Hearing of cases filed against LVB-DBS Bank merger near completion before Madras High Court

The marathon final hearing on the merger of Lakshmi Vilas Bank with DBS Bank India is nearing completion before the Madras High Court.

The marathon final hearing that has been taking place for the past few months on a huge batch of cases filed against the merger of Lakshmi Vilas Bank (LVB) with DBS Bank India Limited, in 2020, is nearing completion before the Madras High Court. The Supreme Court had, in 2022, transferred all cases filed against the merger before various High Courts across the country, to the Madras High Court.

Appearing before the first Division Bench of Chief Justice Sanjay V. Gangapurwala and Justice D. Bharatha Chakravarthy on Monday, February 5, 2024, Senior Counsel Vijay Narayan wound up his arguments on behalf of the Reserve Bank of India (RBI). Thereafter, the judges adjourned the hearing to Wednesday, February 7, for hearing others, and asked Senior Counsel Satish Parasan, representing DBS, to wind up his arguments on Thursday, February 8.

In his submissions, Mr. Narayan told the court that if there was one institution in the country that had remained blemish-less in the last seven decades since Independence, it was the RBI. Therefore, there was no reason to even suspect that the RBI had any malafide intention behind the merger. “Whatever was done, was done in the best interests of the entire banking sector,” he told the Division Bench.

Stating that LVB had a negative net worth, he said, both the shareholders as well as the depositors would have suffered huge losses if the bank had collapsed and wound up instead of being merged with DBS. Pointing out that its assets were also negligible, he said, LVB would have been able to repay only 45-50% of the deposits it had received from its customers.

“It would have become a huge financial scandal that would have had a ripple effect on the banking system in the country,” he said and added that the RBI had averted such a calamity. He also stated that as many as 12 banks did not show any interest in the merger and that only DBS was willing. He said the names of those banks could be disclosed to the court in a sealed envelope though they could not be made public in order to maintain confidentiality.

In his preliminary submissions, Mr. Parasaran said, LVB was in a precarious condition before the merger and that its capital was in the negative. Even to meet the regulatory requirements, LVB was in need of ₹1,711 crore, he said, before the judges decided to continue the hearing on Wednesday and Thursday.

When the first case against the merger was heard by the Madras High Court on November 27, 2020, another Division Bench of Justices Vineet Kothari (since retired) and M.S. Ramesh had refrained from staying the merger since it was represented that it already came into effect from 12 a.m. that day.