Supreme Court on Friday issued notices to the Union government and public sector oil majors Hindustan Petroleum Corporation and Bharat Petroleum Corporation on a public interest litigation challenging the Centre's decision to privatise the two refiners.

A Bench comprising Chief Justice V N Khare and Justice S B Sinha issued the notices on a petition filed by the Oil Sector Officers' Association, challenging the government's divest plans.

• The Divestment Development

The Bench also issued notices to the respondents on an interim prayer of the petitioner seeking stay of the divestment process.

Arguing for the petitioner, senior advocate F S Nariman said the government could not have divested its share in the oil PSUs through an executive order as it had to enact a parliamentary legislation to this effect.

The government had on January 26 decided to sell its 34.01 per cent stake in HPCL to a strategic partner and offload its 35.02 per cent stake in BPCL through public offering in domestic and overseas capital markets.

After the proposed divestment and offer of five per cent stake at concessional rates to the employees, government's shareholding in HPCL was to come down to 12 per cent and that in BPCL to 26 per cent.

Divestment Minister Arun Shourie has maintained that privatisation of the two oil PSUs, which were nationalised through an Act of Parliament in 1970s, did not need Parliament approval.

Shourie's argument was, however, countered by the opposition parties and trade unions, which said privatization of HPCL and BPCL, which together have 40 per cent share in the $15 billion oil retail market, should be ratified by Parliament.

The government then sought an opinion of Attorney General Soli Sorabjee. Sorabjee said sale of the government stake in HPCL and BPCL did not need Parliament approval.

It was argued that the board of the companies were empowered to take decisions on crucial matters like winding up companies without Parliamentary approval. Parliament had also specified cases where the government ought to come back to it before taking a decision.

These include the Coal Mines Nationalisation Act and the Banks Nationalisation Act.

Even in case of textiles mills, where 119 mills were acquired through legislation and the government had decided to close down 66 of these, there were no specific restrictions in the Act.