Cabinet DecisionsLegislation Updates

Scheme of Amalgamation

The Union Cabinet has given its approval to the Scheme of Amalgamation of Lakshmi Vilas Bank Limited (LVB) with DBS Bank India Limited (DBIL).

On 17.11.2020, to protect depositors’ interest and in the interest of financial and banking stability, on RBI’s application under section 45 of the Banking Regulation Act, 1949, LVB had been under a moratorium for a period of 30 days. In parallel, RBI, in consultation with Government, superseded the Board of Directors of LVB and appointed an Administrator to protect the depositors’ interest.

After inviting suggestions and objections from the public and stakeholders, RBI prepared and provided a scheme for the bank’s amalgamation for the Government’s sanction, well in. advance of the end of the period of moratorium so that restrictions on withdrawal faced by the depositors are minimised. With the approval of the scheme, LVB will be amalgamated with DBIL from the appointed date, and with this there will no further restrictions on the depositors regarding the withdrawal of their deposits.

DBIL is a banking company licenced by RBI and operating in India through wholly-owned subsidiary model, DBIL has a strong balance sheet, with strong capital support and it has the advantage of a strong parentage of DBS, a leading financial services group in Asia, with presence in 18 markets and headquartered and listed in Singapore. The combined balance-sheet of DBIL would remain healthy even after amalgamation and its branches would increase to 600.

The speedy amalgamation and resolution of the stress in LVB is in line with the Government’s commitment to a clean banking system while protecting the interests of depositors and the public as well as the financial system.


Cabinet

[Press Release dt. 25-11-2020]

Business NewsNews

The Reserve Bank of India has placed in the public domain a draft scheme of amalgamation of The Lakshmi Vilas Bank Ltd. (LVB) with DBS Bank India Ltd. (DBIL), a banking company incorporated in India under Companies Act, 2013, and having its Registered Office at New Delhi.

DBIL is a wholly-owned subsidiary of DBS Bank Ltd, Singapore (“DBS”), which in turn is a subsidiary of Asia’s leading financial services group, DBS Group Holdings Limited and has the advantage of a strong parentage. It has been issued a banking license to operate as a banking company under Section 22 (1) of the B.R Act, on October 4, 2018. DBIL has a healthy balance sheet, with strong capital support. As on June 30, 2020, its total Regulatory Capital was ₹7,109 crore (against Capital of ₹7,023 crore as on March 31, 2020). As on June 30, 2020, its GNPAs and NNPAs were low at 2.7% and 0.5% respectively; Capital to Risk-Weighted Assets Ratio (CRAR) was comfortable at 15.99% (against requirement of 9%), and Common Equity Tier-1 (CET-1) capital at 12.84% was well above the requirement of 5.5%. Although the DBIL is well capitalised, it will bring in additional capital of ₹2500 crore upfront, to support credit growth of the merged entity. Owing to a comfortable level of capital, the combined balance sheet of DBIL would remain healthy after the proposed amalgamation, with CRAR at 12.51% and CET-1 capital at 9.61%, without taking into account the infusion of additional capital.

The Reserve Bank invites suggestions and objections, if any, from members, depositors and other creditors of transferor bank (LVB) and transferee bank (DBIL), on the draft scheme, which may be sent to the address mentioned in the “Notice”. The draft scheme has also been sent to transferor bank and transferee bank for their suggestions and objections. The suggestions and objections will be received by Reserve Bank up to 5.00 PM on November 20, 2020. The Reserve Bank will take a final view thereafter.

It may be recalled that The Lakshmi Vilas Bank Ltd. has been placed under an order of moratorium on November 17, 2020, which will be effective up to December 16, 2020.


Reserve Bank of India

[Press Release dt. 17-11-2020]

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal: The appellants who are minority shareholders in Trinetra Cement Limited preferred an appeal against the order of NCLT, Division Bench, Chennai whereby the modification of scheme of amalgamation, as sought for by the appellants was rejected. A Scheme of Arrangement for Amalgamation of Trinetra Cement Limited and Trishul Concrete Products Limited (1st and 2nd Respondents) with ‘The India Cements Limited’ (‘3rd Respondent-Transferee Company) was filed before the Hon’ble High Court of Madras, which after first motion stood transferred to the Tribunal, Chennai Bench, at the stage of second motion.

The appellants who claimed to be minority shareholders to the extent of 2.37% of total shareholding in Trinetra Cement Limited filed objections under Rule 34 of the Companies (Court) Rules, 1959 challenging the valuation arrived at by the Valuer on the ground that it was unfair and nontransparent as it was carried out in a single day on 26th February, 2014. It was further submitted that Valuation Report and the Fairness Opinion were not carried out independently since the Valuer and Merchant Banker were working in tandem in complete defiance of the Circulars issued by the statutory body (SEBI).

Learned counsel for the appellants submitted that the Tribunal failed to appreciate that the Valuer cannot work in tandem with the Merchant Banker providing fairness report of valuation. Both the Valuer and Merchant Banker were required to work independently to ensure transparency. Per contra, according to the respondents, the objectors were not present; either in person or by proxy, during the shareholders’ meeting held on 25th March, 2015, when no objection to the Scheme was raised by the shareholders and the resolutions were passed unanimously.

NCLAT rejected the submission made on behalf of the appellants that the multiple steps for the ‘Scheme’ taken on a single day would render the reports invalid as it is usual practice by companies across India that the reports are provided to the Board for approval on the same day. NCLAT, upholding the Tribunal’s order, stated, that full compliance of SEBI Circulars was made out, thereby, rejecting the allegation made by the ‘minority shareholders’ (appellants) that the valuation report was erroneous.

NCLAT held that, “The appellants, having failed to show any such illegality in the valuation made by the Valuer, on mere allegation it cannot be interfered with. From the record, we find that ‘Surplus Assets’ of ‘Trinetra Cement Limited’ have not been valued separately because the Company has to be treated as ‘going concern’. It was in this premises, the valuation of both Trinetra Cement Limited’ and The India Cements Limited’- the ‘Net Asset Value method was not used.” [Arvind Aggarwal v. Trinetra Cements Ltd., 2017 SCC OnLine NCLAT 239, decided on 12.9.2017]