Finance Ministry clarifies IDBI Bank divestment history amid ₹52,878-crore sale to Fairfax

The Finance Ministry on Saturday clarified the legislative and judicial history surrounding the government's authority to dilute its stake in IDBI Bank, following questions raised in media reports about parliamentary developments in 2003.

The clarification comes days after hte Cabinet Committee on Economic Affairs (CCEA) approved the strategic disinvestment of IDBI Bank Ltd and the sale of a 60.72% equity stake to a subsidiary of Fairfax Financial Holdings for ₹52,878.08 crore.

The ministry said the legislative history of the IDBI (Repeal) Act, 2003, a Delhi High Court judgment and successive Union Budget speeches collectively demonstrated the evolution of the government's policy towards strategic disinvestment of the bank.

What happened during the 2003 legislative process?

The ministry said the government had moved an amendment during discussions on the Union Budget in 2003 and the parliamentary debate on the IDBI (Repeal) Act, 2003, seeking to restrict dilution of its shareholding in the bank. However, the amendment was rejected and did not form part of the enacted legislation.

The clarification also referred to the Delhi High Court's December 17, 2018, judgment in All India IDBI Officers’ Association v. Union of India & Others, which examined a challenge to the government's decision to dilute its stake.

The court dismissed the writ petition, holding that statements made during parliamentary debates could not prevent the government from reducing or divesting its shareholding.

“The statements made before the House cannot substitute or override the statute so enacted by the Parliament,” the court observed in paragraph 41 of the judgment, as quoted by the ministry.

In paragraph 42, the court stated that the IDBI Repeal Act, 2003, contained no ambiguity and did not prohibit the government from reducing or divesting its stake in the bank.

The court also held that the principle of promissory estoppel could not be invoked to prevent the government from diluting its shareholding. Statements made during parliamentary debates could not be treated as representations to employees on which they had relied to their detriment.

Successive budgets signalled disinvestment plans

The ministry also cited successive Union Budget speeches to establish the government's policy direction. In the 2016-17 Budget, then Finance Minister Arun Jaitley said the transformation of IDBI Bank had begun and that the government would consider reducing its stake to below 50%.

Earlier, in her 2021-22 Budget speech, Finance Minister Nirmala Sitharaman had identified IDBI Bank among the public sector entities targeted for strategic disinvestment.

The ministry said these developments, alongside the legislative history and the court's ruling, demonstrated the evolution of the government's disinvestment policy.

The latest clarification reinforces the government's position as the proposed sale to Fairfax advances following the CCEA's approval.