A petition has been moved by the All-India IDBI Officers’ Association in the Delhi High Court seeking direction to the Centre disallowing it from reducing their shareholding in IDBI Bank Ltd below 51 per cent from the existing 77 per cent.
*The Petitioner prays for direction to LIC disallowing it from acquiring 51 per cen stake in IDBI Bank and directions to regulatory authorities disallowing them from giving permission to LIC to obtain a 51 per cent stake in IDBI Bank.
*The reduction of 51 per cent stake by the Government of India in IDBI Bank Ltd and acquisition of 51 per cent stake by LIC is ultra vires of the Industrial Development Bank of India Act, 1964 and the Industrial Development Bank (Transfer of Undertaking and Repeal) Act 2003, when read in conjunction.
*The said loss of status as a “public sector bank” shall adversely affect the employment conditions of the employees of the IDBI Bank especially the SC/ST and the OBC employees.
*Further, the said acquisition is not in public interest since it exposes the investments made by the public in IDBI, corrodes the ability of LIC to pay back its policy holders since it will have to invest an amount of Rs 13,000 crore to acquire a 51 per cent stake, allows the Government to shift its responsibility of development onto LIC and paves the path for the future privatization of IDBI Bank Ltd.
*Deposits, IDBI was converted into a “Deemed Banking Company” through IDBI (Transfer of Undertaking and Repeal) Act, 2003. IDBI was renamed as IDBI Ltd. The then Hon’ble Finance Minister of the NDA Government on the floor of the Parliament on 08.12.2003 had assured that post the conversion, Government of India, shall at all times, maintain not less than 51 per cent of the issued capital of the Company.
*This solemn assurance forms a part of the records of the Parliamentary Committee on Assurances formed the very basis for the ultimate passage of the IDBI (Transfer of Undertaking and Repeal) Bill, 2002.
*The IDBI (Transfer of Undertaking and Repeal) Act, 2003 under Section 4, contemplates a similar scheme of arrangement. The intent of the Legislature while amending the IDBI Act, was never to dilute the stake of the Government of India below 51 per cent.
*The dilution of government holding will have an adverse impact on the employees of IDBI Bank Ltd. The reservation policy of the IDBI Bank is as per Government policy and guidelines. Once IDBI Bank Ltd loses is status as a government company, it will no longer have the mandate to follow the reservation policy of the Government which will have negatively impact around 2,000 plus employees of IDBI Bank who fall under the SC/ST/OBC category.
*Further, the remuneration policy of IDBI Bank Ltd. is determined by the Government or with the approval of the Government. After the said dilution, the Government will no longer be the determinant of the remuneration policy
*However, after losing it status as a public bank, IDBI Bank Ltd will no longer have the obligation to offer the said terms and conditions of employment. The said acquisition is a major blow on the confidence of the employees since one of the major reasons for why they sought employment in IDBI Bank Ltd was because of its status as a “national bank”.
*The said acquisition by LIC is also in violation of Section 27 A sub Section (2) Clause 1 of the Insurance Act and Amendment 10 of Regulation 5B of the Insurance Act (Laws and Regulations) 2013, which prevents the insurer to acquire more than 15 per cent stake in a particular company
*Further the said acquisition will have an adverse impact on the general public since the said acquisition will expose the 10,000 crores which the general public had invested in IDBI Bank Ltd since the Government of India will no longer have the obligation to secure the said investment.
*The said acquisition is not a financially prudent decision for LIC given the fact that IDBI Bank has gross NPA’s amounting to a whopping Rs 55,588.26 crore.
*The said investment will be made from the funds of 38 crore policy holders of LIC who have invested their hard earned money to secure their own futures.
*The said investment made by LIC will adversely hamper its own abilities to pay its insurance holders. The acquisition is also in violation of the Insurance Act and its regulations since insurance companies are not allowed to hold more than a 15 per cent stake in another company. Hence, the instant petition.
1. IDBI was later sought to be converted into a Deemed Banking Company through IDBI (Transfer of Undertaking and Repeal) Bill 2002 with the avowed objective of facilitating IDBI to discharge its mandated development finance institution role in an effective manner by lowering its costs of funds through accessing low cost retail deposits viz. Saving bank and current account deposits.
2. In the 13thLokSabha, the Parliamentary Standing Committee on Finance under the Chairmanship of Shri. N. JanardharshanaReddy in detail, dealt with the IDBI (Transfer of Undertaking and Repeal Bill) 2002. Spelling out the objectives of the present Bill, the Ministry of Finance has furnished their written submission as under
3. The Parliamentary Standing Committee in its report at Para 33 had also recommended as under “ The Committee are given to understand that there is a huge investment of Rs 10,000 crores by the general public in IDBI which is not secured. They are of the opinion that this dispensation holds good so long as IDBI is a Government owned banking company, but the day the Government holding in converted IDBI comes below 51 per cent there will be chaos-like situation in the country making investors panicky. Hence, they recommend that the Government should make provisions which will ensure that the government’s shareholding in IDBI do not come below 51 per cent”
4. The Bill was subject matter of extensive debate on 4.12.2002, 21.08.2003, 8.12.2003 in LokSabha and 15.12.2003 in RajyaSabha. Having regard to the recommendations of the Parliamentary Standing Committee on Finance as also the strong sentiments expressed by the Hon’ble members of Parliament, the then Hon’ble Finance Minister, Shr. Jaswant Singh categorically assured the LokSabha on 8.12.2003 that the Government shall, at all times, retain its share holding at not less than 51 per cent.
5. That in March 2004, a trust was created by the Government of India to acquire by transfer the Stressed Assets of IDBI and for managing these assets with a view to recovering the amount due on these assets. The Government as a settler, set up a special purpose vehicle in the form of a Trust and created the Stressed Assets Stabilisation Fund (SASF). The Government then invested Rs 9,000 crores in SASF in the form of non-interest government of India IDBI Special Securities 2004 redeemable in 20 years, SASF assigned these special securities of Rs 9,000 crore to IDBI Bank , which in turn transferred NPASs with Loan Outstanding of Rs 9,000 crore to SASF. The said fund was under the scrutiny and was to be accounted for by the Comptroller Auditor General.
6. That vide letter dated 15th April, 2005, the Reserve Bank of India wrote a letter to the Chairman, IDBI Bank Ltd regarding the categorisation of IDBI Bank Ltd. The Reserve Bank of India confirmed that “Considering the shareholding pattern, IDBI Ltd. may be considered as a Government owned bank. In view of the assurance by the Parliament given on 8th December, 2004 by the Finance Minister during the discussion of the Repeal Bill, 2003 that the government holding in IDBI would always be above 51 per cent, IDBI is categorized under a new sub- group “Other PSBs”.
7. The grounds on which they made the representation were that there seemed to be a distinct differentiation in treatment to the IDBI Bank vis-a-vis the other Public Banks. Secondly, there was an apprehension regarding the fate of the SC/ST and OBC members of the Bank, once the IDBI Bank was put on the road to privatisation. Thirdly, neither the IDBI Act, 1964 nor the Repeal Act, 2003 had mentioned about privatisation of the Bank and hence such acquisition by LIC was uiltra vires of the said Acts.
8. That on 08.07.2016, an RTI reply was received, as filed by Sh. Suresh Y Pawar with reference to the question that “ Whether shareholdings of LIC in a company is considered to decide whether the investee company is a Govt. Company as defined under the Companies Act, 2013?” The reply to the query is as follows “applicant is informed that LIC Shareholding is not considered to decide whether the investee company is a Government company.”
As per certain news articles, the finance ministry is likely to infuse about Rs 10,000 crore within a few days in some state-owned lenders including PNB, Corporation Bank and Central Bank of India, to help them meet the regulatory capital requirement since they are saddled with NPAs of about Rs 10 lakh crore.Out of 21 public sector banks, 13 have already taken the approval of their boards or shareholders for raising capital through the equity market. These media articles clearly show that there is differential treatment of IDBI Bank as compared to other banks.
9. That various media articles show that even the LIC employees are vehemently opposed to the LIC acquisition in IDBI since they are of the opinion that the said move will affect the ability of LIC to pay back its policy holders.