Madras HC gives some interim relief to LVB shareholders but refuses to interfere in merger

The Madras High Court has released an interim order giving certain directions to protect the interests of the Lakshmi Vilas Bank (LVB) shareholders. The court, however, refused to interfere in the amalgamation of the bank with DBS.

In its interim order, Madras HC has dictated that no further prejudicial action should be taken against the LVB shareholders by the respondents, legal news portal, Bar and Bench. Also, DBS Bank should submit an undertaking in the court that they will pay the designated amount, in case the court concludes and orders it to provide compensation to LVB.

In addition to that, like security, DBS Bank should keep a separate reserve fund in its books of account, containing amount equivalent to the face value of shares of the transferor company (LVB) and maintain the same subject to further orders. A bench comprising justices Dr Vineet Kothari and MS Ramesh issued the interim directions.

Further, the court added that even if the authorities can bring down the share value during an amalgamation under Section 45 of the Banking Regulation Act, reducing it to 0 or negative value cannot be done without citing any strong reasons.

On Thursday, Moneycontrol first reported that four more investors plan to file separate petitions in the Madras High Court, approaching the judiciary against certain provisions in the LVB-DBS Bank amalgamation scheme, chiefly the clause that writes off all equity investments. The main concern for investors and promoters is the valuation part of the scheme.

On Thursday, the Bombay High Court turned down the petition filed by investors and promoters to stay the DBS-LVB merger scheme. The court, however, said the promoters’ claim, being a monetary claim, can be considered at the time of disposal of petitions. Promoters are hopeful that their plea shall be addressed on account of the monetary loss following equity write off.

The bank’s business has contracted over the years. Total business summed up to Rs 37,595 crore at the end of September 2020, as against Rs 47,115 crore at the end of September 2019. The net loss after tax was placed at Rs 396.99 crore for the quarter ended September 30, as against a net loss of Rs 357.18 crore in the year-ago quarter.

Major shareholders in the LVB include Indiabulls Housing Finance (4.99 per cent), Prolific Finvest Private Ltd (3.36 percent), Srei Infrastructure Finance (3.34 percent), MN Dastur and Co Pvt Ltd (1.89 percent), Capri Global Holdings Pvt Ltd (1.82 percent), Capri Global Advisory Services (2 percent), Boyance Infrastructure Pvt Ltd (1.36 percent) and Trinity Alternative Investment Managers (1.61 percent).

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