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Ministry of Finance has issued clarification on Legislative Developments concerning Government’s shareholding in IDBI. Read what Ministry said below.
Finance Ministry Clarifies Government’s Power to Reduce Stake in IDBI Bank
The Ministry of Finance has issued a clarification regarding the legislative history and legal position on the Government of India’s shareholding in IDBI Bank. The clarification comes after certain media reports discussed the legislative developments of 2003 and raised questions about whether the Government could reduce its stake in the bank. The Ministry explained that during the discussions on the Union Budget 2003 and the parliamentary debate on the IDBI (Repeal) Act, 2003, an amendment was proposed to restrict the reduction of the Government’s shareholding. However, the amendment was ultimately rejected and was not included in the law passed by Parliament.
The matter was later examined by the Delhi High Court in the case of All India IDBI Officers’ Association v. Union of India & Others, decided on December 17, 2018. While dismissing the writ petition, the Court held that statements made during parliamentary debates could not prevent the Central Government from reducing its stake in IDBI Bank. The Court noted that the amendment intended to restrict the dilution of the Government’s shareholding was not included in the final legislation. It also clarified that statements made during parliamentary discussions could not replace or override the law enacted by Parliament.
In paragraph 42 of its judgment, the Delhi High Court further stated that the IDBI (Repeal) Act, 2003, contained no provision prohibiting the Government from reducing or selling its stake in IDBI Bank. The Court also rejected the application of the principle of promissory estoppel in this case. This legal principle generally prevents a party from going back on a promise when another party has relied on that promise and suffered a disadvantage. The Court held that statements made during parliamentary debates could not be treated as promises to employees that would restrict the Government’s power to dilute its shareholding.
The Ministry also referred to successive Union Budget announcements to explain the Government’s policy on the transformation and strategic disinvestment of IDBI Bank. In the Union Budget 2016–17, the then Finance Minister, Arun Jaitley, stated that the Government would consider reducing its stake in IDBI Bank to below 50%. The Budget speech also highlighted the need to make public sector banks stronger and more competitive and mentioned that the transformation of IDBI Bank had already begun.
In the Union Budget 2021–22, Finance Minister Nirmala Sitharaman reiterated the Government’s commitment to strategic disinvestment despite the COVID-19 pandemic. She identified IDBI Bank among the transactions that the Government intended to complete during the financial year 2021–22. The Budget speech also proposed the privatisation of two public sector banks and one general insurance company, excluding IDBI Bank from that specific proposal for the two banks and one insurer.
The Ministry stated that the legislative history of the IDBI (Repeal) Act, 2003, the Delhi High Court judgment of December 17, 2018, and successive Union Budget announcements together explain the development of the Government’s policy on the strategic disinvestment of IDBI Bank. The clarification reiterates that the 2003 legislation does not prohibit the Government from reducing or selling its shareholding in the bank. It also confirms that statements made during parliamentary debates cannot be used to restrict the Government’s legal authority to dilute its stake in IDBI Bank.
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