Decision of the Union of India Essay

The validity of the decisiveness of the summation of India to foray and bump off 51% deal outs of M/s. Bharat aluminum put in Limited (hereinafter p atomic number 18ntred to as BALCO) is the primary issue in these cases. BALCO was coordinated in 1965 as a political science of India Undertaking chthonic the Companies Act, 1956. Prior to its disin empowerment it had a paid-up plow capital of Rs.488.85 crores which was owned and controlled by the governing body of India. The corporation is engaged in the manufacture of aluminium and had plants at Korba in the dry amaze overmatch of Chhattisgarh and Bidhanbag in the State of West Bengal. The Comp any has integrated aluminium manufacturing plant for the manufacture and ex turn of aluminium metal including wire rods and semi- fabricated products.The presidency of Madhya Pradesh vide its letter date eighteenth March, 1968 wrote to BALCO stating that it proposed that down be granted to it on a 99 twelvemonths lease conseq uence to the wrong and conditions contained in that locationin. The letter envisaged giving on lease judicature land on payment of reward of Rs.200/- per acre and, in addition thereto likewise to provide tenure land which was to be acquired and transferred on lease to BALCO on payment by it the actual make up of acquisition plus annual lease rent. Vide its letter dated thirteenth June, 1968 BALCO gave its assent to the proposal contained in the said(prenominal) letter of 18th March, 1968 for transfer of land to it.BALCO intimated by this letter that the total requirement of land would be about 1616 acres. Thereafter, in addition to the Government land which was transferred, the Government of Madhya Pradesh acquired land for BALCO under the provisions of the institute Acquisition Act, 1894 on payment of compensation. The soil Collector, Bilaspur also granted permission under Section 165(6) of the M.P. Land gross Code, 1959 for acquiring/transferring private land in favour o f BALCO. As a result of the aforementioned(prenominal), BALCO set up its establishment on its acquiring land from and with the help of the State Government.Since 1990-91 successive Central Government had been planning to disinvest whatever of the mankind Sector Undertakings. In spare-time activity to the policy of disinvestment by a reply dated 23rd August, 1996 the Ministry of intentness ( de rolement of Public Enterprises) Government of India constituted a Public Sector Disinvestment counseling initially for a period of ternion years. The Resolution stated that this delegation was established in pursuance of the Common Minimum Programme of the join Front Government at the Centre. The missionary post was an independent, non-statutory consultatory body and was headed by Shri G. V. Ramakrishna who was to be its Full-time Chairman. The electric charge had quaternion part-time Members. Paras 3, 4 and 5 of the said Resolution are as follows 3. The broad terms of bring u p of the missionary post are as follows I. To draw a comprehensive boilers suit long term disinvestment programme within 5-10 years for the PSUs referred to it by the nubble classify. II. To determine the extent of disinvestment (total/partial indicating percentage) in each of the PSU. III. To prioritise the PSUs referred to it by the Core classify in terms of the overall disinvestment programme. IV. To recommend the preferent mode(s) of disinvestment ( domestic help capital securities industrys/international capital markets/auction/private change to set investors/any other(a)) for each of the identified PSUs. Also to suggest an appropriate potpourri of the unlike alternatives taking into tale the market conditions. V. To recommend a fexercising amongst primary and secondary disinvestments taking into account Governments objective, the applicable PSUs funding requirement and the market conditions. VI. To supervise the overall deal help and take stopping points on instrument, pricing, timing, etc. as appropriate.VII. To select the pecuniary advisors for the specified PSUs to facilitate the disinvestment work at. VIII. To witness that appropriate measures are taken during the disinvestment process to protect the affaires of the touch employees including encouraging employees participation in the barter process. IX. To monitor the hap of disinvestment process and take necessary measures and report periodically to the Government on such(prenominal) progress. X. To assist the Government to create semipublic sensory faculty of the Governments disinvestment policies and programmes with a view to developing a freighter from Decatur by the people.XI. To give wide publicity to the disinvestment proposals so as to witness larger public participation in the divisionholding of the scratchprises and XII. To advise the Government on possible capital restructuring of the endeavors by marginal investment, if required, so as to ensure enhanced realisation through disinvestment. 4. The Disinvestment bursting charge willing be advisory body and the Government will take a final decision on the companies to be disinvested and mode of disinvestment on the basis of advice given by the Disinvestment Commission. The PSUs would implement the decision of the Government under the overall supervision of the Disinvestment Commission. 5. The Commission while advising the Government on the above propositions will also take into good will the wagers of stakeholders, browseers, consumers and others having a stake in the relevant public area undertakings.It whitethorn here be noned that by a Resolution dated 12th January, 1998 the precedent Resolution of 23rd August, 1996 was partly modify with deletion of paras 3, 4 and 5 and by substitution of the similar by the following 3(i) The Disinvestment Commission shall be an advisory body and its role and break would be to advise the Government on Disinvestment in those public field units that are referred to it by the Government. 3(ii) The Commission shall also advise the Government on any other matter relating to disinvestment as may be specifically referred to it by the Government, and also carry out any other activities relating to disinvestment as may be assigned to it by the Government. 3(iii) In making its passs, the Commission will also take into consideration the interests of workers, employees and others stake holders, in the public sector unit(s).3(iv) The final decision on the good words of the Disinvestment Commission will vest with the Government. According to the meat of India, it laid down the broad procedures to be followed for touch on the recommendations of the Disinvestment Commission. It was, inter alia, resolved that i. The Ministry of Finance (now Department of Disinvestment) would process the recommendations of the Disinvestment Commission, by inviting comments from the concern administrative machinery ii. Submit the recomm endations to the Core Group of Secretaries for Disinvestment for consideration iii. The recommendations of the Core Group of Secretaries would then be taken to footlocker for decisioniv. It was also decided that the Core Group of Secretaries would be headed by the Cabinet Secretary and its invariable members would be Finance Secretary, r tied(p)ue Secretary, Expenditure Secretary, Secretary Department of Public Enterprises, Secretary Planning Commission and Chief Economic consultant, Ministry of Finance, and v. To implement the decisions, an Inter-Ministerial Group headed by the Secretary/Joint Secretary of the Administrative Ministry and consisting of Joint Secretaries of Department of Economic personal clientele, Department of Public Enterprises, alongwith the Chairman and Managing coach of the Companies as Members and Director (Finance) of the companionship as the Convenor. In case of BALCO, the IMG consisted of Secretary level Officers and was headed by Secretary (Mi nes).On 10th December, 1999 the Department of Disinvestment was set up and the responsibilities which were earlier assigned to the Ministry of Finance be possessed of now been transferred to this Department. The Disinvestment Commission in its second Report conjureted in April, 1997 advised the Government of India that BALCO needed to be privatised. The recommendation which it made was that the Government may immediately disinvest its holding in the Company by offering a significant share of 40% of the paleness to a strategic assistant. The Report further advised that there should be an agreement with the selected strategic partner specifying that the Government would within 2 years make a public offer in the domestic market for further deal of shares to institutions, small investors and employees thereby bringing down its holding to 26%.The Commission also recommended that there should be an on-going redirect examination of the situation and the Government may disinvest its residuum equity of 26% in full in favour of investors in the domestic market at the appropriate time. The Commission had recommended the appointment of a Financial advisor to undertake a proper paygrade of the company and to conduct the sale process. The Commission had categorised BALCO as a non- lens nucleus group industry. The Chairman of the Disinvestment Commission wrote a letter dated 12th June, 1998 to the Secretary, Ministry of Mines, Government on India dis bunk the Governments attention to the recommendation of the Commission for sale of 40% of equity in BALCO and to bringing down of the Government holding to 26% within two years.This letter then referred to the fifth Report of the Commission wherein it had reviewed the question of strategic sale and had suggested that the Government may keep its shareholding on a lower floor the level of investment being offered by the strategic buyer and its divesting roughly portion of equity to other entities. This letter noted that in these circumstances, it may be difficult to get in a multilateral fiscal institution to act fast in taking up share of BALCO. The Chairman of the Commission then recommended that in keeping with the spirit of the recommendations of the 5th Report, you may now kindly consider offering 51% or more to the strategic buyer along with transfer of management. This sale will enable a smooth transaction with the participation of more constrictders and expose price for the shares. This will also be in keeping with the rate of flow policy as announced by the FM in his late(a) budget speech.The Cabinet deputation on Economic Affairs had, in the meantime, in September 1997 granted approval for appointment of a technical and financial advisor, selected through a matched process, for managing the strategic sale and restructuring of BALCO. orbicular publicizing was then issued inviting from interested parties Expression of Interest for plectrum as a Global advisor. The advertise ment was published in four financial papers in India and also in The Economist, a renowned financial magazine published abroad. Eight Merchant Banks showed their interest in appointment of the Global Advisor. The lowest bid of M/s. Jardine Fleming Securities India Ltd. was pass judgment and approved by the Cabinet Committee on Disinvestment on 9th March, 1999.The Cabinet Committee on Disinvestment also approved the proposal of strategic sale of 51% equity in respect of BALCO. The decision of the Government to the aforesaid strategic sale was quarreld by the BALCO Employees Union by filing judicial writ demand nary(prenominal) 2249 of 1999 in the risque flirt of Delhi. This demand was accustomed of by the high gear lawcourt vide its order dated 3rd August, 1999. On 3rd March, 2000, the Union Cabinet approved the Ministry of Mines proposal to reduce the share capital of BALCO from Rs.488.8 crores to Rs.244.4 crores. This resulted in cash flow of Rs.244.4 crores to the Union Government in the Financial Year 1999-2000.A formal cartel between Jardine Fleming, the Global Advisor and the Government of India was executed on 14th June, 2000. The Scope of work of the Global Advisor, inter alia, included the development, updating and review of a magnetic dip of potence buyers of the stake preparing necessary documents assisting the Government of India in sale negotiations with potential buyers and to advise on the sale price to coordinate and monitor the progress of the transaction until its completion.Thereafter, on 16th June, 2000 the Global Advisor, on behalf of the Government of India, issued an advertisement calling for Expression of Interest in leading journals and newfoundspapers such as the Economist, London, the Mining Journal, London, the Economic Times, India, Business Standard, India and the Financial Express, India. The invitation was to Companies and Joint Ventures which may be interested in acquiring 51% shares of the Government of India in BALCO. The exit date for submitting the expression of interest was 30th June, 2000 and the interested companies were required to submit their expression of interest together with their Audited Annual Reports and a profile describing their business and operations.Eight companies submitted their Expression of Interest. These companies were as followsi. Sterlite Industries (India) Ltd.ii. Hindalco Industries Ltd.iii. Tranex Holding Inc.iv. Indian Minerals Corporation Plc.v. VAW Aluminium AG, Germanyvi. ALCOA, ground forcesvii. Sibirsky, Russiaviii. MALCOM/s. Jardine Fleming, Global Advisor made an analysis of the various bids on the basis of the financial and technical capability, familiarity with India and overall credibility. Thereupon two companies, namely, Indian Minerals Corporation Plc. and Tranex Holding Inc. were rejected. The Inter-Ministerial Group (hereinafter referred to as IMG) set up by the Union of India, pass judgment the expression of interest of six out of eight parties and it also decided that the bids of Sterlite and MALCO be treated as champion. Thus there remained five prospective bidders but two, namely, VAW Aluminium AG, Germany and Sibirsky, Russia dropped out and the remaining three, namely, ALCOA, USA Hindalco and Sterlite conducted due diligence (inspection) on BALCO between September to December, 2000. The IMG considered the drafts of the dish outholders Agreement and the Share buy Agreement and had discussions with three prospective bidders and ultimately the said drafts were finalised on 11th January, 2001.For the purpose of carrying out the asset military rating of BALCO, the Global Advisor shortlisted four parties from the list of Registered Government Valuers approved by the Income-Tax Department. On 18th January, 2001, BALCO invited quotations from the four Registered Valuers, so short listed, and the quotation of Shri P. V. Rao was accepted. Shri P. V. Rao was a registered valuer of immovable berth and his team ma tes were Government Registered Valuers authorised to value plant and machinery. They were aid in the work of valuation by officers of the Indian Bureau of Mines for assessing the determine of existing mines.Pending the receipt of the valuation report from Shri P. V. Rao, the Global Advisor on 8th February, 2001 requested the three bidders to submit their financial bids alongwith other necessary documents by 15th February, 2001, which was later extended by one day. On 14th February, 2001 Shri P. V. Rao submitted his asset valuation report to M/s. Jardine Fleming. On 15th February, 2001, an evaluation Committee headed by the Additional Secretary (Mines) was constituted. This Committee was required to fix the entertain price of 51% equity of BALCO which was to be sold to the strategic party. The three contenders, namely, Alcoa, Hindalco and Sterlite Industries Ltd. submitted their sealed bids to the Secretary (Mines) and Secretary (Disinvestment) on 16th February, 2001. It is there after, that M/s. Jardine Fleming posited its valuation report together with the asset valuation done by Shri P. V. Rao to the Evaluation Committee to work out the reserve price.The range of valuation of BALCO that emerged on various methodologies was as follows-(i) Discounted Cash operate Rs. 651.2 994.7 crores(ii) Comparables Rs. 587 909 cores(iii) Balance Sheet Rs. 597.2 681.9 croresThus, the range of valuation by all these methods came between Rs.587 and Rs.995 crores for 100% of the equity. Ipso facto, for 51% of the equity, the range of valuation came out as Rs.300 to Rs.507 crores. The Evaluation Committee then deliberated on the various methodologies and concluded, as per the affidavit of the Union of India, that the most appropriate methodology for valuing the shares of a running business of BALCO would be the Discounted Cash Flow method. It decided to add a control pension of 25% on the base value of equity (although the Advisor had viewed that the premium shou ld range between 10-15%) and then add the value of non-core assets to arrive at a valuation of Rs.1008.6 crores for the company as a whole, 51% of which amounts of Rs.514.4 crores which was pertinacious as the Reserve Price.According to the respondents, the Evaluation Committee felt that summation Valuation Report appeared to have over valued the fixed assets of the company at Rs.1072.2 crores. The committee further observed that the fixed asset valuation method was only a good indicator of the value that could be realised if the business was to be liquidated, rather than for valuing the business as a going concern. Furthermore, the asset valuation method did not take into account the liabilities and contingent liability that go with the business.When the financial bids were opened, it was found that the bid of Sterlite Industries was the highest at Rs.551.5 crores, the bid of Hindalco was Rs.275 crores while ALCOA had opted out. The report of the Evaluation Committee for acce ptance of the bid which was higher than the reserve price was considered by the IMG which recommended the acceptance of the bid of Sterlite Industries to the core group of Secretaries. This core group in turn made its recommendation to the Cabinet Committee on Disinvestment which on 2 inaugural February, 2001 approved/accepted the bid of Sterlite Industries at Rs.551.5 crores. The Governments decision was communicated to Sterlite Industries on that date.The contract of the decision to accept the bid of Sterlite Industries led to the initiation of legal legal proceeding challenging the said decision. On 23rd February, 2001 Dr. B. L. Wadhera filed Civil judicial writ Petition No. 1262 of 2001 in the Delhi High act. This was followed by Writ Petition No. 1280 of 2001 filed by the employees of BALCO on 24th February, 2001 also in the High speak to of Delhi. On that very date, i.e., on 24th February, 2001 another employee of BALCO, namely, Mr. Samund Singh Kanwar filed Civil Writ Pet ition No. 241 of 2001 in the High Court of Chhattisgarh. While the aforesaid writ petitions were pending there was a Calling Attention communicate on Disinvestment with regard to BALCO in the Rajya Sabha. Discussions on the said motion took place in the Rajya Sabha on 27th February, 2001 and the matter was discussed in the Lok Sabha on 1st March, 2001.The motion that this Ho social occasion disapproves the proposed disinvestment of Bharat Aluminium Company Ltd. was defeated in the Lok Sabha by 239 votes to 119 votes. Soon thereafter on 2nd March, 2001, Shareholders Agreement and Share get Agreement between the Government of India and Sterlite Industries Limited were signed. Pursuant to the instruction execution of sale, 51% of the equity was transferred to Sterlite Industries Limited and a cheque for Rs.551.5 crores was received. It is not necessary to refer to the terms of the agreement in any great detail pull to notice a few clauses which pertain to safeguarding the inter est of the employees of the company.articles H and J of the preamble reads as follows H. Subject to Clause 7.2, the Parties envision that all employees of the Company on the date hereof shall continue in the employment of the Company. J. The SP recognises that the Government in relation to its employment policies follows certain tenets for the benefit of the members of the Scheduled caste/Scheduled Tribes, physically handicapped persons and other socially disadvantaged categories of the society. The SP shall use its best efforts to cause the Company to provide adequate job opportunities for such persons. Further, in the event of any reduction in the strength of the employees of the Company, the SP shall use its best efforts to ensure that the physically handicapped persons are retrenched at the end.Clause 7.2 which contains the Representations, Warranties and Covenants of M/s. Sterlite Industries is as follows The SP represents and warrants to and covenants with each of the Gover nment and the Company that (a) it has been duly incorporated or created and is validly subsisting and in good rest under the laws of the legal power indicated in the preamble to this Agreement (b) it has the corporate power and authority to enter into and perform its obligations under this Agreement (c) this Agreement has been duly authorised, executed and delivered by it and constitutes a valid and binding obligation enforceable against it in amity with its terms (d) it is not a party to, bound or affected by or subject to any indenture, mortgage, lease agreement, instrument, charter or by-law provision, statute, regulation, judgment, decree or law which would be violated, contravened, breached by or under which default would occur or under which any payment or repayment would be accelerated as a result of the execution and delivery of this Agreement or the consummation of any of the transactions provided for in this Agreement.(e) Notwithstanding anything to the contrary in this Agreement, it shall not retrench any part of the labour force of the Company for a period of one (1) year from the Closing Date other than any freeing or border of employees of the Company from their employment in accordance with the applicable staff regulations and standing orders of the Company or applicable Law and (f) Notwithstanding anything to the contrary in this Agreement, but subject to sub-clause (e) above, any restructuring of the labour force of the Company shall be implemented in the manner recommended by the Board and in accordance with all applicable laws. (g) Notwithstanding anything to the contrary in this Agreement, but subject sub-clause (e) above, in the event of any reduction of the strength of the Companys employees the SP shall ensure that the Company offers its employees, an option to voluntarily retire on terms that are not, in any manner, less favourable than the voluntary hideaway scheme offered by the Company which is referred to in Schedule 7 .4 of the Share Purchase Agreement and (h) It shall vote all the voting equity shares of the Company, directly or indirectly, held by it to ensure that all provisions of this Agreement, to the extent required, are incorporated in the Companys articles of association.With the filing of the writ petitions in the High Court of Delhi and in the High Court of Chhattisgarh, an application for transfer of the petitions was filed by the Union of India in this Court. After the notices were issued, the company received various notices from the regime in Chhattisgarh for alleged beach of various provisions of the M. P. Land Revenue Code and the Mining Concession Rules. Some of the notices were not only communicate to the company but also to individuals alleging violation of the provisions of the code and the rules as also encroachment having taken place on Government land by BALCO.This led to the filing of the Write Petition No. 194 by BALCO in this court, inter alia, challenging the validit y of the said notices. During the pendancy of the writ petition, the workers of the company went on strike on 3rd March, 2001. Some interim orders were passed in the transfer petition and subsequently on 9th May, 2001 the strike was called off. By order of battle dated 9th April, 2001, the writ petitions which were pending in the High Court of Delhi and Chhattisgarh were transferred to this Court being Transfer lawsuit No. 8 of 2001 which pertains to the writ petition filed by BALCO Employees Union Transfer Case No. 9 of 2001 pertains to the writ petition filed by Dr. B. L. Wadhera in the Delhi High Court and Transfer Case No. 10 of 2001 is the writ petition filed by Mr. Samund Singh Kanwar in the High Court of Chhattisgarh. On behalf of the BALCO Employees Union, Shri Dipankar P. Gupta, learned senior counsel submitted that the workmen have been adversely affected by the decision of the Government of India to disinvest 51% of the shares in BALCO in favour of a private par ty.He contended that before disinvestment, the constitutional paid-up capital of BALCO was owned and controlled by the Government of India and its administrative control co-vested in the Ministry of Mines. BALCO was, therefore, a State within the meaning of Articles 12 of the Constitution. Reliance for this was placed on Ajay Hasia and Others vs. Khalid Mujib Sehravardi and Others, (1981) 1 SCC 722 Central Inland piss Transport Corporation Limited and Another Vs. Brojo Nath Ganguly and Another, (1986) 3 SCC 156. He also contended that by reason of disinvestment the workmen have lost their rights and protection under Articles 14 and 16 of the Constitution.This is an adverse civil consequence and, therefore, they had a right to be perceive before and during the process of disinvestment. The type of consultation with the workmen which was necessary, according to Shri Dipankar P. Gupta, was whether BALCO should go through the process of disinvestment who should be the strategic partn er and how should the bid of the strategic partner be evaluated. Referring to the averment of Union of India to the effect that interest of the employees has been protected, Shri Dipankar P. Gupta, submitted that in fact there was no effective protection of the workmens interest in the process of disinvestment.He further submitted that the workmen have reason to cerebrate that apart from the sale of 51% of the shares in favour of Sterlite Industries the Agreement postulates that balance 49% will also be sold to them with the result that when usually in such cases 5% of the shares are disinvested in favour of the employees the same would not happen in the present case. Reliance was placed on the decision of National Textile Workers Union and Others vs. P.R. Ramakrishnan and others, (1983) 1 SCC 228 and it was also contended that even though there may be no loss of jobs in the present case but the taking away of the right or protection of Articles 14 and 16 is the civil cons equence and, therefore, the workmen have a right to be heard. It was submitted that such rights and benefits are both procedural as swell as substantive.Procedural benefits and rights includes the right to approach High Court under Article 226 of the Constitution and this Court under Article 32 of the Constitution in the event of violation of any of their rights. This is a major(ip) advantage since it is a relatively swift method of redressal of grievances which would not be available to employees of private organisations. Instances were given of the substantive rights which flow from Articles 14 and 16 like, right to equality, equal pay for equal work, right to pension including the principle that there can be no discrimination in the matter of granting or withholding of pension vide Bharat rock oil (Erstwhile Burmah Shell) Management Staff Pensioners vs. Bharat Petroleum Corporation Ltd. and Others, (1988) 3 SCC page 32), right to inquiry and reasons before dismissal etc.The afo resaid contentions of Shri Gupta were supported by Shri G. L. Sanghi and Shri Ranjit Kumar, senior counsel, appearing for some of the Unions who were interveners in the writ petition filed by BALCO Employees Union. He submitted that the workers should have been heard at different stages during the process of disinvestment, the manner in which views may be invited and evaluated by the Government the method of evaluation the factors to be taken into consideration and the choice of the strategic partner the terms and conditions under which the strategic partner will take over the employment of the workers and the terms and conditions of the Share Holders Agreement are the stages in which the workers should have been heard and consulted.It was submitted that the decision of the Delhi High Court of 3rd August, 1999 does not come in the way of these contentions being raise inasmuch as the petition at that time was regarded as premature and the order which was passed actually preserves th e workers rights to raise the contention in future. Reiterating these contentions Shri Ravindra Shrivastava, learned abet General, State of Chhattisgarh submitted that the State does not challenge the policy of disinvestment per se on principle as a measure of socio-economic reform and for industrial well being in the country. He however, contended that the implementation of the policy of disinvestment in the present case, has failed to evolve a comprehensive package of socio-economic and political reform and to construction the decision making process so as to achieve in a just, fair and reasonable manner, the ultimate goal of the policy and that the interest of the workers in the industrial sector cannot be undermined and, therefore, any decision which was promising to affect the interest of the workers and employees as a class as a whole cannot and ought not to be taken to the exclusion of such class, lest it may be counter productive.He contended that the Disinvestmen t Commission had recommended that some percentage of equity share may be offered to the workers to solicit their participation in the enterprise and which would go a long way in proving the disinvestment plan meaty and successful. In this regard, it was not shown from any material or record that the Government of India had at any stage addressed itself to this vital aspect of the disinvestment process or had taken into consideration the likely repercussions on the interest, right and stance of the employees and workers. This non-consideration indicates that there has been an arbitrariness in not taking into consideration relevant facts in the decision making process.It is further contended that the impugned decision defeats the provisions of the M.P. Land Revenue Code and goes against the fundamental basis on which the land was acquired and deal to the company. Implicit in the submissions on behalf of the employees is the challenge to the decision to disinvest bulk of the shares of BALCO in favour of Sterlite Industries Limited. The first question, therefore, which would arise for consideration, is whether such a decision is amenable to judicial review and if so within what parameters and to what extent.On behalf of the Union of India, the Attorney General submitted that since 1990-91 successive Governments have gone in for disinvestment. Disinvestment had receive imperative both in the case of Centre and the States primarily for three reasons. Firstly, despite every effort the rate of fathers of governmental enterprises had been woefully low, excluding the sectors in which government have a monopoly and for which they can, therefore, charge any price. The rate of return on central enterprises came to minus 4% while the cost at which the government borrows money is at the rate of 10 to 11%. In the States out of 946 State level enterprises, about 241 were not working at all about 551 were making losses and 100 were reported not to be submitting their a ccounts at all.Secondly, neither the Centre nor the States have resources to sustain enterprises that are not able to stand on their own in the new environment of intense competition. Thirdly, despite repeated efforts it was not possible to change the work culture of governmental enterprises. As a result, even the strongest among them have been sinking into increasing difficulties as the environment is more and more competitive and technological change has become faster. In support, the Solicitor General submitted that the challenge to the decision to disinvest on the ground that it impairs public interest, or that it was without any need to disinvest, or that it was inconsistent with the decision of the Disinvestment Commission was untenable.