AUM Capital holds a little less than 0.50 per cent in LVB.
While refusing to give the stay, the Bench said no prejudicial action by DBIL should be taken against the shareholders of LVB without the court’s permission.
The court also asked DBIL to give an undertaking that the bank would give cash compensation to the shareholders of LVB if it was asked to do so.
The court said the reserve fund DBIL would create should be worth the face value of the shares of LVB and maintain it until further orders.
Reducing the book value of the shares to zero or rather a negative figure had not happened “in the public domain” and the shareholders, including AUM Capital, did not seem to be aware of the reasons for it, the court observed.
“Their interest therefore deserves to be protected in the manner now onwards in a legally permissible manner, till the respondents file their counter and satisfy the Court and the writ petition is disposed of, as the petitioner has made a prima facie case,” said the Bench.
The court observed the “Draft Amalgamation Scheme and Powers of Moratorium and Supersession of Board”, etc. appeared to have happened “in a fast track”. Barely in a week (November 17-25), the exercise under Section 45 (of the Banking Regulation Act) appeared to have been completed, leaving the shareholders of LVB in the dark.
“This aspect of the matter calls for a judicial review and that is why we are inclined to admit this writ petition,” said the court, which turned down the request of the Reserve Bank of India (RBI) and DBIL that the interim order might be kept in abeyance for three weeks.
During the hearing, Raman and Datar argued the shareholders’ interests were not protected, the amalgamation decision was “arbitrary and devious”, and sufficient notice was not given to the LVB shareholders to submit their objections to the draft amalgamation scheme. Few submitted their objections, but no change was made in the draft, they said.
Datar said the capital of over 97,000 shareholders was wiped out overnight while the apex court had said that at least 5 days’ time be given.
The counsels argued it was the first time the shareholders’ value was wiped out while amalgamating a bank under Section 45 of the Banking Regulation Act. They said there should have been a bidding process for LVB.
Ravi Kadam, senior counsel appearing for the RBI, said the regulator took the decision to protect the interests of depositors and saw fit to frame a scheme of amalgamation of LVB with a healthy and financially sound bank.
R Sankaranarayanan, additional solicitor general appearing for the Centre, said the RBI and Centre were empowered to protect the interests of small depositors. Therefore, it became necessary for the Central government to invoke the powers, he said.
A R L Sundaresan, senior counsel of DBIL, said the present petitioner and other shareholders of that company could not claim anything in any manner from DBIL, whose rights could not be altered or prejudiced by interfering with the scheme.
He urged the court not to grant an interim relief even if the writ petition was admitted for hearing.
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