CENTRE FOR PUBLIC INTEREST LITIGATIONversusUNION OF INDIA AND ANR.

A             CENTRE FOR PUBLIC INTEREST LITIGATION
                                        v.
                        UNION OF INDIA AND ANR.

                             SEPTEMBER 16, 2003
B
              [S. RAJENDRA BABU AND G.P. MATHUR, JJ.]

       ESSO (Acquisition of Undertaking in India) Act, 1974-Section 7-
  Disinvestment-Procedure required for-Private oil companies acquired
  by the Government by enacting various statutes-Government taking
C decision to disinvest oil companies by executive decision-No steps to
  repeal or amend the provisions ofthe statutes-Held, disinvestment cannot
  be made without repealing or amending the statutes-Constitution of
  India-Article 32.

D        Interpretation of Statute-Preamble to a statute-Significance a/-
    Held, though does not control the statute but can be an aid to construction
    of the statute.

       In the 1970s, the Government of India acquired oil companies,
E which were till then being run and controlled by private parties. For
  acquiring the companies, Parliament enacted ESSO (Acquisition of
  Undertaking in India) Act, 1974, the Burma Shell (Acquisition of
  Undertaking in India) Act, 1976 and Caltex (Acquisition of Shares of
  Caltex Oil Refining India Limited and all the Undertakings in India
  for Caltex India Limited) Act, 1977. The provisions of all the Acts were
F identical. The preamble of the Acts stated that the acquisitions were
  being done to ensure that the ownership and control of the petroleum
  products are vested in the State and are so distributed as best to
  subserve the common good. Section 7 of the Acts permitted vesting of
  the right, title, interest and liabilities of the acquired companies in a
G Government company. The Acts adopted the definition of Government
  company in the Companies Act, 1956 thereby meaning that to be a
  Government company at least 51% shares in the company should be
  owned either by the Central Government or any State Government or
  both. Pursuant to the enactment of the acquisition Acts, the private oil
H companies were acquired and transferred to Government companies
                                       746
      CENTRE FOR PUBLIC INTEREST LITIGATION v. U.0.1.                747
incorporated under the provisions of the Companies Act, 1956.              A
     The Central Government took a decision to sell majority of shares
of two such Government oil companies to private parties. The
disinvestment was sought to be dorie through an executive decision and
not by way of repeal or amendment of the statutes by which the B
companies had been acquired. The action of the Government in
disinvesting the share of the Government oil companies without
repealing or amending the statutes was challenged by the petitioner by
way of a public interest litigation under Article 32 of the Constitution
of India.
                                                                           c
      Justifying the disinvestment of the companies without repealing
or amending the ESSO (Acquisition of Undertaking in India) Act and
other Acts, the respondents contended, inter alia, thaf the Acts by
virtue of which these companies were acquired did not lay down any
restrictions on the disinvestment of the companies; that the disinvestment D
would subserve the common good; that subsequent to acquisitions
several new assets have been acquired by the oil companies and the
present assets hardly bore any resemblance to the assets acquired
under the statute; that the disposal of the assets of the company would
be governed by the provisions of the Companies Act, 1956 and so there E
was no need for Parliamentary approval or sanction.

     Allowing the petitions and holding that the Government could not
disinvest without suitably amending the concerned statutes, the Court

     HELD : 1.1. On the language of the ESSO (Acquisition of F
Undertaking in India) Act, 1974, the method adopted by the Govern-
ment in exercising its executive powers to disinvest the companies without
repealing or amending the law is not permissible at all. [762-Fl

      1.2. The Preamble to the ESSO (Acquisition of Undertaking in G
India) Act, 1974 clearly stated that the acquisition is done in order to
ensure that the ownership and control of petroleum products vested
in the State and thereby so distributed as best to subserve the common
good. Preamble though does not control the statute, is an admissible
aid to construction thereof. [758-A, BJ                                  H
    748                 SUPREME COURT REPORTS [2003] SUPP. 3 S.C.R.
A        I.3. The ESSO (Acquisition of Undertaking in India) Act, 1974
  sets out that the assets of the undertaking shall vest in the Government
  as provided under Section 3 of the Act. However, Section 7 of the
  ESSO (Acquisition of Undertaking in India) Act, 1974 enables the
  Government to transfer of the undertaking to a Government company
B as defined under Section 617 of the Companies Act, 1956. If the ESSO
  (Acquisition of Undertaking in India) Act, 1974 intended that the
  undertaking so vested in the Government company can be transferred,
  wholly or party, to any company other than a Government company,
  there certainly would have been an indication to that effect in the Act
C itself. [758-8, CJ
        1.4. When the provisions of the ESSO (Acquisition of Undertaking
  in India) Act, 1974 provide for vesting of the property of the under-
  taking in the Government or a Government company, it cannot mean
  that it enables the same being held by any other person, particularly
D in the context that the object of the ESSO (Acquisition of Undertaking
  in India) Act, 1974 is that the ownership and control of the petroleum
  products is distributed and marketed in India by the State or Govern-
  ment company and that thereby so distributed as best to subserve the
  common good. If disinvestment takes place and the company ceases to
E be a Government company as defined under Section 617 of the
  Companies Act to say that it is still a Government company as
  contemplated under Section 7 of the ESSO (Acquisition of Undertaking
  in India) Act, 1974 will be a fallacy. [758-E-G)

F         Ba/co Employee's Union v. Union of India, [2002) 2 sec 333;
    distinguished.

        Smt. Sita Devi (Dead) by LRs. v. State of Bihar & Ors., [1995) Supp.
    1 sec 670, cited.

G         2. Sales of shares of the Government companies, though uninhib-
    ited, cannot be to such an extent so as the substratum of the character
    of the Government companies is allowed to be lost and converted into
    an ordinary company without being approved by the Government.
    Government, in turn, is subject to the statutory limitations.
H                                                                 [759-D-E)
CENTRE FOR PUBLIC INTEREST LITIGATION v. U.0.1. [RAJENDRA BABU, J.] 749

     3. Accretions to the Government company's assets subsequent to A
acquisition of the undertaking is an irrelevant factor in the context of
the question being considered. What is required to be seen is, not
which asset can be transferred or not, but whether the undertaking
can change its character from a Government company to ordinary
company without Parliamentary clearance in the light of the statute B
of acquisition. -(759-F)

     Western Coalfield Limitedv. Municipal Council, Birsinghpur Pali &
Anr. (1999) 3 SCC 290 and Municipal Commissioner of Dum Dum
Municipality & Ors. v. Indian Tourism Development Corporation & Ors.
[1995) 5 sec 251, cited.                                               C
     CIVIL ORIGINAL JURISDICTION: Writ Petition (C) No. 171 of
2003.

     Under Article 32 of the Constitution of India.
                                                                           D
                                 WITH

     W.P. (C) No. 286 of 2003.

    F.S. Nariman, Salman Khurshid, Shanti Bhushan, Rajinder Sachar, E
Ram Jethmalani, Imtiaz Ahmed, Ms. Naghma Imtiaz, S. Rehan, V.N.
Raghupathy, Prashant Bhµshan, Dr. K.S. Chauhan, Chand Kiran, Dr. D.N.
Sandanshiv and Suresh Kant for the Petitioner.

     Ravi Prakash Gupta for Intervenor.
                                                                           F
     L. Nageswara Rao, Additional Solicitor General, Harish N. Salve,
Prateek Jalan, Saurabh Kirpal, B.V. Balaram Das and K.C. Kaushik for the
Respondents.

     The Judgment of the Court was delivered by
                                                                           G
      RAJENDRA BABU, J. : In these two writ petitions filed in public
interest the petitioners are calling in question the decision of the
Government to sell majority of shares in Hindustan Petroleum Corporation
Limited (HPCL) and Bharat Petroleum Corporation Limited (BPCL) to
private parties without Parliamentary approval or sanction as being con- H
    750                   SUPREME COURT REPORTS [2003) SUPP. 3 S.C.R.

A trary to and violative of the provisions of the ESSO (Acquisition of
    Undertaking in India) Act, 1974, the Burma Shell (Acquisition of Under-
    taking in India) Act, 1976 and Caltex (Acquisition of Shares of Caltex Oil
    Refining India Limited and all the Undertakings in India for Caltex India
    Limited) Act, 1977.
B
           The petitioners contended that in the Preamble to these enactments
    it is provided that oil distribution business be vested in the State so that
    the distribution subserves the common general good; that, further, the
    enactments mandate that the assets and the oil distribution business must
    vest in the State or in Government companies; that, they are not opposed
C   to the policy of disinvestment but they are only challenging the manner
    in which the policy of disinvestment is being given effect to in respect of
    HPCL and BPCL; that, unless the enactments are repealed or amended
    appropriately, the Government should be restrained from proceeding with
    the disinvestment resulting in HPCL and BPCL ceasing to be Government
D   companies. It is further submitted that disinvestment in HPCL and BPCL
    could result in the State losing control over their assets and oil distribution
    business and, therefore, it is contrary to the object of the enactments.

          It is the submission of the learned counsel for the petitioners that
E acquisition of HPCL and BPCL has taken place in pursuance of Article
    39(b) of the Constitution; that, Article 39(b) subserves the object of
    building a welfare State and an egalitarian social order; that, therefore,
    these enactments have been passed with the object of giving effect to
    Article 39(b) of the Constitution and the provisions of the enactment
    provide for vesting of these undertakings in the State or in a Government
F   company; that, it is not open to the Government to disinvest the same
    without first changing the law in this regard either by repealing the
    enactments or by making appropriate changes by way of amendments in
    the enactments. The learned counsel further relied upon a decision of
    Superior Court of Justice of Ontario between Brian Payne v. James Wilson
G   and Her Majesty the Queen in Right of Ontario dated April 19, 2002. In
    that decision the Superior Court of Justice of Ontario declared that any sale
    of the common shares of Hydro One Inc., held in the name of Her Majesty
    in right of Ontario, whether pursuant to an initial public offering of
    common shares or by way of a secondary offering, or otherwise, contra-
H   venes sub-section 48( I) of the Electricity Act, 1998. In that enactment
CENTRE FOR PUBLIC INTEREST LITIGATION v. U.0.1. [RAJENDRA BABU, J.] 751

Section 48(1) provides that the Lieutenant Governor in Council may cause A
two corporations to be incorporated under the Business Corporations Act
and shares in those corporations may be acquired and held in the name of
Her Majesty in right of Ontario by a member of the Executive Council
designated by the Lieutenant Governor in Council. That order was
appealed to the Court of Appeal of Ontario. During pendency of the B
appeal the Electricity Act, 1998 was amended by replacing Section 48(1)
thereof which expressly authorises the Minister of Environment and
Energy to dispose or otherwise deal with the shares of the Hydro One Inc.
and on that basis, disposed of the appeal. It was further noticed in that
decision that the reasons given by the Superior Court of Justice cannot be C
read as a general pronouncement on the rights of the Crown to deal with
its assets; that, the learned Judge purported to analyse a specific provision
in a specific Act; that, he did so in the context of the entirety of the
Electricity Act, 1998, the specific circumstances surrounding its enactment
and the comments of the Minister responsible for that specific Act.
                                                                            D
       In the counter-affidavits filed on behalf of the contesting respondents,
it is urged that the policy of disinvestment followed by the Government
of India has been upheld by this Court in BALCO Employees' Union v.
Union ofIndia, [2002] 2 SCC 333; that the decision to disinvestment and
the implementation thereof is purely an administrative decision relating to E
the economic policy of the State; that, it is the prerogative of each elected
Government to follow its own policy; that, the contention of the
petitioners that prior approval of Parliament for disinvesting Government's
holding in HPCL and BPCL is not necessary since in the Acquisition Act
setting up these companies there are no restrictions on the disinvestment F
of these companies; that, the said companies are registered under the
Companies Act, 1956; that, the sale of shares thereof do not require
Parliamentary approval; that, the Memorandum and Articles of Asso-
ciation of the said companies also do not contain any such restriction on
transfer of shares; that, the Acts in question have worked themselves out
after acquisition; that, the provisions of the Companies Act, 1956 and G
Securities and Exchange Board oflndia's guidelines govern the companies
in question under which there are no restrictions on disinvesting Govern-
ment share holding in these companies; that, there is no other statutory
bar to such sale of shares; that, indeed, the Disinvestment Commission
examined the issues relating to disinvestment of IBP Co: Ltd. and found H
    752                  SUPREME COURT REPORTS [2003] SUPP. 3 S.C.R.
A that there was no necessity of Parliamentary approval for its disinvestment;
  that, in fact, shares in HPCL and BPCL were sold during the period 1991-
  92 to 1993-94 through executive decisions; that, similarly, another public
  sector undertaking, Maruti Udyog Limited where acquisition was through
  an Act of Parliament, was disinvested through executive decisions over
B the last two decades; that, even in those cases, Parliamentary approva• was
  not required and the present case does not stand on a different footing as
  the legal regime is similar; that, in the enactments in question there are
  no express or implied provisions restraining transfer of shares of HPCL
  or BPCL; that, oil is an important sector of the economy and can grow
C only with increasing efficiency and that the key to efficiency is competition
  and disinvestment is an important instrument to achieve competition; that,
  after dismantling of the Administered Prices Mechanism with effect from
   1.4.2002, the Government's main responsibility in the petroleum sector
  is laying down the broad policy framework with the objectives of ensuring
  oil security in the country and protecting the interests of consumers; that,
D under the ensuing market scenario in the oil sector, there is a need for an
  independent statutory regulatory mechanism to ensure competition, en-
  courage investment and protect consumers' interest in the oil sector; that,
   steps have been taken to introduce in Parliament a Bill for establishing a
   statutory regulatory authority; that, two private parties viz., Mis Reliance
E Industries Limited and Essar Oil Limited, have already been granted
   authorisations to market transportation fuels and the Government has
   already deregulated Exploration and Production, Refining and Pipelines;
  that, there is now widespread private sector participation in Exploration
   and Production, Refining and Pipelines; that, petroleum sector and con-
F sumers are expected to benefit as a result of such increased competition;
  that, in this global economic scenario and the need for greater private
  participation and private finance initiative, disinvestment by Government
  of its share holding in State owned companies is an instrument of economic
  policy accepted globally. It is also brought to our notice by him that assets
   of the HPCL and BPCL were acquired by the Central Government through
G Acts of Parliament but in course of time of more than quarter of a century
  the assets have changed their nature and today they bear hardly any
  resemblance to the assets which were acquired under the statures; that most
   of the present assets of the two companies have been acquired after
   acquisition by means of investment by the Government and those assets
H which were initially acquired under statute have also been transformed into
CENTRE FOR PUBLIC INTEREST LITIGATION v. U.0.1. [RAJENDRA BABU, J.] 753

substantially different assets; that, data placed before the Court will clearly A
indicate that the assets of HPCL and BPCL today have only a remote
semblance to the assets that had been acquired in 1974 and 1976 and a large
proportion of the assets of the two companies have been added after
acquisition; that, even the assets that were taken over are no longer the
same as capital has been spent on them over the past several years; that, B
all these assets now belong to HPCL and BPCL which are incorporated
under the Companies Act, 1956; that, at the highest, the petitioner's
contention can be that the assets taken over cannot be privatised but there
clearly cannot be any requirement of Parliamentary approval or sanction
for disposal of assets added post-acquisition; that, assets acquired by HPCL C
and BPCL either by acquisition through legislation or through purchase
have all now indistinguishably merged and form the assets of the compa-
nies, disposal of which will be governed only by the provisions of the
Companies Act, 1956 and there is no need for any Parliamentary approval
or sanction. In this context, he relied upon the decisions of this Court in
Western Coalfields Limitedv. Municipal Council, Birsinghpur Pali & Anr., D
[1999] 3 SCC 290, and Municipal Commissioner of Dum Dum Municipal-
ity & Ors. v. Indian Tourism Development Corporation & Ors., [1995] 5
sec· 251, to i!ldicate the nature of holding by a Government company of
the assets held by it.
                                                                              E
       In addition, Shri Harish Salve contended that as per Section 7 of the
Act, the Central Government may vest the assets acquired by it in any
Government company which becomes a complete owner of the acquired
assets and the Central Government has no further interest in the assets so
transferred to the companies. The company holding the acquired assets
is like any other company incorporated under the Companies Act; that such F
companies do not hold or administer these properties for and on behalf of
the Central Government; that there is no express or implied prohibition in
Section 7 of the Act on the transfer by the Central Government of its shares
in these companies; that, the only reason why the assets were acquired
by the Government by legislation was that part of the assets included the G
marketing part of a foreign company; that the parliamentary debates
specifically show that the understanding was that for the transfer of the
shares and assets in an Indian company did not require the enactment of
a law. That part of the assets belonging to the two oil companies were
obtained by negotiated purchase, rather than through acquisition; that in H
    754                    SUPREME COURT REPORTS [2003] SUPP. 3 S.C.R.

A the case ofBurmah Shell, the assets belonging to the Indian subsidiary were
  bought through a commercial transaction; that, it cannot be gainsaid that
  the companies are free to sell off their assets without any change in the
  law; that thus if the companies desire to sell off at this distance of time
  the old machinery inherited by them (and the value of which is a small
B fraction of its current net worth), there is no legal embargo even if it
  amounts to the company no longer holding any of the assets vested in after
  nationalisation; that if the contention of the petitioners is accepted, the
  Central Government cannot sell its shares even in such a company; that,
  the definition of a Government Company can be amended under the
  Companies Act generally and unrelated to purposes nationalisation laws
C or can amalgamate these companies with another company which may
  ultimately impact the Central Government's shareholding; that thus, there
   is nothing in law to prevent the Central Government to amend the articles
  to provide that even if it continues to hold 51 %, it will not interfere in the
  management with the private strategic partner who holds less shares; that
D the Government can attain the same object in a manner more favourable
  to the Government - viz. by selling off its shares to reduce its holding; that,
  the submission that the policy underlying a statute has to be determined
   from a reading of the preamble; and that reference to the preamble of a
   statute can be had only when the words of a statute are ambiguous and
   placed reliance on Smt. Sita Devi (Dead) by LRs. v. State of Bihar & Ors.
E [1995] Supp I sec 670, para 2; that, the legislative policy as spelt out in
  the preamble which is to ensure that the assets are so managed and the
   undertaking is so run to ensure that its business remains vested in the State
   so that it can be run for the public good; that even by transfer of a company
   other than Government company the assets can be distributed in a manner
F that would subserve the common good and "the common good" is a matter
   of economic policy; that with the passage oftime, the needs of the economy
   may dictate changes - a change cannot be condemned on the ground that
   it would be deterimental to common good. In this context, it is submitted
   that the nationalisation was a part of a larger policy to bring in the oil sector
   under Government control; that, the control of the oil sector was not
G attained by a legislation but by administrative policy; that the prices of oil
   products were also controlled by executive orders. These have been all
   modified by the Government in exercise of executive power; that in view
   of these changes, the continuance of Government ownership of shares in
   these companies is no longer considered to be necessary; that the percep-
H tion now is that the "common good" will best be subserved by the
CENTRE FOR PUBLIC INTEREST LITIGATION v. U.0.1. [RAJENDRA BABU. J.] 755

privatisation of these undertakings; that this perception is a matter of A
economic policy not amenable to judicial review.

      We start our discussion of the matter from a constitutional angle.
When the government decides to set up a new company, the investment
for setting it up is shown as a 'new instrument of service' and exhibited B
separately in the demand for grants for the concerned Ministry while
presenting the Annual Budget. Under Article 113(2) of the Constitution,
estimates are presented to Parliament in the fonn of demand for grants.
This fulfills the technical requirement of parliamentary approval when a
new company is set up. The President, in exercise of his powers conferred
under Article 113(2) of the Constitution has framed the General Financial C
Rules, in which under Rule 71, it is provided that no expenditure shall be
incurred during a financial year on a new service not contemplated in the
Annual Budget for the year except after obtaining the supplementary grant
or an advance from the Contingency Fund. Setting up a new public sector
company is defined as a 'new instrument of service' for which approval D
of Parliament is required for expenditure from the Consolidated Fund of
India. If this is the background in which a new company is set up, can
such a company be dismantled without some kind of parliamentary
mandate? In this background we will now consider the case on hand.
                                                                             E
      The pleadings filed and the arguments raised before this Court
indicate that the question for consideration before us is wnether or not
there is any express or implied limitation on the Government to privatise
HPCL and BPCL. It is no doubt. true that the two companies are
Government companies and being instrumentalities of the State, they can
enter into contracts among other things, but question is whether this power F
is circumscribed by any statute either expressly or by necessary implica-
tion. It is also clear that there is no provision in the Act expressly stating
that the Government shall, at all times, hold not less than 51 % of the paid-
up capital of each corresponding new company, as has been stated in the
Banking Companies (Acquisition & Transfer of Undertakings) Act. Nor G
is there any provision as in the Coal Mines Nationalisation Act, 1973 to
the effect that "no person, other than the Central Government or a
Government company or a corporation owned, managed, or controlled by
the Central Government shall carry on coal mining operation, in India, in
any form".                                                                     H
    756                  SUPREME COURT REPORTS (2003] SUPP. 3 S.C.R.

A        For the purpose of understanding the provisions we will set out the
    relevant provisions of one of the enactments. We make it clear that the
    three enactments stated above in this case are identical.

          Preamble to the ESSO (Acquisition of Undertaking in India) Act,
B 1974 (hereinafter referred to as 'the Act') reads as follows :-
             "An Act to provide for the acquisition and transfer of the right,
             title and interest of ESSO Eastern Inc. in relation to its undertak-
             ings in India with a view to ensuring co-ordinate distribution and
             utilisation of petroleum products distributed and marketed in India
c            by Esso Eastern Inc. and for matters connected therewith or
             incidental thereto.

             WHEREAS Esso Eastern Inc., a foreign company, is carrying on,
             in India the business of distribution and marketing petroleum
             products manufactured by Esso Standard Refining Company of
D            India Limited and Lube India Limited, and has, for that purpose,
             established places of business at Bombay and other places in
             India;

             AND WHEREAS it is expedient in the public interest that the
E            undertakings, in India, of Esso Eastern Inc. should be acquired
             in order to ensure that the ownership and control of the petroleum
             products distributed and marketed in India by the said company
             are vested in the State and thereby so distributed as best to
             subserve the common good;"

F      Section 2(d) of the Act defines a 'Government company' to mean
  "a company as defined in section 617 of the Companies Act, 1956."
  Section 617 of the Companies Act, 1956 provides that a Government
  company means "any company in which not less than 5 I% of the paid-
  up share capital is held by the Central Government or by any Stale
G Government or Government1 partly by the Central Government or partly
  by one or more State Governments and includes a company which is
  subsidiary of the Government company". Thus, holding of only 51 % or
  more of the shares in a company either by the Central Government or State
  Government makes a company a Government company. Chapter II of the
H Act provides for acquisition of the undertakings in India of Esso compa-
CENTRE FOR PUBLIC INTEREST LITIGATION v. U.0.1. [RAJENDRA BABU, J.) 757

nies. Section 3 provides for transfer and vesting in the Central Government A
of the undertakings of Esso in India. Section 4 provides for general effect
of vesting. Section 5 provides for the Central Government to be lessee or
tenant under certain circumstances. Section 6 deals with removal of doubts.
For the present purpose, Section 7 of the Act is important and it reads as
follows:-
                                                                                B
         "Section 7(1). Notwithstanding anything contained in sections 3,
         4 and 5, the Central Government may, if it is satisfied that a
         Government company is willing to comply, or has complied, with
         such terms and conditions as that Government may think fit to
         impose, direct, by notification, that the right, title and interest and C
         the liabilities of Esso in relation to any undertaking in India shall,
         instead of continuing to vest in the Central Government, vest in
         the Government company either on the date of the notification or
         on such earlier or later date (not bt;ing a date earlier than the
         appointed day) as may be specified in the notification.                 .D
         (2) where the right, title and interest and the liabilities or Esso in
         relation to its undertakings in India vest in a Government com-
         pany under sub-section (!), the government company shall, on
         and from the date of such vesting, be deemed to have become E
         the owner, tenant or lessee, as the case may be, in relation to such
         undertakings, and all the rights and liabilities of the Central
         Government in relation to such undertakings shall, on and from
         the date of such vesting, be deemed to have become the rights
         and liabilities, respectively, of the Government company.
                                                                                F
         (3) the provisions of sub-section (2) of section 5 shall apply to
         a lease or tenancy, which vests in the Government company, as
         they apply to a lease or tenancy vested in the Central Government
         and reference therein to the "Central Government" shall be
         construed as a reference to the Government company."              G
     Section 7 provides that subject to the conditions that may be imposed
by the Government,. right, title and interest and liabilities ofEsso in relation
to any undertaking in India can be vested in a Government company and
sub-section (2) thereof enables such Government company to become the
owner from such date.                                                            H
    758                   SUPREME COURT REPORTS [2003] SUPP. 3 S.C.R.

A        In order to interpret the enactments in question it is necessary to look
  to the Preamble to the Act. The Preamble to the Act clearly stated that
  acquisition is done "in order to ensure that the ownership and control of
  petroleum products, distributed and marketed in India by the said company
  are vested in the State and thereby so distributed as best to subserve the
B common good." (emphasis supplied). Preamble, though does not control
  the statute, is an admissible aid to construction thereof. The Act sets out
  that the assets of the undertaking shall vest in the Government as provided
  under Section 3 of the Act. However, Section 7 of the Act enables the
  Government to transfer the undertaking to a Government company as
C defined under Section 617 of the Companies Act, 1956. Ifthe Act intended
  that the undertaking so vested in the Government company can be
  transferred, wholly or partly, to any company other than a Government
  company, there certainly would have been an indication to that effect in
  the Act itself. The question, therefore, is whether absence of specific
  provision as contained in the Banking Companies (Acquisition & Transfer
D of Undertakings) Act or in the Coal Mines Nationalisation Act, 1973 that
  the share holding shall always be held by Government, will give a different
  complexion to these provisions. When the provisions of the Act provide
  for vesting of the property of the undertaking in the Government or a
  Government company, it cannot mean that it enables the same being held
E by any other person, particularly in the context that the object of the Act
   is that the ownership and control of the petroleum products is distributed
  and marketed in India by the State or Government company and that
  thereby so distributed as best to subserve the common good. The argument
  that there is no specific provision in the Act as contained in the Banking
F Companies (Acquisition & Transfer of Undertakings) Act or in the Coal
  Mines Nationalisation Act, 1973 does not carry the matter any further
  because the idea embedded in those provisions are implicit in the provi-
   sions of this enactment, as explained earlier. If disinvestment takes place
  and the company ceases to be a Government company as defined under
   Section 617 of the Companies Act, to say that it is still a Government
G company as contemplated under Section 7 of the Act will be a fallacy.
  What is contemplated under Section 7 of the Act is only a Government
  company and no other. In relation to a Government company Sections 224
  to 233 are substituted and the audit of the company takes place under the
  supervision and control of the Comptroller & Auditor General oflndia who
H shall give effect to Section 224 (1-B)(l-C). The Auditors shall submit a
CENTRE FOR PUBLIC INTEREST LITIGATION v. U.0.1. [RAJENDRA BABU, J.] 759

report to the Comptroller & Auditor General of India and even when audit A
takes place, subject to his instructions, Comptroller & Auditor General of
India may also conduct supplementary audit and a test audit. Under
Section 19(1) of Comptroller & Auditor General's (Duties, Powers and
Conduct of Service) Act, 1971 audit of companies is to be conducted by
him in terms of the Companies Act. Annual Reports on the working of B
affairs of the company is laid before Parliament under Section 619( 1)(b)
of the Companies Act. Such control will be lost if a company ceases to
be a Government company.

     Argument of Sri Harish Salve that a simple amendment of Section
617 of the Companies Act unrelated to the acquisition can alter the position   C
in law is only perceived but not attained and hence does not require any
examination. He contended that to facilitate disinvestment of the shares
the public sector enterprises are allowed to list the shares on Stock
Exchanges, irrespective of the percentage of shares disinvested by the
Government and, therefore, submitted that there is no need for the D
Government to obtain Parliamentary approval. Sales of shares of these
companies, though uninhibited, cannot be to such an extent so that the
substratum of the character of the Government companies is allowed to be
lost and converted into an ordinary company without being approved by
the General Body of shareholders and, in this case, the Government. E
Government, in tum, is subject to the statutory limitations, to which we
have adverted to now. Hence, the argument begs the question which is
put in issue before us.

      Again accretions to the Government company's assets subsequent to F
acquisition of the undertaking is an irrelevant factor in the context of the
question we are considering. Here what is required to be seen is, not which
asset can be transferred or not, but whether the undertaking can change its
character from a Government company to ordinary company without
Parliamentary clearance in the light of the statute of acquisition.
                                                                               G
     The debate as to whether a privatization law is necessary has been
going on all over the world. This aspect has been discussed by Pierre
Guislain in his book entitled 'The Privatization Challenge' published by
the World Bank. 'The views of the learned Author are reproduced
hereunder:                                                               H
    760                  SUPREME COURT REPORTS (2003] SUPP. 3 S.C.R.

A           "Whether a country needs to enact a privatization law or can do
            without one depends on several factors: the political situation and
            legal traditions of the country, the scope of its privatization
            program, and the nature of the enterprises to be privatized. Two
            different issues have to br addressed: does legislation need to be
            enacted to authorize or facilitate privatization, and if so, should
B
            the new provisions take the form of amendments to the pertinent
            laws or be grouped together in a specific privatization law?

            Some countries have opted to enact privatization laws even when
            privatization could have been implemented without amending the
c           existing legislation. This may have the advantage of mobilizing
            explicit political support and commitment in favour of privatiza-
            tion from the very start. It may confer a stronger, clearer mandate
            on the government and agencies in charge of implementing
            privatization and make them more accountable. A privatization
D           law also provides an opportunity to introduce changes in legis-
            lation that, although not required for commencing the process,
            may substantially facilitate it. On the other hand, a privatization
            law involves risks, including potentially long delays in getting
            parliament approval, the sometimes excessively restrictive scope
E           of legislative provisions, and a tendency on the part of some
            parliaments to interfere too much in the implementation of
             privatization transactions. Furthermore, special legislation may
            not be needed for the transfer of the subsidiaries, participations,
             or assets of State Owned Enterprises or public holding compa-
            nies." (pp. 296 - 297]
F
        The learned Author has further enunciated that if legislation is to be
  brought for privatization, the same should reflect the broad political lines
  of the privatization strategy and programme and that it should also endow
  the Government or privatization agency with the required implementation
G powers, and it should avoid restrictions that may unduly tie the hands of
  the executing agencies and slow down the process. The legislation must
  allow adequate flexibility, in the choice of the privatization technique best
  suited to each, while providing basic safeguards guaranteeing the integrity
  and efficiency of the process. Success of the programme hinges on, among
H other things, a basic consensus among Parliament, Government, and head
CENTRE FOR PUBLIC INTEREST LITIGATION v. U.0.1. [RAJENDRA BABU, J.] 761

of state on the scope and broad lines of the programme; a clear mandate A
given to the executing agencies along with the powers necessary for
fulfilling that mandate; and unambiguous, flexible, and competitive priva-
tization procedures applied in a transparent manner by officials account-
able for their actions.

     Apart from United Kingdom, there have been privatization pro-
                                                                               B
grammes in France and Italy in Europe. Similarly massive programme has
been carried out in Argentina, Mexico and Brazil. In these countries,
Privatization Acts have been enacted and numerous routes are adopted to
achieve privatization, some of which are illustrated below:
                                                                               c
     I. A public offering of shares combined with a listing on the stock
exchange has brought share ownership to many millions of people and
have been the mechanism through which the Government's desire to widen
share ownership has been brought to fruition.
                                                                               D
       2. A trade sale to another private sector company or to a consortium
and such a transaction is inherently more private than a share offering and
some of the privatizations executed in this manner have faced some
criticism for being insufficiently open to public examination and debate.

     3. A 'management buy-out' where the public sector entity's manage- E
ment team combine together to raise finance and, in conjunction with the
financier, purchase the business through a newly formed vehicle company.

     4. A private placing of shares in a business with a group of investors.
                                                                               F
    5. Making State assets available under concession so that the assets
may then be worked out by the concessionary.

      6. Special features of making provision for a golden share that is a
special share in the privatized entity which is retained by the Government
and which typically entrenches certain provisions within the company's G
articles of association in such a way as to prevent specified changes
occurring without the consent of the Government. Such processes are
adopted in certain businesses which are important in defence and strategic
grounds and so should be insulated from the possibility of take over or,
more generally, that businesses which are new to the private sector should H
    762                   SUPREME COURT REPORTS (2003] SUPP. 3 S.C.R.

A not be blown off course by an unsolicited take over offer made early in
    their newly private lives. This special share can be a double-edged sword
    and it may give protection to the Government in certain sensitive circum-
    stances but leave the Government with the risk of incurring the wrath of
    shareholders who would be denied the right to accept what might be a very
B   attractive offer for their shares.

          [Vide C.Graham and T. Prosser Golden Shares : Industrial Policy by
    Stealth]

          7. There were certain other categories where debt equity swaps were
C followed.
          We have an overview of the position world over on whether there is
    any need for law regarding privatisation or what routes are to be adopted
    for achieving the same. Irrespective of those considerations, we base our
D   decision on the statutes with which we are concerned.

          In the case of BALCO (supra) executive action to disinvest was not
    challenged probably due to the fact that there was no statutory backing of
    the nature with which we are concerned in the present case. In the case
    of Maruti Udyog limited (supra), though acquired under an enactment,
E   there was no challenge to the same to disinvest merely by executive action.
    Thus, these cases stand on a different footing.

          There is no challenge before this Court as to the policy of disinvestment.
    The only question raised before us whether the method adopted by the
F   Government in exercising its executive powers to disinvest HPCL and
    BPCL without repealing or amending the law is permissible or not. We
    find that on the language of the Act such a course is not permissible at all.

          In the result, we allow these petitions restraining the Central Govern-
    ment from proceeding with disinvestment resulting in HPCL and BPCL
G   ceasing to be Government companies without appropriately amending the
    statutes concerned suitably.

    B.K.M.                                                      Petitions allowed.