The Tyre Corporation of India Limited (Disinvestment of Ownership) Act, 200
1. Background and Purpose
TCIL was established on March 5, 1984, by nationalizing two sick companies: Inchek Tyres Limited and National Rubber Manufacturers Limited. Despite efforts to revive TCIL, it continued to face financial difficulties and was referred to the Board for Industrial and Financial Reconstruction (BIFR). The BIFR recommended the induction of a strategic partner to revitalize the company. In response, the government introduced the Disinvestment of Ownership Act to enable the sale of its equity in TCIL and attract private investment for its revival.
2. Key Provisions of the Act
Section 2: Disinvestment in the Company
This section empowers the Central Government, upon the recommendations of the Board for Reconstruction of Public Sector Enterprises, to disinvest its shares in TCIL. The disinvestment can be carried out through various methods, including:
Transfer of shares to any person
Exchange of shares
Relinquishment of shares
The terms and conditions of such disinvestment are to be agreed upon between the government and the acquiring entity.
Section 3: Payment of Consideration for Disinvestment
This section outlines the process for determining the consideration to be received by the government for the disinvestment. It mandates that the consideration should be based on the optimum valuation of TCIL's land, assets, and liabilities. The valuation methodology is to be specified by the Central Government to ensure transparency and fairness in the disinvestment process.
Section 4: Manner of Disinvestment
This section provides the modalities for disinvestment, which may include:
Public offer of shares
Preferential allotment
Private placement
The government is authorized to adopt any of these methods to achieve the disinvestment objectives.
Section 5: Provision in Respect of Officers and Other Employees
This section addresses the concerns of employees affected by the disinvestment. It stipulates that the acquiring entity must retain all employees of TCIL for a minimum period of one year from the date of disinvestment. This provision aims to protect the interests of employees and ensure job security during the transition period.
Section 6: Act to Have Overriding Effect
This section ensures that the provisions of the Act take precedence over any inconsistent provisions in other laws. It grants the Act an overriding effect to facilitate the disinvestment process without legal hindrances.
3. Legislative Process and Parliamentary Discussion
The Tyre Corporation of India Limited (Disinvestment of Ownership) Bill, 2007, was introduced in the Lok Sabha on May 17, 2007. It was referred to the Standing Committee on Industry, which submitted its report on August 14, 2007. After incorporating the committee's suggestions, the Bill was passed by both Houses of Parliament and received the President's assent on December 12, 2007.
During the parliamentary discussions, concerns were raised about the valuation of TCIL's assets, the protection of employees' rights, and the potential impact on the public sector character of the company. The government assured that the disinvestment would be conducted transparently and that employees' interests would be safeguarded.
4. Judicial Oversight and Case Law
In the case of Tyre Corporation of India Ltd. (Now In Liqn) v. Union of India, the Supreme Court dealt with the winding-up of TCIL. The Court observed that the company had become financially unviable, and despite the government's substantial investment, it had failed to recover. The Court upheld the decision to wind up the company, emphasizing the need for judicial oversight in matters of public sector enterprises facing financial distress.
5. Conclusion
The Tyre Corporation of India Limited (Disinvestment of Ownership) Act, 2007, represents a significant step towards restructuring and revitalizing a public sector enterprise facing financial challenges. By facilitating the entry of private investment, the Act aimed to ensure the continued production and distribution of essential goods, thereby serving the public interest. The legislative and judicial processes surrounding the Act underscore the importance of transparency, accountability, and protection of stakeholders' interests in the disinvestment of public sector enterprises.
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