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Shareholder moves HC for appointment of administrator for LVB
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SME Times News Bureau | 29 Sep, 2020
A minority shareholder and a
retired senior manager of the Lakshmi Vilas Bank (LVB) has moved the
Madras High Court to direct the Central government, the Reserve Bank of
India (RBI) and the Securities and Exchange Board of India (SEBI) to
suspend the board of the private bank and appoint an administrator.
R.
Subramanian pleaded that this action be taken to ensure the reserved
savings and investments made by investing public/stakeholders in the
bank are not misutilised, and prevent misleading statements by its
management.
Admitting the matter, the court has given eight weeks
time for the Department of Financial Services of the Union Finance
Ministry, the RBI, the SEBI and the LVB to respond.
"Strangely,
the nominees of the RBI on the LVB Board have not raised any concern or
red flag despite the happenings in the bank," Subramanian, 67, told
IANS.
In his petition, Subramanian, who was the General Secretary
of the Lakshmi Vilas Bank Officers' Association, and retired from the
bank in 2013 as a senior manager, said that he had sent a representation
to the Centre, and the RBI, "bringing to their notice the mismanagement
and misleading disclosures to the general public for taking appropriate
action but these have not been considered".
In his plea,
Subramanian has alleged that from 2016 onwards, the LVB, due to
mismanagement and serious violations of banking regulations, fell into
doldrums.
"... but however all such shortfalls have been
completely concealed or misquoted by disclosing false and suited details
in the documents placed in the public domain, misleading the
stakeholders as well as general public to invest in the Respondent Bank
(LVB)," he said in the petition.
He contended that the
mismanagement has resulted in gross non-performing assets (NPA) leaping
from 2.67 per cent in 2017 to 15.30 per cent in 2019 and stretching to
25.39 per cent in March 2020. "Any such increase in gross NPA could not
be justified as a common occurrence in the banking industry. This
evidences quick mortality of advances and the options of the bank made
against the guidelines of the RBI and the SEBI," Subramanian argued.
"I
submit that the total deposits in the respondent bank, as on March 31,
2020, are Rs 21,443 crore. But there is no safety for the deposits made
by general public as per the information available in the public domain
and qualified statements of the statutory auditors of the bank in the
balance sheet," he said.
He said Religare Finvest Ltd had
deposited Rs 400 crore on November 11, 2016 and Rs 350 crore on January
5, 2017 with the LVB, and the bank extended loans of approximately Rs
720 crore to ARHC Holdings and its subsidiary Ranchem against the said
deposits without any documents of consent of the depositor company.
He said LVB neither obtained any documents nor consent from the depositor Religare Finvest to stand as surety.
Subsequently,
the LVB illegally adjusted deposit proceeds to loan accounts and the
same was questioned by Religare Finvest which issued legal notice
alleging the said appropriation of deposit proceeds to said loan
accounts.
The bank also violated SEBI regulations by not reporting this material development to the stock exchanges, he said.
Subramanian
also said LVB violated its investment policy by making an investment of
about Rs 180 crore in Taalwalkar group, despite the adverse signals
relating to the financial and management of the said company.
"RBI
nominees came heavily on the bank about the corporate governance of the
bank, directed to conduct investigation in fraud angle and suggested a
forensic audit," Subramanian said in the petition.
The petitioner
also alleged that the LVB came out with a premium rights issue and
raised about Rs 786 crore with misleading information and holding back
information about material litigation, as to Religare Finvest's Rs 750
crore deposit, in the letter of offer and Red Herring prospectus, as
required under SEBI (LODR) Regulation number 30, "which is nothing but
suppression of material facts/dispute".
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