A bench comprising justices DY Chandrachud and BV Nagarathna took objection to the closure of preliminary inquiry by the Central Bureau of Investigation (CBI) in the HZL disinvestment during 1997-2003.
"There is no bar on the constitutional power of this Court to direct the CBI to register a regular case, in spite of its decision to close a preliminary enquiry," said the bench.
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The top court directed the CBI to fully investigate the National Democratic Alliance government's 2002 decision during the tenure of then minister Arun Shourie to disinvest the majority shareholding in HZL.
Allowing further disinvestment, the top court said HZL ceased to remain a government company after Anil Agarwal-led Vedanta Resources firm, Sterlite Opportunities and Ventures, picked up 64.92 per cent stakes in it.
Directing a full-fledged CBI probe, the top court said: "It is our considered opinion that the disinvestment (26 per cent stake in HZL) in 2002 evinces a prima facie case for registration of a regular case. We are desisting from commenting on some crucial facts and names of individuals involved, so as to not cause prejudice to the investigation of the matter."
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The bench took into account CBI officials' observation, who recommended the conversion of the preliminary enquiry into a regular case, and added that it satisfies court's conscience for exercising its exceptional powers to direct the CBI to conduct an investigation into the matter.
"The registration of a regular case, followed by a full-fledged investigation must be conducted. This court shall be duly apprised of the status of the investigation," it added.
In 2016, the apex court had directed the Narendra Modi government to maintain status quo on the proposed disinvestment of the public sector undertaking. It was a huge blow, which restricted the government to initiate any process of further disinvestment of world's second largest zinc producer, and also delayed Vedanta Resources taking control of the company.
The top court allowed the Centre's plea contending that the residual shareholding of 29.5 per cent, valued at about Rs 40,000 crore, should be off-loaded in the open market, as it will strengthen revenues for public purposes.
The top court judgment came on a plea of National Confederation of Officer's Association, an employee union, represented through advocate Prashant Bhushan sought CBI probe into the alleged irregularities in HZL's stake sale.
The petitioner alleged that Sterlite Industries, picked up a majority stake at an undervalued price, resulting in estimated losses running into hundreds of crores to the exchequer.