A Committee of Secretaries (CoS) will meet here on February 1 to take a call on the Balco arbitration award. In a 2:1 decision, a three-member arbitration panel had earlier this week ruled Sterlite Industries call option to acquire the balance 49 per cent government stake in Balco as invalid.

The arbitration panel had ruled that the call option was in violation of Section 111A(2) of the Companies Act, 1956. This has now led to a view that Government can sell its residual 49 per cent stake in Bharat Aluminium Company (Balco) to any entity it deems fit.

“The Committee of Secretaries will consider the arbitration award on February 1 and take appropriate course of action. It is difficult to say know now what the Government will do on this,” official sources said.

Sterlite had acquired 51 per cent stake in Balco for Rs 551 crore. This original transaction had given Sterlite an option to buy out the residual 49 per cent stake in three years. When Sterlite decided to exercise the call option, there was disagreement on the valuation and the matter finally went into arbitration.

The NDA Government sold 51 per cent stake in Balco to Sterlite in 2001. The Supreme Court, in December 2001, validated the transaction. When Sterlite exercised the call option, the Congress-led UPA Government referred the matter to the Attorney General, who held the call option as invalid under the company law.

Sterlite moved the Delhi Court in 2006 for interim relief. Later, a Committee of Secretaries had recommended that the Government sells 10 per cent in an Initial Public offering (IPO) to discover the correct price. The Cabinet Committee on Economic Affairs (CCEA) had also approved this route. However, in 2009, Sterlite went in for arbitration.

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