Babubhai Vaghela, former senior manager at IOC, says general statutory rule allowing the executive to approve mergers of government entities goes against fundamental principle of separation of powers
The proposed merger of Maharashtra Elektrosmelt (MEL) with Steel Authority of India (SAIL) is illegal and must be cancelled, according to renowned RTI activist Babubhai Vaghela.
Mr Vaghela, who was senior manager of Indian Oil Corporation (IOC) in Ahmedabad, has asked the Union government to cancel the merger, citing several judicial precedents. He has alleged that the general statutory rule (GSR) 238, of 2nd February 1978, that allows the executive to approve mergers, goes against the principle of the separation of powers.
On a similar issue on Tuesday, the Madras High Court upheld the principle of separation of power and granted an interim stay on a provision in the National Green Tribunal Act for appointment of some officials. Ruling on a PIL, a division bench said that allowing executives to play a judicial role exceeding their powers, would be contrary to the spirit of the Constitution, was against the principle of separation of powers and would nullify the purpose of fair administration of justice.
The general statutory rule 238 was issued by the government of India about a year ago in the case of the merger of IOC subsidiary Bongaigaon Refinery & Petrochemicals (BRPL) with its parent company. The rule empowers the Ministry of Corporate Affairs (MCA) to hear and approve mergers of government entities under sections 391-394 of the Companies Act 1956.
The case of the merger of Maharashtra Elektrosmelt with SAIL is to be heard before the Ministry of Corporate Affairs on 8th March.
Mr Vaghela said, "GSR 238 is against the constitutional scheme of separation of powers and has been legally challenged. Even a senior advocate of M/s Amarchand Mangaldas, representing IOC and BRPL was convinced about it, during the hearing of the IOC-BRPL merger petition by Jitesh Khosla, then joint secretary of MCA." Mr Vaghela, who was an objector in the hearing, had requested Mr Khosla to refer the jurisdiction issue for legal scrutiny.
Mr Vaghela also claims that SAIL did not send any notification to its shareholders about the annual general meeting where the decision on the merger was taken. Thus, the decision taken should be declared null and void. He has also requested the Vigilance Commission to investigate why shareholders do not receive requisite notifications. Many PSUs, including Oil and Natural Gas Corporation, he says, do not communicate matters to their shareholders.
Replying to his objection, Anirudh Das, advocate representing SAIL, said that since Mr Vaghela neither attended the meeting, nor voted on the proposal, his objection to the decision was not valid. Mr Das has also claimed that the required communication was sent by Speed Post and that the company has the receipt of the delivery by post.
Mr Vaghela, however, dismissed the argument by the advocate saying, "I did not receive the communication to attend the shareholders meeting, said to have been called by the MCA and, therefore, the question of my attending or not attending, and voting or not voting, does not arise. Papers said to have been despatched on 22nd February 2011 have, till the time of writing (this message), are not received. Knowing the extent of corruption prevalent in the government, tall claims of transferor or transferee company; Ministry of Steel or PMO cannot be taken at face value."
The Maharashtra Elektrosmelt share last traded on 17th February 2011 at a price of Rs298, marginally up from its 52-week low of Rs270 a couple of days earlier. SAIL closed 0.82% lower at Rs157.40 on the Bombay Stock Exchange today, while the benchmark Sensex closed 0.23% up at 18,489 points after a volatile trading session.
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