Supreme Court spurns moves on LIC IPO intervention

Supreme Court spurns moves on LIC IPO intervention

It was hearing petitions challenging the Money Bill and appeals against the decisions of the Madras High Court and the Bombay High Court

The Supreme Court has refused to interfere with the Life Insurance Corporation (LIC) Initial Public Offering (IPO). However, it has agreed to examine the amendment made to the LIC Act, 1956 by way of the Finance Act, 2021, introduced as a Money Bill.

The bench comprising Justice D Y Chandrachud, Justice Surya Kant, and Justice P S Narasimha said, "On the aspect of interim relief, the court must be guided by a well-settled principle of prima facie case, the balance of convenience and irreparable injury. The court has been apprised of the fact that 73 lakh applicants have subscribed to the IPO and it has been oversubscribed 6 times even in the category which has been reserved for policyholders."

The court added, "It is necessary to note that the dilution of LIC has been 3.5 percent. And 22.13 crore equity shares of the face value are being offered at a premium of Rs.939 and receipts in the Consolidated Fund of India are Rs.20,500 crore. The IPO opened for anchor investors on 2 May 2022, for the general public on May 4, and closed on May 9. We are of the view that no case of grant of interim relief has been made out."

The court issued a notice in the matter and directed that it be tagged with the pending proceedings before a larger bench on the question of the constitutional validity of the bills being introduced as money bills.

The bench was hearing the petitions challenging the amendments to the LIC Act and also appeals against the decisions of the Madras High Court and the Bombay High Court refusing to interfere with the IPO.

Appearing on behalf of the petitioners, Senior Advocate Indira Jaising submitted that by amending the LIC Act, the character of the corporation was being changed from a mutual benefit society to a joint-stock company. It amounted to expropriation of surplus from participating policyholders to shareholders to whom the shares would be allotted.

She contended that it raised the question of violation of the right to property under the Constitution of India.

"My money is being diverted to the shareholder. There was a statute saying I am entitled to 95 percent. Such a percentage of the remaining surplus was to be allocated to the members. Now, in 75 years, there is the first-time definition of members as shareholders. Outsiders become owners," she added.

The senior counsel, meanwhile, prayed that the money invested by the subscribers be kept in the 'Application Supported by Blocked Account (ASBA), or to say that their rights would be dependent on the outcome of the case so as to put them on notice.

Appearing on the Government of India's behalf, Additional Solicitor General N Venkataraman opposed this. He argued that the plea was just an attempt, "To scare the investors and to play a spoilsport."

Maintaining that 73 lakh bank accounts were blocked, he wondered, "How can such an important policy decision be interfered with at the eleventh hour."

Pointing to the date of filing of the petitions, the ASG contended that there was a delay in filing them. He added that only two shareholders out of 50,000 were before the court. "Where is the balance of convenience or irreparable injury, who will compensate for this?" he questioned.

"An interim order will send a completely wrong signal to the markets and then any IPO can be interfered with," he added.