SC denies interim relief to policyholders seeking stay on LIC IPO shares allotment

New Delhi: The Supreme Court Thursday refused to grant any interim relief and stay the LIC IPO share allotment on a batch of pleas filed by some policyholders.

A bench of Justices DY Chandrachud, Surya Kant, and PS Narasimha said that the court should be reluctant to grant any interim relief in matters of commercial investments and IPO.

Having regard to the facts which have been drawn to the notice of the court, we are of the considered view that no case for the grant of interim relief is made out. We, therefore, decline interim relief, the bench said.

It issued notice to the Centre and LIC on a writ petition filed by some policyholders and on an appeal filed against the judgement of the Madras High Court and transferred to itself a plea pending before the Bombay High Court on the issue.

The apex court directed that replies are filed in eight weeks and rejoinder affidavits be filed thereafter in four weeks as it tagged the present proceedings with the pending matter on the issue of money bill before the larger bench.

The bench said, On the aspect of whether any case is made for grant of interim relief, the court must be guided by the well-settled parameters namely -the existence of prima facie case, the balance of convenience and irreparable harm and injury.

It said that on the aspect of constitutional issue pertaining to the passage of money bill and on the construction of section 28 of LIC Act, it is inclined to issue the notice as it would be necessary to observe that the submission which has been made on behalf of petitioners would warrant further deliberation.

The LIC IPO opened on May 4 for retail and other investors and is set to be allotted on Thursday.

The bench noted that as many as 73 lakh applicants both in India and around the world have subscribed to the LIC's IPO and the IPO has been oversubscribed six times even in the category which has been especially reserved for the policyholders.

The top court said that it is necessary to note the percentage dilution of the shareholding of the LIC as a result of the offer for sale is to the extent of 3.5 percent and 22.13 crore equity shares of a face value of Rs 10 each is being offered at a premium of Rs 939.

The bench said that the expected receipt into the consolidated fund of India is estimated to be Rs 20,500 crores and the IPO has been oversubscribed by 2.95 times by the general public.

It noted the submission of Additional Solicitor General N Venkatraman, appearing for the Centre and LIC that section 28 of the LIC Act as originally enacted did not confer any contractual right to the participating policyholders to appropriate 95 per cent of the surplus and the distribution of surplus was in all material time dependent upon notification of the Central government.

It noted that no statutory guarantee has been issued to the participating shareholders on the distribution of a particular quantum of the surplus and the amendment which has been brought by the Finance Act envisages allotment of shares to shareholders in the LIC.

During the hearing, Venkatraman further opposed the grant of any interim relief and adverted to various relevant dates having a bearing on the balance of convenience and said that irreparable harm would be caused, if any interim relief is granted.

He submitted that the bill which eventually resulted in the Finance Act, of 2021 was passed on March 28, 2021, nearly 15 months ago, and the petition under Article 32 which has been instituted before the court was filed on May 9, 2022, which is the date on which the LIC IPO stands closed.

He pointed out that the appeal has been filed against the Madras HC verdict dated March 21 on May 2 and similarly is the appeal filed against the Bombay HC order of April 11.

At the outset, senior advocate Indira Jaising, appearing for the petitioner policyholders, said that the process which has led to the enactment of the amendment to the LIC Act was on the basis that the Finance Act was the money bill and the issue has been referred to the larger bench in 2020.

She said as a result of the amendment to section 28 of the LIC Act, 1956, the character of the LIC which is in the nature of a mutual benefit society is sought to be converted to a joint-stock company.

She added this amounts to an expropriation of the surplus and its distribution in the participating policyholders to the shareholders to whom the shares will be allotted as the result of the IPO.

Jaising said earlier 95 percent of the surplus went to participating policyholders while five per cent was retained by the Central government, which was just a trustee of the LIC.

She added the entitlement of the participating policyholders would be altered by the amendment which has been brought about by the Finance Act, 2021 to the provisions of the LIC Act and would be in violation of the provisions of the Constitution.

The top court noted that by the Finance Act of 2021, an amendment was brought to the LIC Act and on February 13, 2022, a draft red herring prospectus was filed with SEBI for the Initial Public Offering (IPO) of LIC.

It noted that on April 26, 2022, the red herring prospectus was made available on SEBI's website, indicating a price band of Rs 902 to Rs 949 per equity share with a discount of Rs 60 for the policyholder.

On April 27, a price band advertisement was published and the government announced that LIC's IPO will be opened on May 2for anchor investors and from May 4 to May 9, 2022, for the general public.

(With agency inputs)

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