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SC refuses to stay LIC IPO process, issues notice to centre

The Supreme Court on Thursday issued notices to the central government on multiple pleas challenging the government move to dilute its share in Life Insurance Corporation (LIC) of India but refused to interfere with the IPO process for now.

The government had by way of an amendment to the 2021 Finance Act decided to trade 5% shares in the open market through an IPO. This was challenged both in the Madras and the Bombay High Courts. The High Courts had earlier refused to stay the IPO.

The IPO opened on May 4, 2022, and ended on May 9, 2022.The process of allotting shares to those who have subscribed to the IPO is now underway.

The disinvestment is expected to rake in over Rs 25,000 crore for the Consolidated Fund of India.

As per figures quoted by Additional Solicitor General K Natarajan in court today, the IPO was over-subscribed 6 times by policyholders as well.

The percentage share diluted was only 3.5%, he said. Some 22.13 crore equity shares of Rs 10 each were offered at Rs 939, as per the figures recorded by the court. The funds received will be utilised for the development of the country, the senior advocate argued.

A three-judge bench led by Justice DY Chadrachud also referred these petitions to a larger bench which is examining whether every bill can be designated as a money bill bypassing the scrutiny of the Rajya Sabha.

The petitioners, who have challenged the government move to divest its share in what is one of the largest insurance companies in the world, argued that it would change the nature of the company and jeopardise the interests of the policy holders.

95% of the surplus which used to go to the policy-holders will go to the shareholders now, their counsel Indira Jaising said. Senior advocate Shyam Divan appeared for some others who have challenged the parliamentary decision to change the laws to facilitate the IPO.

The central government argued that they had come to the court at the last minute and their prayers for interim relief cannot be granted. The court eventually rejected the plea for interim relief on the ground that it involved “investments” and as such the court would be reluctant to interfere with the process.

The other two judges on the bench were Justices Surya Kant and PS Narasimha. LIC controls over 66% of the insurance market in India.

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