By Abhishek Prabhat BBC correspondent in Delhi

The privatisation of the oil majors faces resistance

The court says the government cannot go ahead with plans to sell Hindustan Petroleum and Bharat Petroleum Corporation Limited without parliamentary approval.

Oil sector workers had objected to the sell off plan fearing job losses after privatisation.

Reacting to the court order, India's Disinvestment Minister, Arun Shourie, said it would have "far-reaching consequences" for the country's economic reform process.

Setback

A two-judge bench of the country's highest court said that since the two companies were nationalised by parliament, only parliament - and not the cabinet - can sign off on their sale.

If for all these companies we have to go back to the legislatures than naturally the process will become infinitely more complex and uncertain Arun Shourie Disinvestment Minister

"The government by itself cannot privatise those companies which have been set up by an act of parliament," the judges said.

Mr Arun Shourie said he would immediately stop all moves to sell the companies but added a note of caution.

The minister said that many state-run companies were set up under laws enacted by legislatures.

"If for all these companies we have to go back to the legislatures than naturally the process will become infinitely more complex and uncertain," he told the BBC.

Profit-making

The court was ruling on a petition filed by oil sector workers and a public interest petition challenging the government plans to sell the two companies.

The workers also said that since the two companies were profit-earning, the government had no reason to sell them off. HPCL and BPCL between them supply 40% of India's $15b retail oil market.

The government had planned to sell 34% of its stake in HPCL to a single investor and float 35% of BPCL in the market in its drive to raise nearly three billion dollars by March next year through asset sales in state-run companies.

The privatisation of the two companies was cleared by the cabinet in January this year despite stiff resistance by some of the key allies of the government.

Analysts said Tuesday's court order was a setback for the government whose privatisation process has repeatedly run into trouble.

They said it will not be easy for the government to get a parliamentary nod for the sale of the two companies when it was in a minority in the upper house, the Rajya Sabha.

Meanwhile, the stocks of the two companies fell sharply on the country's main stock exchange in Bombay (Mumbai).