The Madras High Court has directed the Reserve Bank of India (RBI) to revalue the shares and assets of Lakshmi Vilas Bank (LVB) and DBS Bank India Limited (DBIL) as on the date before the amalgamation. The court observed that the value of the LVB shares should not have been reduced to zero without evaluating the shares of both banks and determining the swap ratio to protect the interests of shareholders and bondholders.
While acknowledging the irregularities committed by some of LVB’s directors, the court stated that the RBI’s subsequent intervention was necessary to safeguard the interests of depositors. However, the court emphasized that the RBI should have ensured transparency in the entire process and protected the interests of shareholders.
The court expressed concern over the RBI’s rejection of over 3,500 objections without disclosing reasons within eight days, considering the lengthy and complex nature of the merger process. The judges questioned the RBI’s reluctance to reveal details of the 12 proposals considered for the merger, even after its completion, and their willingness to present them only in a sealed cover.
The court also noted that the entire LVB shares should not have been written off solely upon DBIL’s insistence. It held that while the process leading to the amalgamation may have legal flaws, reversing the amalgamation in its entirety may not be feasible, given its irreversible nature.
The Madras High Court’s directive underscores the importance of transparency and accountability in financial transactions, particularly when mergers involve the interests of multiple stakeholders.
