HC allows plea against Lakshmi Vilas, wants Sebi and RBI replies in 8 weeks

An individual shareholder filed a PIL raising serious of allegations against the bank functioning, asked Court to appoint an administrator

A minority shareholder of Lakshmi Vilas Bank (LVB) approached the Madras High Court with a plea to direct RBI and Sebi to initiate appropriate  legal action against the bank by appointing an administrator and suspendind the Board to safeguard the savings and investments made by public stakeholders in the lender. The Court admitted the petition and gave eight weeks' time to the Department of Financial Services, RBI, Sebi and the bank to respond.

According to 67-year-old R Subramanian's  affidavit, a copy of which is available with Business Standard, the petitioner claims he is a former officer of LVB, and a minority shareholder and depositor of the bank too. He had been an employee of the bank for 36 years and retired as a senior manager in 2013.

The High Court admitted the petition and gave eight weeks time for The Secretary Department of Financial Services, RBI, Sebi and the lender to respond.

An email sent to LVB evinced no immediate response.

In the writ petition, which he called ‘Public Interest Litigation’, Subramanian alleged large-scale mismanagement and misleading information/data to the general public and stakeholders, in violation of RBI and Sebi regulations, ultimately affecting the interest of members of the public who had made deposits in the bank or subscribed to its rights issue. 

He alleged that the bank got into big troublr in 2016 due to mismanagement and other serious violations, and completely concealed such shortfalls and disclosed false details in the documents placed in the public domain. In the process it  misled the stakeholders as well as general public. The ineffective and mismanagement has resulted in a spike in gross non-performing assets (NPA).

Subramanian also alleged there were irregularities in transactions related to the Religare Finvest Ltd, which the bank failed to disclose to the stock exchange within the stipulated time, in clear violation of Sebi norms.

The petitioner also alleged the bank invested around Rs 180 crore in the Talwalkar group despite adverse signals on the financial and management of the company. It violated its own investment policy. RBI nominees came down heavily on the bank over corporate governance, and directed it to conduct a probe into the fraud angle and suggested forensic audit.

The petitioner also alleged that the bank had given misleading information in the prospectus regarding its financial status and material litigations before the rights issues in 2017, in order to fetch a premium.

Subramanian also raised allegations against LVB in reporting profit numbers during the January-March quarter.