on its capacity to decide,
as a shareholder, to disinvest its shareholding, so long as the process of D
disinvestment is transparent and the Union Government is following a
process which comports with law and results in the best price being
realized for its shareholding. In Life Insurance Corporation of India
v. Escorts Ltd. 30, a Constitution Bench of this Court inter alia
considered whether the action of an instrumentality of the State (the
Life Insurance Corporation) in asserting its rights as a shareholder to E
bring about a change in the management of a public limited company,
was amenable to public law standards. Answering the question, Justice
O Chinnappa Reddy, speaking for the Constitution Bench held:
“102. […] Broadly speaking, the court will examine actions of
State if they pertain to the public law domain and refrain from F
examining them if they pertain to the private law field. The
difficulty will lie in demarcating the frontier between the public
law domain and the private law field. It is impossible to draw the
line with precision and we do not want to attempt it. The question
must be decided in each case with reference to the particular G
action, the activity in which the State or the instrumentality of the
State is engaged when performing the action, the public law or
private law character of the action and a host of other relevant
circumstances. When the State or an instrumentality of the State
30
(1986) 1 SCC 264 H
942 SUPREME COURT REPORTS [2021] 10 S.C.R.

A ventures into the corporate world and purchases the shares of a
company, it assumes to itself the ordinary role of a shareholder,
and dons the robes of a shareholder, with all the rights available to
such a shareholder. There is no reason why the State as a
shareholder should be expected to state its reasons when it seeks
to change the management, by a resolution of the company, like
B
any other shareholder.”
The Constitution Bench held that the notice by the Life Insurance
Corporation requisitioning a meeting of the company was not liable to be
questioned on any of the grounds set out in the writ petition. This principle
has been followed as a precedent by various decisions of this Court 31.
C
The Union Government, in the present case, is exercising its rights
as a shareholder and has taken a decision to disinvest its residual
shareholding of 29.54 per cent in HZL. HZL is no longer a government
company. In any event, the decision of the Union Government, as an
incident of its policy of disinvestment, to sell its shares in the open market,
D cannot be questioned by reading a bar on its powers to do so, from the
provisions of the Nationalisation Act 1976. No such express or implied
bar exists, failing the applicability of this Court’s decision in Centre for
Public Interest Litigation (supra).
E CBI’s preliminary enquiry
E
49. A preliminary enquiry on the basis of ‘confidential source
information’ in relation to the HZL disinvestment during 1997-2003, was
registered by the CBI on 6 November 2013. In compliance of this Court’s
order dated 3 November 2014, a status report was submitted by CBI.
Furthermore, on 19 January 2016, this Court had directed CBI to submit
F another status report in a sealed cover. By an affidavit dated 14 July
2020, the Head of Branch, Anti-Corruption Branch32, Jodhpur has
annexed a ‘self-contained note’dated 6 March 2017, detailing the closure
of the preliminary enquiry, after compliance with the process detailed in
the CBI Crime Manual, 200533.
G 50. The above affidavit, theself-contained note closing the
preliminary enquiry and additional documents detailing the steps taken
31
ABL International Ltd. v. Export Credit Guarantee Corporation of India, (2004)
3 SCC 553 (two-judge Bench); Central Inland Water Transport Corporation Limited
v. Brojo Nath Ganguly, (1986) 3 SCC 156 (two-judge Bench)
32
“ACB”
33
H “CBI Crime Manual”
NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC 943
SECTOR ENT. v. UOI [DR. DHANANJAYA Y CHANDRACHUD, J.]

by the CBI during the preliminary enquiry were shared for the perusal A
ofthis Court. The Special Prosecutor, CBI Head Office, New Delhi on
31 July 2014, the Director of Prosecutionon 16 October 2014, and the
Special Directoron 21 March 2016 have stated their reasons for
recommending the closure of the preliminary enquiry without registering
a regular case.
B
51. However, the Additional Director, CBI on 22 August 2014,
recommended the conversion of the preliminary enquiry into a regular
case, against certain named officials and persons under Section 120B
read with Section 420 of the Indian Penal Code 1860 and Sections 13(2)
and 13(1)(d) of the Prevention of Corruption Act 1988. A similar
conclusion was reached by the Enquiry Officer (Head of Branch, ACB, C
Jodhpur) on 4 April 2014, Senior Public Prosecutor, Jodhpur on 21 April
2014, the Head of Branch, Jodhpur, on 25 April 2014, the Head of the
Zone, DLI on 13 August 2014, the Deputy Legal Advisor, ACB, Jodhpur
on 26 May 2014, the Deputy Superintendent of Police, Jaipur on 12
February 2015 and the Head of Branch, Jodhpur on 13 February 2015. D
52. In view of the difference of opinion between the Director of
CBI and the Director of Prosecution, CBI, the matter was to be referred
to the Attorney General on 17 October 2014, in accordance with Para
23.21 of the CBI Crime Manual.However, the status of this referral has
not been alluded to before us, for determination of the closure of the E
preliminary enquiry.
53. Chapter 9 of the CBI Crime Manual details the process of
conducting preliminary enquiries. Para 9.1 states that “a P[reliminary]
E[nquiry] may be converted into R[egular] C[ase] as soon as
sufficient material becomes available to show that prima facie there F
has been commission of a cognizable offence”. In Lalita Kumari
(supra), a Constitution Bench of this Court had underscored the duty of
the police to register an FIR when the information received prima facie
discloses the commission of a cognizable offence. However, the decision
recognizes that in certain cases, a preliminary enquiry may be held. With
specific reference to the CBI Manual, this Court noted that the “the G
police can conduct a sort of preliminary verification or inquiry for
the limited purpose of ascertaining as to whether a cognizable
offence has been committed.34” This Court issued inter alia, the
following directions:
34
Para 119 H
944 SUPREME COURT REPORTS [2021] 10 S.C.R.

A “120. In view of the aforesaid discussion, we hold:
[….]
(120.3) If the inquiry discloses the commission of a cognizable
offence, the FIR must be registered. In cases where preliminary
inquiry ends in closing the complaint, a copy of the entry of such
B closure must be supplied to the first informant forthwith and not
later than one week. It must disclose reasons in brief for closing
the complaint and not proceeding further.
(120.4) The police officer cannot avoid his duty of registering
offence if cognizable offence is disclosed. Action must be
C taken against erring officers who do not register the FIR if
information received by him discloses a cognizable offence.
(120.5) The scope of preliminary inquiry is not to verify the
veracity or otherwise of the information received but only
to ascertain whether the information reveals any cognizable
D offence……”
(emphasis supplied)
54. In Central Bureau of Investigation (CBI) v. Thommandru
Hannah Vijaylakshmi @ T.H. Vijaylakshmi and another,35a three-
judge Bench of this Court held that it is not mandatory to hold a preliminary
E
enquiry in all cases before registering an FIR against a public official, in
a matter involving the possession of disproportionate assets. Speaking
for the three-judge Bench, one of us (Justice DY Chandrachud), noted
the stage at which a preliminary enquiry is converted into a regular case:
“24. Hence, all these decisions do not mandate that a Preliminary
F
Enquiry must be conducted before the registration of an FIR in
corruption cases. An FIR will not stand vitiated because a
Preliminary Enquiry has not been conducted. The decision
in Managipet (supra) dealt specifically with a case of
Disproportionate Assets. In that context, the judgment holds that
G where relevant information regarding prima facie
allegations disclosing a cognizable offence is available, the
officer recording the FIR can proceed against the accused
on the basis of the information without conducting a
Preliminary Enquiry.
35
H 2021 SCC OnLine SC 923
NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC 945
SECTOR ENT. v. UOI [DR. DHANANJAYA Y CHANDRACHUD, J.]

[…] A
35. Hence, two distinct principles emerge from the above : (i) a
Preliminary Enquiry is registered when information (received from
a complaint or “source information”) after verification indicates
serious misconduct on part of a public servant but is not enough
to justify the registration of a Regular Case; and (ii) when the B
information available or after its secret verification reveals the
commission of a cognizable offence, a Regular Case has to be
registered instead of a Preliminary Enquiry being resorted to
necessarily.
[….] C
37. The precedents of this Court and the provisions of the CBI
Manual make it abundantly clear that a Preliminary Enquiry is not
mandatory in all cases which involve allegations of corruption.
The decision of the Constitution Bench in Lalita Kumari (supra)
holds that if the information received discloses the commission of D
a cognizable offence at the outset, no Preliminary Enquiry would
be required. It also clarified that the scope of a Preliminary
Enquiry is not to check the veracity of the information
received, but only to scrutinize whether it discloses the
commission of a cognizable offence. Similarly, para 9.1 of the
CBI Manual notes that a Preliminary Enquiry is required only if E
the information (whether verified or unverified) does not disclose
the commission of a cognizable offence. Even when a
Preliminary Enquiry is initiated, it has to stop as soon as
the officer ascertains that enough material has been
collected which discloses the commission of a cognizable F
offence. A similar conclusion has been reached by a two Judge
Bench in Managipet (supra) as well. Hence, the proposition that
a Preliminary Enquiry is mandatory is plainly contrary to law, for
it is not only contrary to the decision of the Constitution Bench
in Lalita Kumari (supra) but would also tear apart the framework
created by the CBI Manual.” G
(emphasis supplied)
55. In Manohar Lal Sharma v. Principal Secretary,36 a three-
judge Bench of this Court, while monitoring an investigation in a matter
36
(2014) 2 SCC 532 H
946 SUPREME COURT REPORTS [2021] 10 S.C.R.

A of national importance, had elaborated on the duty of the CBI to convert
a preliminary enquiry into a regular case, once a prima facie case
involving the commission of a cognizable offence is evinced. Justice R
M Lodha, speaking on behalf of the Court, had also remarked on the
nature of the powers of the constitutional court, while monitoring an
investigation in exceptional matters. This power could be operationalized
B
to do complete justice:
“29…Once jurisdiction is conferred on CBI to investigate the
offence by virtue of notification under Section 3 of the DSPE Act
or CBI takes up investigation in relation to the crime which is
otherwise within the jurisdiction of the State police on the direction
C of the constitutional court, the exercise of the power of investigation
by CBI is regulated by the Code and the guidelines are provided
in the CBI (Crime) Manual. Para 9.1 of the Manual says that
when, a complaint is received or information is available which
may, after verification, as enjoined in the Manual, indicate serious
D misconduct on the part of a public servant but is not adequate to
justify registration of a regular case under the provisions of Section
154 of the Code, a preliminary enquiry (PE) may be registered
after obtaining approval of the competent authority. It also says
that where the High Courts and the Supreme Court entrust matters
to CBI for inquiry and submission of report, a PE may be registered
E after obtaining orders from the head office. When the complaint
and source information reveal commission of a prima facie
cognizable offence, a regular case (RC) is to be registered as
enjoined by law. A PE may be converted into RC as soon as
sufficient material becomes available to show that prima
F facie there has been commission of a cognizable offence.
When information available is adequate to indicate
commission of cognizable offence or its discreet verification
leads to similar conclusion, a regular case must be registered
instead of a PE. […]
G 38. The monitoring of investigations/inquiries by the Court is
intended to ensure that proper progress takes place without directing
or channelling the mode or manner of investigation. The whole
idea is to retain public confidence in the impartial inquiry/
investigation into the alleged crime; that inquiry/investigation into
every accusation is made on a reasonable basis irrespective of
H
NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC 947
SECTOR ENT. v. UOI [DR. DHANANJAYA Y CHANDRACHUD, J.]

the position and status of that person and the inquiry/investigation A
is taken to the logical conclusion in accordance with law. The
monitoring by the Court aims to lend credence to the inquiry/
investigation being conducted by CBI as premier investigating
agency and to eliminate any impression of bias, lack of fairness
and objectivity therein.
B
[….]
50. When the Court monitors the investigation, there is already
departure inasmuch as the investigating agency informs the Court
about the progress of the investigation. Once the constitutional
court monitors the inquiry/investigation which is only done C
in extraordinary circumstances and in exceptional situations
having regard to the larger public interest, the inquiry/
investigation into the crime under the PC Act against public
servants by CBI must be allowed to have its course
unhindered and uninfluenced and the procedure
contemplated by Section 6-A cannot be put at the level D
which impedes exercise of constitutional power by the
Supreme Court under Articles 32, 136 and 142 of the
Constitution. Any other view in this regard will be directly
inconsistent with the power conferred on the highest constitutional
court.” E
(emphasis supplied)
56. There is no bar on the constitutional power of this Court to
direct the CBI to register a regular case, inspite of its decision to close a
preliminary enquiry. Analogously, this Court has directed the police to
register an FIR, once a cognizable offence has been disclosed to it. In F
Shashikant v. Central Bureau of Investigation37 a two-judge Bench
of this Court, has held that this Court has the power to direct the CBI to
conduct an investigation in exceptional cases, despite the CBI’s decision
to close the preliminary enquiry,even in the exercise of its writ jurisdiction:
“3. The appellant claims himself to be a vigilant employee. He G
made an anonymous complaint to the Central Bureau of
Investigation alleging corrupt practices and financial irregularities
on the part of some officers of his department. Respondent 1
stated that on the basis of a source information, a preliminary
37
(2007) 1 SCC 630 H
948 SUPREME COURT REPORTS [2021] 10 S.C.R.

A inquiry was conducted in which the statements of various officers
were recorded. However, the investigating officer was of the
opinion that it was not necessary to register a first information
report. It recommended for holding of departmental proceedings
against the officers concerned. The said recommendation found
favour with the higher officers. The opinion of the Central
B
Vigilance Commission was also obtained.
[…]
17. The appellant does not deny or dispute that the first respondent
initiated a preliminary inquiry upon receipt of the complaint. The
C question which arises for consideration is as to whether it was
obligatory on the part of the first respondent to lodge a first
information report and carry out a full-fledged investigation about
the truthfulness or otherwise of the allegations made in the said
anonymous complaint.

D […]
30. The first respondent [CBI] is a statutory authority. It
has a statutory duty to carry out investigation in accordance
with law. Ordinarily, it is not within the province of the court
to direct the investigative agency to carry out investigation
E in a particular manner. A writ court ordinarily again would
not interfere with the functioning of an investigative agency.
Only in exceptional cases, it may do so. No such case has
been made out by the appellant herein. The nature of relief
prayed for in the writ petition also is beyond the domain of
a writ court save and except, as indicated hereinbefore, an
F exceptional case is made out.”
(emphasis supplied)
57. Upon perusal of the aforementioned reports and
recommendations, it is our considered opinion that the disinvestment in
2002 evinces a prime facie case for registration of a regular case. We
G
are desisting from commenting on some crucial facts and names of
individuals involved, so as to not cause prejudice to the investigation of
the matter. Some details in the CBI officials’ recommendations to register
a regular case, which have not been adequately addressed by the self-
contained note closing the preliminary enquiry, are as follows:
H
NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC 949
SECTOR ENT. v. UOI [DR. DHANANJAYA Y CHANDRACHUD, J.]

A. Irregularities in the decision to disinvest 26 per cent, instead A
of 25 per cent:
(i) The Disinvestment Commission in its sixth report of
December 1997 had categorized HZL as a “non-core PSU”
and had recommended its disinvestment, but not beyond 25
per cent of the equity, in order to retain control. The B
Government’s share at the time was 75.92 per cent;
(ii) The Cabinet Committee on Disinvestment was to be the
final authority, with a Core Group of Secretaries on
Disinvestment as the recommending body. An Inter-
Ministerial Group of Secretaries was to implement the C
decisions of disinvestment. On 6 July 1999, the Cabinet
Committee on Disinvestment had allegedly taken note of
the recommendations of the Disinvestment Commission
regarding disinvestment of 25 per cent and accepted the
same. However, the Core Group of Secretaries on
Disinvestment,on 17 February 2000, had allegedly D
disregarded this recommendation and proposed a sale of
26 per cent, without any justification. During the seventh
meeting of the Core Group of Secretaries on Disinvestment
on 16 June 2000, the body was informed of the Ministry of
Mines’ objection to seeking the approval of the Cabinet E
Committee of Disinvestment for transfer of management
control to a strategic partner.Yet, the Cabinet Committee
of Disinvestment approved the Core Group of Secretaries
on Disinvestment’s proposal of disinvestment of 26 per cent
equity to a strategic partner with management control and
appointment of an advisor, instead of a 25 per cent sale. F
This was allegedly done on the basis of a senior government
official’s note dated 27 August 2000, without further details
or reasoning. This decision of disinvesting 26 per cent equity
reduced the Union Government’s share in HZL to 49.92
per cent; G
B. Irregularities in the bidding process:
(iii) The advertisement dated 4 December 2000, soliciting
‘Expressions of Interest’, was allegedly confined to the sale
of 26 per cent equity. It allegedly did not mention that a
H
950 SUPREME COURT REPORTS [2021] 10 S.C.R.

A road-map for a complete sale of the company had been
decided and the remaining shares would also be eventually
sold to the strategic partner;
(iv) During the first bidding in 2001, the Evaluation Committee
had fixed the reserve price at Rs. 35.90 per share. Nine
B parties had submitted an expression of interest for the
process of disinvestment, of which six were considered as
qualified bidders. However, only one bid of SOVL was
received for Rs 29.22 per share on 8 November 2001, much
below the reserve price of Rs 35.90 per share. In view of
the unsuccessful bid, the Evaluation Committee had
C recommendedthe delaying of the tender process until the
global markets stabilized. However, this recommendation
was initially accepted, but rejected the very next day- on
10 November 2001, without furnishing any reasons. Second
bids were invited soon after, in March 2002;
D (v) In March 2002,bids were invited, with the reserve price
being reduced from Rs 35.90 per share to Rs 32.15 per
share.The rationale justifying the reduction of the reserve
price has not been mentioned in the self-contained note.
Final price bids were invited only from the earlier six qualified
E interested parties, instead of a competitive open bidding
process, in view of the reduced share price. Only two
qualified interested parties- SOVL and M/s Indo Gulf
Corporation submitted their bids. The sale was made to
SOVL at Rs 40.51 per share, totalling to Rs 445 crores
(approx.). Allegedly, at least three bidders were required to
F process the matter. No justification has been furnished to
rebut this;
(vi) During the second bidding process, SOVL’s bid was
accepted, inspite of an alleged adverse SEBI order which
disqualified SOVL from participation;
G
(vii) The Ministry of Law had recommended the removal of the
mandatory obligations in the Shareholders’ Agreement and
the Share Purchase Agreement with SOVL. These
recommendations had been allegedly disregarded without
any justifications;
H
NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC 951
SECTOR ENT. v. UOI [DR. DHANANJAYA Y CHANDRACHUD, J.]

(viii) The Comptroller and Auditor General’s Report 17 of 2006 A
indicated that the Asset Valuer and Global Advisor had not
valued the assets of the company properly. Further, the
Comptroller and Auditor General’s Report stated that the
subsequent sale of 18.92 per cent equity to SOVL in 2002
at the old rate of Rs 40.51 per share, was not in line with
B
the Share Purchase Agreement, as the prevailing rate then
was Rs 119.10 per share, resulting in a loss of about Rs 650
crores;
C. Irregularities in the valuation of 26 per cent equity for
disinvestment
C
(ix) M/s BNP Paribas was appointed as the ‘Global Advisor’
on 9 January 2002. However, during the preliminary enquiry,
the CBI was allegedly unable to trace these officials
representing the Global Advisor. It was found that M/s BNP
Paribas was a bank based in France, but the erstwhile
company M/s BNP Paribas Equities India Pvt. Ltd. (also D
known as M/s BNP Prime Peregrine India Pvt. Ltd.) had
undergone voluntary liquidationon 5 September 2001. The
advisors had allegedly used the name of ‘M/s BNP Paribas’
during most of their correspondence and the bank was
denying the details of the company and its existence; E
(x) The untraceable officials of ‘M/s BNP Paribas’ had relied
on three methodologies for valuation- (i) discounted cash
flow method38; (ii) comparable companies methodology
(relative valuation methodology); and (iii) balance sheet
methodology. The DCF method was allegedly chosen on F
22 March 2002 without any justification, in spite of the first
report of the Disinvestment Commission recommending the
‘asset valuation method’, in case of a strategic sale;
(xi) ‘M/s R B Shah Associates’ was appointed as an ‘Asset
Valuer’ for the valuation of the fixed assets, without issuing
G
a competitive/ limited biddingadvertisement, which was
allegedly against the Union Government’s policy. An
unknown public servant had allegedly appointed these
private valuers who did not possess the requisite expertise.
38
“DCF” H
952 SUPREME COURT REPORTS [2021] 10 S.C.R.

A The valuers allegedly failed to consider goodwill, technical
know-how and various assets of HZL, including 150 million
tonnes of ore reserves in various mines, to the tune of
Rs 80,000 crores; Union Government’s earlier investment
of Rs 83 crores (approx.) in Andhra Pradesh Gas Power
Ltd.; Rs 175 crores in advance income tax; various
B
properties to the tune of Rs 20,000 crores (approx.); and
scrap valued at Rs 600 crores (approx.);
(xii) The value of Kayad Mines, Ajmer; Sindeshar Khurd,
Rajsamand; and Bamania Kalan Mines, Rajsamand was
not included in the valuation of assets, in spite of their
C mention in the Share Purchase Agreement;
(xiii) The valuation of ore reserves was done only for Agucha
Mines,and for ten years, by a discounting method of six per
cent. The life of the mine was allegedly much longer;
(xiv) Discounts were given on certain leasehold properties,
D without any basis. The life of Zawar and Rajpura Dariba
Mines was allegedly taken as eighteen years and fifteen
years respectively, without valuing the ore reserves. Value
of ore reserves was also not included for Agnigundala lead
mines, Sargipalli Lead Zinc Mines, Matun Rock Phosphate
E Mines and Sindeshar Kurd Mines.
(xv) The value of lead and zinc mineral at the time was Rs 66,292
crores (approx.). Even if 40 per cent cost of extraction
process is excluded, the value would have allegedly been
around Rs 39,000 crores. Yet, the valuer had valued the ore
reserves at a paltry Rs 748.88 crores;
F
(xvi) Control premium was not added in the valuation, irrespective
of certain officials recommending its inclusion. The rationale
for its exclusion has not been explained in the self-contained
note;
(xvii) In October 2001, the Voluntary Retirement Scheme39 was
G introduced and 1993 employees were given VRS. In January
2003, 1856 employees were given VRS. However, an
amount of Rs 776 crores has been taken as VRS
expenditure, which allegedly incorrectly assumes that all

39
H “VRS”
NATIONAL CONFED. OF OFFICERS ASSOC. OF CENTRAL PUBLIC 953
SECTOR ENT. v. UOI [DR. DHANANJAYA Y CHANDRACHUD, J.]

7222 employees and 1058 officers of HZL have been given A
VRS; and
(xviii) During the enquiry, the CBI had sought opinions from certain
experts who were Chartered Engineers. These experts had
opined that the valuation was on the lower side, without
including relevant mining properties. Allegedly, the absence B
of any mining engineer or geologist in the team of the asset
valuers was also not understandable. Allegedly, if the
valuation had been conducted properly, on the basis of DCF
method, the value would have been over Rs 1000, per share.
58. Some of the aforesaid observations of the officials of the CBI,
who recommended the conversion of the preliminary enquiry into a C
regular case, satisfy this Court’s conscience for exercising its exceptional
powers to direct the CBI to conduct an investigation into the matter. A
prima facie case for a cognizable offence, as mandated in para 9.1 of
the CBI Manual, has been made out in this case and warrants the
registration of a regular case. The registration of a regular case, followed D
by a full-fledged investigation must be conducted. This Court shall be
duly apprised of the status of the investigation.
59. The petitioner has alleged that the complainant, C P Babel,
was the brother of Petitioner No 3 which entitles them to a copy of the
report of the CBI closing the preliminary enquiry, in terms of Para 120
(iii) of Lalita Kumari (supra)40. However, we are denying this relief on E
two counts- (i) the finding of the Constitution Bench of this Court was
with respect to the informant alone, and the original complainant is not
before us; and (ii) CBI has stated that the preliminary enquiry was
registered at the behest of source information, much before C P Babel’s
complaint. F
FConclusion
60. Accordingly, we hold that:
(i) The summary dismissal of an earlier petition under Article
32 of the Constitution does not bar the present writ petition
on grounds of res judicata as there has been no substantive G
decision on the merits of the issues;
40
“…120.3 If the inquiry discloses the commission of a cognizable offence, the FIR
must be registered. In cases where preliminary inquiry ends in closing the complaint, a
copy of the entry of such closure must be supplied to the first informant forthwith and
not later than one week. It must disclose reasons in brief for closing the complaint and
not proceeding further…” H
954 SUPREME COURT REPORTS [2021] 10 S.C.R.

A (ii) The decision in Centre for Public Interest Litigation
(supra) does not apply to the present facts because HZL
had ceased to be a government company, at the stage of
the disinvestment which is in challenge. Hence, the Union
Government’s decision to disinvest 29.54 per cent of its
residual shareholding in HZL is not interdicted by the
B
principles laid down by this Court in Centre for Public
Interest Litigation (supra);
(iii) SOVL has stated before the Court that it is not exercising
its second call option under the Share Purchase Agreement;
C (iv) The Union Government has stated through the Solicitor
General that the residual shareholding shall be divested in
the open market and shall take place in accordance with
the rules and regulations of SEBI to ensure that the best
price is realized for the sale of the shareholding; and

D (v) 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.
61. Accordingly, the petition under Article 32 is partially allowed.
E The CBI is directed to register a regular case and periodically submit
status reports of its investigation to this Court. The aforesaid reports
shall be submitted every quarter, or as otherwise directed by this Court.
62. Pending application(s), if any, shall stand disposed of.

F Nidhi Jain Petition partly allowed.

G

H