In a massive sale, the government has sold enemy shares worth about Rs 1,150 crore in Bengaluru-based IT major Wipro. These shares have been sold to Life Insurance Corporation (LIC), General Insurance Corporation and the New India Assurance Corporation.
The 44.4 million enemy shares held by the Custodian of Enemy Property for India (CEPI) was sold at Rs 259 apiece on the Bombay Stock Exchange. The proceeds from the share sale will be part of the government’s divestment plan.
Here are five things to know:
What is an enemy property?
An enemy property refers to assets left behind by people who are no longer citizens of India and have migrated to either Pakistan or China. This is defined under the Enemy Property Act in 1968, which was put in place after the Indo-China war of 1962 and India-Pakistan War of 1965. Post these wars, the government confiscated properties of those who migrated to China and Pakistan, including movable properties such as shares (or securities) and jewellery.
In 2017, this Act was amended stating that successors of those who migrated to Pakistan and China during Partition, will not have a claim over properties left behind in India.
In the case of Wipro, the shares reportedly belong to two Pakistanis.
Who manages these properties?
After the Enemy Property Act was enacted in 1968, these properties were entrusted with the Custodian of Enemy Property of India (CEPI) to preserve and manage.
There are about 6.5 crore shares belonging to 20,323 shareholders in 996 companies under CEPI’s custody. Of these, 588 companies are functional currently and 139 are listed on the stock exchange.
What is the process for selling enemy shares?
The sale of such shares has to be approved by the Alternative Mechanism (AM) under the chairmanship of the Finance Minister and comprising Minister of Road Transport and Highways as well as the Home Minister.
The AM will be supported by a High Level Committee (HLC) of officers co-chaired by the Secretary, Department of Investment and Public Asset Management (DIPAM). and Secretary, MHA (with representatives from DEA, DLA, M/o Corporate Affairs and CEPI) that would give its recommendations with regard to quantum, price/price-band, principles/ mechanisms for sale of shares, etc.
Before any sale of enemy shares is initiated, the CEPI will have to certify that selling these shares doesn’t contravene any judgement or order of any court or authority and that it can be disposed of by the government.
DIPAM will appoint advisors and intermediaries such as Merchant Bankers, Legal Adviser, Selling Brokers etc, through an open tender/limited tender process. An Inter-Ministerial Group (IMG) will guide the process of sale. The shares are valued at current price.
Why is the government selling these shares now?
In November 2018, the Cabinet gave permission to the Department of Investment and Public Asset Management (DIPAM) to sell ‘enemy shares’ held in companies. The Cabinet chaired by PM Modi gave ‘In principle’ approval for sale of enemy shares under the Custodian of Enemy Property of India (CEPI), as per sub-section 1 of section 8A of the Enemy Property Act, 1968.
The decision also noted that sale proceeds should be deposited as disinvestment proceeds in the Government Account maintained by Ministry of Finance. At current market value, the government expects to mop up Rs 3000 crore through the sale of all 6.5 crore shares in its custody.
While announcing the same, the government said that the decision will lead to monetisation of movable enemy property, which has been lying dormant for decades. Sale proceeds from this may be used for development and social welfare programmes.
The government had carried out its first-ever sale of ‘enemy shares’ in March this year, when it mopped up Rs 700 crore.
How many ‘enemy properties’ has the government identified?
According to reports, the government began identifying properties in January 2019. There are reportedly a total of 9,400 properties worth over Rs 1 lakh crore.
Of these, 9,280 properties were left by Pakistani nationals, of which 4,991 properties are in Uttar Pradesh, 2,735 in West Bengal and 487 properties in Delhi.
126 properties were left behind by Chinese nationals. Of these, 57 are located in Meghalaya, 29 in West Bengal and seven in Assam.
With inputs from Luke Koshi