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Government bars tainted firms from sell-off process

Mamata Singh

The government has decided to bar all tainted companies, against which regulatory bodies have issued orders, from participating in the divestment process.

The ban will however not cover the sister concerns of these companies, who will be allowed to bid for the government stake in public sector undertakings.

The ban on companies named in the orders from regulatory bodies like the Securities and Exchanges Board of India, the Reserve Bank of India or the department of company affairs will hold even if these companies appeal against it in the courts.

Even if a company obtains a stay order pending a final decision, it will still be barred from participating in the privatisation process for a period of five years or till the court takes a final decision, whichever is shorter, said minister of state for divestment, Arun Shourie. An interim stay order will not enable a company to enter the fray, he added.

This means that till a court exonerates a "tainted" company, it will not be able to participate in the divestment process.

"Any company, be it a merchant banker advising the government on divestment or a company bidding for government stake, which puts the nation's security in jeopardy will be barred from the process," the minister said.

The norms for merchant bankers specify that even sister concerns of banks against which orders have been passed by regulatory authorities will be barred from acting as advisors in the privatisation programme.

However, only final orders passed by such bodies will be considered for this purpose. Interim orders will not be used as a basis for banning merchant bankers.

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