New Delhi, October 17 (H.S.): The Union Finance Ministry has issued a clarification on the legal and legislative developments concerning the government’s shareholding in public sector lender IDBI Bank.

On Saturday, the ministry responded to comments and views in media reports that questioned the legislative developments relating to the government’s stake in IDBI Bank in 2003. In its clarification, the ministry said the legislative history of the IDBI (Repeal) Act, 2003, a Delhi High Court judgment and successive Union Budget speeches reflected the gradual evolution of the government’s policy towards the strategic disinvestment of IDBI Bank.

During parliamentary discussions on the IDBI (Repeal) Act in 2003, an amendment was proposed to restrict the reduction of the government’s shareholding in the bank. However, the amendment was rejected and did not become part of the law ultimately enacted.

The clarification comes at a time when the Cabinet Committee on Economic Affairs (CCEA) has approved the strategic disinvestment of IDBI Bank Limited. The proposed transaction involves the sale of a 60.72 per cent stake in the bank to a subsidiary of Fairfax Financial Holdings for Rs 52,878.08 crore. The stake comprises the Central Government’s 30.48 per cent shareholding and the Life Insurance Corporation of India’s (LIC) 30.24 per cent stake.

The ministry reiterated that the government has the legal authority to reduce or sell its shareholding in IDBI Bank. In support of its position, it cited a 2018 judgment of the Delhi High Court, which held that no provision of law prevented the government from reducing its stake in the bank.

The Finance Ministry again referred to the parliamentary discussions on the IDBI (Repeal) Act, 2003, stating that the government had proposed an amendment intended to restrict the dilution of its shareholding. However, the proposal was rejected and did not form part of the enacted legislation.

The ministry also cited the Delhi High Court’s judgment dated December 17, 2018, in the case of *All India IDBI Officers’ Association versus Union of India and Others*. The court had dismissed a petition challenging the reduction of the government’s shareholding in the bank.

According to the ministry, the court held that statements made during parliamentary debates could not override the legislation ultimately passed by Parliament. It also ruled that the doctrine of promissory estoppel could not be invoked to prevent the government from reducing or selling its stake in IDBI Bank.

The ministry further referred to successive Union Budget speeches to explain how the government’s policy on the bank’s strategic disinvestment had evolved over the years. It said the Delhi High Court judgment, together with budget announcements made in different financial years, demonstrated the gradual development of the government’s approach towards reducing its shareholding in IDBI Bank.

In the Union Budget speech for the financial year 2016–17, the then Finance Minister, Arun Jaitley, had stated that the process of transforming IDBI Bank had begun. He had said the government would take the process forward and explore options to bring its shareholding in the bank below 50 per cent.

While presenting the Union Budget for 2021–22, Finance Minister Nirmala Sitharaman had reiterated the government’s commitment to advancing the strategic disinvestment programme.

“Despite COVID-19, we have continued to work towards strategic disinvestment,” she had said. She added that several transactions were expected to be completed during the financial year 2021–22, including those involving Bharat Petroleum Corporation Limited (BPCL), Air India, the Shipping Corporation of India, the Container Corporation of India, IDBI Bank, BEML, Pawan Hans and Neelachal Ispat Nigam Limited.

Sitharaman had also stated that, apart from IDBI Bank, the government proposed to initiate the privatisation of two public sector banks and a general insurance company during the financial year 2021–22. She noted that the process would require legislative amendments, which were proposed to be introduced during the same parliamentary session.

The Central Government has now approved the strategic sale of IDBI Bank as part of a broader reform initiative in the banking sector. Earlier this week, the Cabinet Committee on Economic Affairs approved the proposal to sell a 60.72 per cent stake in the bank for approximately Rs 52,878 crore.

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Hindusthan Samachar / Jun Sarkar