They said the Centre and RBI
are free to proceed further with the merger as per the scheme. The bench adjourned the hearing to January 21 and asked the Centre and the RBI
to file counters, while rejecting RBI
and DBS India request to keep in abeyance the order not to take any further actions prejudicial to the shareholders of LVB for three weeks.
The petitioner alleged that the merger scheme had been devised in violation of the Banking Regulation Act
which requires the RBI to take into consideration all the stakeholders of the bank that is being merged.
The Madras High Court
has asked DBS Bank
India to give an undertaking that it would compensate the shareholders of LVB in case the writ petition filed against the amalgamation scheme is decided against it
“It was argued that after protecting the interests of depositors and the creditors, one has to explore the avenues for protecting the shareholders, but here it was not done. The decision taken to merge LVB with DBS Bank India was arbitrary and devious,” PS Raman, who appeared for the petitioner, said.
He said the court was also told that DBS Bank India was ready to acquire 50 per cent stake in LVB earlier for about Rs 5,000 crore which the RBI declined then, but now the entire LVB is given free of cost to DBS Bank India.
“The court was told that thousands of shareholders had subscribed to LVB’s premium rights issue and in seven months time what would have gone wrong,” Raman told the court.
The lawyer further argued that sufficient notice was not given to the LVB shareholders to submit their objections to the draft amalgamation scheme.
He added, the capital of over 97,000 shareholders was wiped out overnight while the Supreme Court had said at least five days time should be given.
He pointed to the court though the shareholders had submitted their objections to the draft amalgamation scheme, no change was made in the draft and it was announced as the final scheme.
Appearing for AUM, Datar expressed grievance over the entire capital of over 97,000 individual investors being wiped out overnight by way of the amalgamation scheme.
Datar also told the court that it was the first time the shareholders value was wiped out entirely while amalgamating a bank under Section 45 of the Banking Regulation Act.
He said there ought to have been a bidding process for LVB.
The counsel for RBI argued that the stay against the amalgamation should not be given as it would result in chaos.
On Thursday, the Bombay High Court on Thursday refused to grant stay on the final scheme of amalgamation between DBS Bank and Lakshmi Vilas Bank
which will came into effect today. A group of promoter entities had initiated legal action against the Reserve Bank of India, the Union of India & DBS Bank, seeking claims for shareholders whose entire equity will be wiped out post the amalgamation.
A writ petition was filed in the Bombay High Court by Kare Electronics & Development Pvt Ltd, Pranava Electronics Pvt Ltd and K R Pradeep. A separate petition was filed by Indiabulls Housing Finance
which holds 4.99 per cent in LVB. The petition stated while the promoters are not against the amalgamation per se, they argued that LVB has been given away by RBI in a hurry without taking into account shareholders' interest, said the person cited earlier.