The Finance Ministry has said Parliament never barred the government from cutting its stake in IDBI Bank, and that the Delhi High Court settled the point in 2018.
In a clarification issued on Saturday, the ministry responded to media reports that questioned the legal footing for reducing the government's holding.
The ministry said an amendment seeking to restrict dilution of the government's stake was moved during the 2003 Budget discussions and the debate on the IDBI (Repeal) Act, 2003.
It was rejected and never became part of the law.
It then pointed to the Delhi High Court's 17 December 2018 judgment in All India IDBI Officers' Association v. Union of India.
The court dismissed the petition and held that remarks made in Parliament about 15 years earlier could not override the enacted statute.
It also ruled that promissory estoppel did not apply, because the statements were not a representation on which employees could claim to have relied to their detriment.
The court found the 2003 Act unambiguous and said there was no scope to read into it any bar on the government reducing or selling its stake.
The ministry called the judgment significant because it directly addressed the doctrine that had been used to challenge dilution.
The clarification also traced the government's stated policy through successive Budgets.
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In 2016-17, then Finance Minister Arun Jaitley said the transformation of IDBI Bank had begun and that the government would consider reducing its stake to below 50%.
In 2021-22, Finance Minister Nirmala Sitharaman listed IDBI Bank among the strategic disinvestment transactions to be completed that year.
The statement comes days after the Cabinet Committee on Economic Affairs, on October 14, approved the sale.
Canada-based Fairfax Financial Holdings will acquire a combined 60.72% stake from the government and Life Insurance Corporation of India (LIC) for Rs 52,878 crore.
The plan also includes a proposed merger of CSB Bank with IDBI Bank within two years, subject to RBI and Sebi approvals. Fairfax holds about 40% of CSB Bank.
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The deal ends a process that stretched over five years, after the disinvestment was first announced in the Union Budget for 2021-22.
The government held 45.48% of the bank and LIC 49.24% before the sale. The government says the bank's recovery is complete, with gross non-performing assets at 2.32% and total business above Rs 6.27 lakh crore as of September 2026.
The ministry concluded that the 2003 legislative history, the 2018 ruling and the Budget speeches together show a consistent policy towards strategic disinvestment of the bank.
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