Chennai: Within days of the annual general body meeting rejecting resolutions relating to the appointment of its CEO and six directors, a Chennai-based shareholder has moved the Madras high court with a public interest litigation demanding the appointment of an administrator to run Lakshmi Vilas Bank (LVB).
Also, the petitioner has demanded the suspension of the board.
The Madras high court has since admitted the petition and given eight weeks time for the secretary of the Department of Financial Services, the Reserve Bank of India, the Securities and Exchange Board of India (SEBI) and LVB to respond.
Sixty-seven-year-old R. Subramanian, the petitioner, claims himself to be a former officer of LVB. He is a shareholder and depositor as well. After serving the bank for 36 years, he retired in 2013.
Significantly, the petitioner has alleged large-scale mismanagement and dissemination of misleading information and data to the general public and shareholders alike. These irregularities have significantly hurt the bank. These were done in violation of the rules laid down by the RBI and SEBI, the petitioner has said. All these have resulted in the gross non-performing assets rising from 2.67% in 2017 to 15.30% in 2019 and to further 25.39% in March 2020.
“Any such increase in gross NPA could not be justified as a common occurrence,” the petitioner has said.
The petitioner has particularly questioned the transaction relationship with Religarefinvest Ltd. The bank had extended loans to some entities against the deposits made by Religarefinvest. Strangely enough, it did not get the consent from the depositor-company for doing so. When the bank did adjust the deposit against the loans, it got entangled in a legal dispute with the depositor-company.
The petitioner has alleged that regulatory authorities weren’t informed of these details in time.
Also read: Clouds Continue to Gather Around Lakshmi Vilas Bank as Shareholders Vote Out the CEO
The petitioner has also found fault with the bank’s investment in the Talwalkar group. He has alleged the bank had made investment in the Talwalkar group despite getting adverse signals on the financial and management of said company.
The petition has also raised doubts about the legitimacy of the financial numbers disclosed by the bank for the final quarter of the last financial year.
According to the petitioner, the bank managed to float a rights issue in 2017 at a substantial premium by providing misleading information in the prospectus on the financial status of the bank.
With the bank currently being run by a committee of directors as cleared by the Reserve Bank of India, the PIL in the Madras high court brings a new twist to the LVB saga which has been under limelight for a while now for all wrong reasons.
Given the highly distributed shareholding structure of the bank industry watchers were completely stunned when seven resolutions relating to the appointment were thrown out by the shareholders at the annual general body meeting last week. It was an unprecedented event in the annals of the Indian banking history. The unfolding drama at LVB is being watched with more than cursory interest by stakeholders across the canvas.
