Top court refuses to stay LIC IPO’S share allocation
THE PETITIONERS HAD CHALLENGED THE VALIDITY OF THE AMENDMENTS MADE TO THE LIC ACT
NEW DELHI: The Supreme Court on Thursday refused to interfere with the allocation of Life Insurance Corporation (LIC) shares through an Initial Public Offer (IPO) even as it issued a notice on petitions challenging the validity of the amendments to the LIC Act saying it could not have been done by way of a money bill.
A bench of justices Dhananjaya Y Chandrachud, Surya Kant and PS Narasimha issued the notice on separate petitions filed by LIC policyholders against the amendment to Section 28 of the LIC Act. According to them, the character of the corporation was changed from a mutual benefit society to a joint-stock company through the change.
The petitioners failed to get relief from the Madras and Bombay high courts. They approached the top court seeking interim directions to stay the allocation of shares through IPO. The petitioners said the allocation would take away the dividend previously available to policyholders on the surplus earned on the LIC funds.
The top court refused any interim relief. It noted the IPO opened for anchor investors on May 2 and for the general public on May 4 and closed on May 9. “We have been apprised of the fact that 7.3 million applicants in India and abroad have subscribed to the IPO and it has been over-subscribed over six times even in the category which has been reserved for policy holders,” the bench said.
However, the Court issued notice on the petitions as they raised a legal question on whether changes to LIC Act could be introduced by a money bill when it neither concerned taxes nor appropriation from Consolidated Fund. As this issue stood referred to a 7-judge bench in a separate case decided in Roger Mathew case (2020), the bench tagged these petitions to be taken up by the Constitution Bench.
The Centre argued against any interim order as the shares will be open for trading next week. Additional solicitor general N Venkatraman, appearing for the Centre, said, “Any order at this stage will send completely wrong signals in the market at the time of allotment. Please do not do it. 73 lakh bank accounts are blocked today. It will start trading from May 17.”
Venkatraman pointed out that both the Madras and Bombay high courts did not pass any interim relief as the petitioners failed to justify their right, either under the policy holding contract or any statutory right under the LIC Act, to claim appropriate dividend over the surplus LIC funds. “The contract gives them no right to get 95% of the nonparticipating shareholders’ surplus,” he said. “This petition is simply to scare investors and play spoilsport by coming in at the last minute.”
He told the court the Finance Act for the amendment was passed in March 2021 almost 15 months back and even the present appeals were filed early this month despite the orders being passed by the high courts.