Chennai, Sep 29 (IANS) 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”.