Bombay HC declines interim relief to LVB promoter entities in DBS merger spat

The Bombay High Court on November 26 declined to provide any ad interim relief to a group of LVB promoter entities which had sought a stay on the scheme of with DBS Bank India sanctioned by the central government in consultation with the Reserve Bank of India (RBI).

The court will next hear the matter on December 14, 2020. The detailed written order from the Bombay High Court is awaited.

According to the final scheme of amalgamation of Lakshmi Vilas Bank (LVB) with DBS Bank India, the entire amount of the paid-up share capital will be written off resulting in shareholders losing their entire investment.

The division bench of the Bombay High Court was of the prima facie view that the claim of the aggrieved promoter entities and shareholders of LVB was "monetary" in nature and could be decided at a later stage. Hence, they were not inclined to grant a stay on the scheme of amalgamation, according to people familiar with November 26’s courtroom proceedings

A day before the final scheme of amalgamation between LVB (LVB) and DBS Bank India becomes effective, the promoter group entities of the ailing south India-based lender had initiated legal action against the RBI, the Union of India, and DBS Bank.

According to people familiar with November 26’s courtroom arguments, the promoter group entities challenged the jurisdiction of the government authorities and argued that as shareholders, they required some compensation at least for their investments, if not the full amount. They alleged that equity value could have been reduced, but not written down to zero, adding that the sanctioned plan fell short of a “scheme of amalgamation”.

On the other hand, the opposing side highlighted the fact that as equity shareholders, the aggrieved parties were aware of the risks involved.

According to the final scheme of amalgamation of LVB with DBS Bank India, the entire amount of the paid-up share capital will be written off resulting in shareholders losing their entire investment.

The promoter group holds 6.80 percent stake in LVB. All the branches of LVB will function as branches of DBS Bank India with effect from November 27, 2020.

The writ petition has been filed at the Bombay High Court by Kare Electronics & Development Private Ltd, Pranava Electronics Private Ltd, and KR Pradeep.

“On and from the appointed date, the entire amount of the paid-up share capital and reserves and surplus, including the balances in the share/securities premium account of the transferor bank, shall stand written off,” the scheme states.

Moneycontrol could not immediately connect with the promoter group entities , the RBI, and DBS for an official comment.

Moneycontrol had earlier reported that institutional shareholders of LVB who are set to lose their entire investment are weighing legal action.

LVB-DBS merger: Facing a wipeout, LVB’s ‘shocked’ equity holders weigh legal action

Institutional equity investors in LVB include Indiabulls Housing Finance Ltd, which had a 4.99 per cent stake in the bank as of September 2020, Prolific Finvest Private Ltd (3.36 per cent), Srei Infrastructure Finance (3.34 per cent), MN Dastur and Co Pvt Ltd (1.89 percent), Capri Global Holdings Pvt Ltd (1.82 per cent), Capri Global Advisory Services (2 per cent), Boyance Infrastructure Pvt Ltd (1.36 per cent) and Trinity Alternative Investment Managers (1.61 per cent).