The Supreme Court on Monday dismissed a petition filed by shareholders of Bank of Rajasthan (BoR) challenging the Udaipur-based bank's merger with ICICI Bank, India's largest private sector lender.
A bench headed by Justice DK Jain refused relief to Ram Prasad Somani and Radhey Shyam Agarwal who had sought a direction to the Centre and RBI to forfeit the 55.1% shares held by the promoter group PK Tayal group in BoR.
RBI on August 12 had approved BoR's merger with ICICI Bank after the boards of both the banks on May 23 had approved the merger for a share exchange ratio of 25 shares of ICICI Bank for 118 shares of BoR.
The petitioners said that their rights were infringed by the merger and the extraordinary general meeting (EGM) that was never held. They also said that RBI had ignored the genuine shareholders and accepted the views of dominant shareholder group (Tayals) who have 55.1% shareholding in the bank.
The petition said that RBI was well aware of the mismangement in the bank and thus the merger was detrimental to the interest of the depositors and shareholders.
"Therefore, the order of August 12, 2010, is vitiated with extraneous reasons, malafide intention and the same is arbitrary and is liable to be quashed," the petition stated.
The two petitioners, who held total 4,620 shares, alleged that the dominant shareholder group, who took board resolution and also called EGM on June 21, was not competent to take any decision regarding merger as BoR has also been under RBI scanner for alleged violation of banking regulations, including those on corporate governance. Besides, market regulator SEBI had on March 8 prohibited the Tayal group (promoters of BoR) from trading in securities.
Somani said that since the acquistion of shares by PK Tayal and his group is under judicial scrutiny, then how can RBI grant approval to merger particularly when there is prohibition imposed by Sebi.
The Tayal family in 1999 had bought a significant stake in BoR. But the deal was challenged by Somani who had also sought Sebi intervention. He alleged that the Tayal group had committed breach of SEBI (Substantial acquisition of shares and take over of regulation) 1997 and the group should be asked to divested the holding in excess of the limit set out in the regulation and such excess shares be offered to the public for subscription also.