BusinessWorld magazine has a sensational scoop based on the internal minutes of the Core Group of Secretaries on Disinvestment, showing how rules were changed for the controversial privatisation of IDBI Bank, which was sold to Canada-based Fairfax Financial Holdings for Rs 52,878 crore ($5.55 billion) at Rs 81 per share.The internal minutes state that the initial sealed bids from Fairfax and another entity came well below the confidentially set minimum reserve price of Rs 94.42. The Fairfax bids came at Rs 75.So what do the babus do? They pull off something unprecedented but do it openly and transparently. They move to another valuation method, and ask Fairfax and another bidder (strangely not named because it was later rejected by the home ministry for security reasons!) to give new bids.This time Fairfax bids Rs 81 per share, still well below the original reserve price of Rs 94.42. Then Fairfax says this is the final offer and it would withdraw if not accepted. The government accepts it and also gives some relief on disputed tax claims on IDBI Bank. The taxpayer also makes a hefty contribution here!The deal goes through at Rs 81 per share and the internal note strangely gives reasons for why this sale was necessary for the government at this juncture: fiscal stress on the Union government due to high energy prices, lack of FDI inflows and the currency under strain because of the global energy crises!As per the BusinessWorld report, the justification for the change of rules and methodology for the sale of IDBI Bank came from the General Financial Rules for the sale of government physical assets (but not shares). Then it cites the Railway Stores Code on auctioning scrap:“Bids lower than the reserve prices may, however, be accepted by the Depot Officer where found expedient provided the Depot Officer doing so records his reasons in writing.”In my 40 years of journalism I have not come across such a justification for privatisation.Illustration: Pariplab Chakraborty.A former secretary in the NDA-led Union government, Satyanarayan Mohanty, says the normative legal position is that when the government changes the rules of bidding after shortlisting and opening the bids, then the offer must be made de novo to everyone as new bidders might want to participate under the changed rules.Clearly, the Core Group of Secretaries chose not to follow this principle. One doesn’t know how this position can be justified legally by the government.The other odd thing is that another bidder was rejected by the home ministry on grounds of national security and the name of that entity is withheld. One doesn’t know what necessitated the name of the losing bidder to be withheld. This too has no precedent.BusinessWorld‘s Palak Shah must be commended for this investigation.(Post script: In 2017-2018, IDBI Bank was near collapse with gross non-performing assets peaking near 28-30%. It was placed under the Reserve Bank of India’s strict Prompt Corrective Action framework, which severely limited its operations. To prevent a deeper banking crisis, the government directed the state-owned Life Insurance Corporation (LIC) to step in. In January 2019, LIC infused Rs 21,624 crore to acquire a 51% controlling stake.)This piece was first published on The India Cable – a premium newsletter from The Wire – and has been republished here. To subscribe to The India Cable, click here.