owes its existence to Section 9 of the Act which exists even today and cannot be ignored.
Analysts tracking the developments relating to the process of the residual stake sale said that such positions are taken to be extra-cautious in the light of complaints by certain sections that the company was undervalued when sold.
The CBI is also investigating how the sale was done without Parliament's nod.
However, the government has failed to highlight the positives of its decision. In the case of HZL, the company’s share rose from Rs 1.68 in the year before Agarwal's Sterlite bought it in 2002 to Rs 130.60, taking its market valuation from Rs 706 crore to over Rs 55,000 crore, a jump of 78 times. Sales have risen over 10 times and profits 101 times in the last 11 years while investments rose from minus Rs 3 crore the year Sterlite bought it to Rs 3,200 crore in 2012-13.
The background of the case is as follows: HZL was incorporated in 1966 as a public sector undertaking after the takeover of the erstwhile Metal Corporation of India Ltd (MCIL), a private company by an ordinance promulgated on 22/10/1965. On account of some disputes, the Act was replaced by the Metal Corporation (Nationalisation and Miscellaneous Provisions) Act, 1976.
The government disinvested 24.08% of its equity in HZL in 1991-92 in the domestic market. Later, in 2002, it disinvested 26% equity in favour of Sterlite Opportunities and Ventures Ltd (SOVL) along with management control. Subsequently, SOVL acquired 20% equity shares of HZL from the market through the mandatory open offer.
The shareholders' agreement contained provisions for two call options, out of which the first call option was exercised by SOVL in August 2003. Currently, SOVL's stake in the company is at 64.92%, the central government holds 29.54% and the balance 5.54% is with the public and institutions.
SOVL was entitled to exercise the second call option for the balance government's stake upon the expiry of five years from the closing date, 10/04/2007. It exercised the second call option in July 2009. However, it was rejected by the mines ministry in the light of the opinion of AG given in 2006 stating that laws do not permit it.
Upon the rejection of the second call option, dispute resolution mechanism was invoked and the matter is currently before an arbitral tribunal, the next date of which is on November 13.