No legal bar on reducing govt stake in IDBI Bank, clarifies Finance Ministry amid stake sale

The clarification comes days after the government approved the sale of a 60.72 per cent stake in IDBI Bank to Canada''s Fairfax Financial Holdings for Rs 52,878 crore on October 14. The transaction involves the sale of 30.48 per cent stake held by the government and 30.24 per cent held by Life Insurance Corporation of India (LIC).

In a statement issued on Saturday, the Finance Ministry said certain media reports had raised questions about parliamentary discussions in 2003 concerning the government''s shareholding in IDBI Bank.

The ministry clarified that an amendment seeking to restrict the dilution of the government''s stake was proposed during discussions on the IDBI (Repeal) Act, 2003, but was ultimately rejected and did not become part of the law.

Referring to the Delhi High Court''s December 17, 2018 judgment in the All India IDBI Officers'' Association versus Union of India case, the ministry highlighted that statements made during parliamentary debates could not override the legislation enacted by Parliament.

The court had observed, "The statements made before the House cannot substitute or override the statue so enacted by the Parliament."

It further ruled, "There is no ambiguity in the language of the IDBI Repeal Act, 2003 and there is no scope to read any provision into the said enactment which proscribes the Government from reducing or divesting its stake in IDBI Ltd."

The ministry said the judgment also rejected the argument that earlier statements made in Parliament amounted to a binding promise preventing the government from reducing its shareholding.

The Finance Ministry further referred to successive Union Budget speeches that had outlined the government''s policy towards IDBI Bank.

In the Union Budget 2016–17, then Finance Minister late Arun Jaitley had stated, "The process of transformation of IDBI Bank has already started. Government will take it forward and also consider the option of reducing its stake to below 50%."

The Union Budget 2021–22, presented by Finance Minister Nirmala Sitharaman, also identified IDBI Bank among the entities targeted for strategic disinvestment.

The latest clarification is significant as the government moves ahead with the approved stake sale, which would leave the Centre with a 15 per cent shareholding and LIC with 19 per cent, while transferring majority ownership to the strategic buyer.

The ministry reiterated that the 2003 legislation contains no provision prohibiting the government from reducing or divesting its stake in IDBI Bank. (ANI)