The division bench of Justice Gautam Patel and Justice MJ Jamdar, however, clarified that any public issue that LIC proceeds with will be subject to the court’s final ruling. The court will hear the matter further on June 21.
“We made it clear that we were not hearing the matter for final disposal at this stage,” said the court in its 18-page order. “We do, however, clarify that since the petition is kept for final disposal at the admission stage, and we propose to list it as soon as possible once the court re-opens after the summer recess, any public issue that LIC proceeds with between now and then may possibly be subjected to further orders in this Writ Petition.”
Three policyholders, in their petitions, sought to quash the amendment made to the Life Insurance Corporation Act, 1956, by way of the Finance Act, 2021 and argued that the Finance Bill that was a precursor to the Finance Act 2021 could never have been passed as a Money Bill under Article 110 of the Constitution of India.
Pradeep Sancheti, senior advocate, while appearing for the policyholders argued that under Section 28 of the LIC Act, every policyholder held ‘property’ in the surplus from the life insurance business. “That surplus is, therefore, the “property of” every policyholder and of all policyholders as a class,” he said.
The court passed the order on April 11 but it was uploaded recently on the court’s website.
Countering this, N Venkataraman, additional solicitor general, appearing for LIC and the Centre, argued that the question of ‘property’ for Article 300-A challenge runs like this. First, there is no binding contract that the Petitioners (or that the class that they may be said to represent) have with any assurance to property rights. “The sum assured does not become part of the surplus though it is the part of the LIC fund,” he said.
“The amendment to the LIC Act is not really a corporate restructuring but must necessarily be a Money Bill because it affects inflows and potential outflows from the Consolidated Fund of India,” argued Venkataraman.
The court, while refusing to grant any interim relief to stay on the issuance of the DRHP, observed that “it is possible perhaps to draw an analogy that when a person is given a cheque or a negotiable instrument, he, as the holder, has the right to receive the funds but he cannot be said to have a property in the bank account on which the cheque is drawn.”
The government plans to dilute its stake in LIC through an IPO that could raise as much as Rs 63,000 crore through a 5% dilution.
