The Bombay High Court has allowed the Reserve Bank of India (RBI) to complete the process of merger of LVB into DBS as per schedule.
The Bombay High Court has dismissed the petition of promoters of Laxmi Vilas Bank (LVB) against the merger with DBS Bank. It has allowed the Reserve Bank of India (RBI) to complete the process of merger of LVB with DBS as per the schedule. The merger of LVB with DBS Bank became effective from Friday.
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However, a bench of Justices Nitin Jamdar and Milind Jadhav has approved the petition of the promoters and shareholders seeking compensation. The next hearing of the case will be held on 14 December. In this case, promoters and shareholders, including Indiabulls Housing Finance, have approached the court against the RBI, the central government and DBS Bank.
In this case, RBI senior advocate Ravi Kadam said, “The merger plan has got the approval of the central government. Now it has got the legal recognition of the government, which cannot be challenged.” He said that the situation of the bank (LVB) was deteriorating day by day and about Rs 700 crore of negative net worth had been reached.
Promoters’ lawyer Darius Khambata said the RBI’s move was beyond the scope of Section 45 of the Banking Regulation Act. He said that it is necessary for the RBI to take care of the interests of all parties under this act. He said that LVB shareholders have been completely ignored in this case.
Under the merger scheme of LVB in DBS Bank, the equity capital, reserves and surpluses of LVB have been completely written-off (zeroing value). Because of this, the shareholders of LVB have got nothing. Promoters of LVB include Care Electronics & Development Pvt Ltd, Pranav Electronics Pvt Ltd and KR Pradeep.