MUMBAI : The Mumbai High Court on Thursday refused to grant the suspension of the final plan of merger between DBS bank and Lakshmi Vilas bank, which will take effect on Friday. A group of promoter entities had taken legal action against the Reserve Bank of India, the Union of India and the DBS Bank, seeking claims for shareholders whose total capital will be eliminated after the merger.
At the hearing held on Friday, the court said it is not willing to suspend the merger plan that will take effect from November 27. Let the parties submit their affidavits and the arguments will be heard on December 14, “said a person who attended the court hearing. The matter was heard by Judge Nitin Jamdar and Judge Milind Jadhav.
Kare Electronics & Development Private Ltd, Pranava Electronics Private Ltd and KR Pradeep filed a petition in the Bombay High Court. Indiabulls Housing Finance filed a separate petition, which owns 4.99% of LVB. The petition said that while the promoters are not against the merger per se, they argued that LVB has been hastily delivered by RBI without taking into account the interest of shareholders, the person quoted above said.
RBI, on the other hand, argued that the bank has a negative network and every effort was made to revive it, which failed. Therefore, RBI had to go ahead with the merger in the public interest and in the interest of the depositors. LVB has almost 4000 employees and 20 lakh depositors. Therefore, the RBI has exercised its powers in accordance with the law.
According to LVB’s final merger scheme with DBS Bank India, the full amount of paid-up share capital will be written off, causing shareholders to lose their entire investment. LVB’s retail shareholders, who own 23.98% of its shares as of September 30, will be left with absolutely nothing, and RBI will propose to delist the bank’s listed shares or bonds after the merger.
As of September 30, foreign portfolio investors (FPI) had 8.65% and insurance companies, including Life Insurance Corp. of India, had 6.40% of LVB. FPIs include India Opportunities Growth Fund Ltd-Pinewood Strategy, EQ Assets, and Aviator Emerging Market Fund. Aditya Birla Sun Life Insurance and Pramerica Life Insurance had 1.83% and 2.73%, respectively.
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