While the Central Government recently approved a merger between Lakshmi Vilas Bank Limited (LVB) and DBS Bank, the Bombay High Court has refused to offer an interim stay on the merger. This essentially means that the merger will go through without any obstacles.
The High Court said that it wasn’t offering a stay on the merger as the reliefs that are sought by the shareholders and customers of the bank were of “monetary terms” and that these can be decided at a later stage of the hearing.
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Lakshmi Vilas Bank will begin normal operations as DBS Bank India Limited starting November 27. The merger was proposed by the Reserve Bank of India (RBI) while the Central Government formally approved the scheme on Wednesday.
The RBI has previously said that the moratorium on Lakshmi Vilas Bank will be lifted on Nov 27, thus allowing its customers to withdraw funds without any limits.
The decision to merge the two institutions was challenged at the Bombay High Court on November 26 by shareholders as well as promoters of LVB which includes Kare Electronics & Development Private Limited, Pranava Electronics Private Limited, and K R Pradeep who is a promoter of Indiabulls Housing Finance. The petitioners had sought interim relief in the form of a stay of the merger until the hearing.
Given the urgency involved, a division bench consisting of Justices Nitin M Jamdar and Milind N Jadhav heard the case through video-conferencing and subsequently refused the interim relief sought by the petitioners.
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Senior advocate and counsel for the RBI, Ravi Kadam addressed the concerns of the petitioners.
“The petitioners are mere shareholders, they are risk-takers, but RBI has to protect the interest of account holders and depositors who are not shareholders… This amalgamation scheme is a legislative act and petitioners cannot seek to stay on it. Continuity of the financial system, economy and depositors’ interest is important,” he said.
Kadam further said that LVB has a negative net worth of nearly ₹700 crores. In opposition to the Indiabulls Housing’s request for relief, Kadam said that they purchased shares in LVB to take over the institution. When this couldn’t happen, they are now seeking compensation, he added.
The High Court has scheduled the next hearing on the matter for December 14 where it will hear responses from other parties in the case.
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