Search the Internet          Tips  Sites: Finance, Investment

Law ministry rejects DoD disqualification norms

Puja Mehra

The law ministry has rejected the guidelines proposed by the department of divestment for disqualifying companies on the grounds that they will prevent just about all Indian firms from bidding for the government stake in public sector enterprises.

Terming the proposed guidelines as legally untenable, the law ministry has instead ruled that only if a nexus affecting the company's ability to run the PSE can be established should it be debarred from bidding for government equity.

If the same Indian companies can acquire stakes in these PSEs via the creeping acquisition or the hostile takeover route, why should they not be allowed to acquire stakes via the government's bidding process, Union law, justice & company affairs minister Arun Jaitley is learnt to have told DoD secretary Pradip Baijal at the meeting held on Thursday.

Allowing more companies to bid for the government stake will raise its valuation. Preventing them will not help since the companies can in any case pick up the stake in the open market.

The meeting of the Cabinet committee on divestment, scheduled for Friday, is likely to get postponed due to the lack of agreement between the two ministries.

DoD had proposed barring companies named by Sebi in its final orders from bidding. The idea was to exclude the kind of company, which defrauds small investors. The law ministry, however, is of the view that Sebi has issued orders against companies over a wide range of other issues also.

These factors, however, do not restrict the ability of these companies to turn around public sector companies.

Powered by

YOU MAY ALSO WANT TO READ:
The Rediff-Business Standard Special
The Budget 2001-2002 Special
Money
Business News

Tell us what you think of this report