The marathon remaining listening to that has been going down for the previous few months on an enormous batch of instances filed in opposition to the merger of Lakshmi Vilas Financial institution (LVB) with DBS Financial institution India Restricted, in 2020, is nearing completion earlier than the Madras Excessive Courtroom. The Supreme Courtroom had, in 2022, transferred all instances filed in opposition to the merger earlier than varied Excessive Courts throughout the nation, to the Madras Excessive Courtroom.
Showing earlier than the primary Division Bench of Chief Justice Sanjay V. Gangapurwala and Justice D. Bharatha Chakravarthy on Monday, February 5, 2024, Senior Counsel Vijay Narayan wound up his arguments on behalf of the Reserve Financial institution of India (RBI). Thereafter, the judges adjourned the listening to to Wednesday, February 7, for listening to others, and requested Senior Counsel Satish Parasan, representing DBS, to wind up his arguments on Thursday, February 8.
In his submissions, Mr. Narayan advised the court docket that if there was one establishment within the nation that had remained blemish-less within the final seven a long time since Independence, it was the RBI. Due to this fact, there was no motive to even suspect that the RBI had any malafide intention behind the merger. “Whatever was done, was done in the best interests of the entire banking sector,” he advised the Division Bench.
Stating that LVB had a destructive internet price, he stated, each the shareholders in addition to the depositors would have suffered large losses if the financial institution had collapsed and wound up as a substitute of being merged with DBS. Stating that its property have been additionally negligible, he stated, LVB would have been capable of repay solely 45-50% of the deposits it had obtained from its prospects.
“It would have become a huge financial scandal that would have had a ripple effect on the banking system in the country,” he stated and added that the RBI had averted such a calamity. He additionally acknowledged that as many as 12 banks didn’t present any curiosity within the merger and that solely DBS was prepared. He stated the names of these banks may very well be disclosed to the court docket in a sealed envelope although they might not be made public so as to preserve confidentiality.
In his preliminary submissions, Mr. Parasaran stated, LVB was in a precarious situation earlier than the merger and that its capital was within the destructive. Even to fulfill the regulatory necessities, LVB was in want of ₹1,711 crore, he stated, earlier than the judges determined to proceed the listening to on Wednesday and Thursday.
When the primary case in opposition to the merger was heard by the Madras Excessive Courtroom on November 27, 2020, one other Division Bench of Justices Vineet Kothari (since retired) and M.S. Ramesh had kept away from staying the merger because it was represented that it already got here into impact from 12 a.m. that day.
The judges, nevertheless, restrained DBS Financial institution India Restricted, a subsidiary of DBS Singapore, from taking any motion prejudicial to the pursuits of shareholders of LVB with out the depart of the court docket. In addition they directed DBS to furnish an enterprise that it will present money compensation to LVB shareholders if the court docket orders so in future.
It was additional ordered that DBS ought to create a separate reserve fund in its personal books of accounts to the extent of the face worth of the shares of LVB and preserve the identical, topic to additional court docket orders. The interim orders have been handed on the writ petition filed by West Bengal-based AUM Capital Market Personal Restricted, a retail investor holding 13 lakh shares in LVB.
Senior Counsel Arvind P. Datar and P.S. Raman had questioned the necessity for Reserve Financial institution of India to have moved the proposal for the merger and the Centre’s approval to it at break neck pace. They claimed that LVB was in strong well being and its ebook worth, in addition to market worth within the inventory trade, was pretty good.
The petitioner contended that all of a sudden, the RBI in addition to the Centre invoked their powers beneath Part 45 of the Banking Regulation Act for the merger and framed a scheme which decreased the ebook worth of the shares of LVB to zero.