In a relief to Reserve Bank of India, the Supreme Court on Wednesday stayed a Madras High Court order asking it to determine the value of shares, assets and investor bonds of the cash-strapped Lakshmi Vilas Bank (LVB) and the Indian subsidiary of DBS Bank of Singapore.
The merger proposal of LVB and DBS Bank India Limited (DBIL), the Indian arm of the Singapore Bank, was approved in 2020.
The top court refused to accept prima facie the submission of investors that around 92,000 people will lose their money if the high court order is stayed.
It said a foreign bank was involved in the merger and stalling it will have “wider ramification and the foreign investors will lose faith in our regulatory mechanism”.
A bench comprising Chief Justice D Y Chandrachud and Justices JB Pardiwala and Manoj Misra stayed the high court order and issued notices to Aum Capital, representing the investors, and others on separate appeals of the RBI and the DBS Bank against the HC judgement.
It also asked them to file their responses within two weeks and listed the pleas after that for final hearing.
The RBI, represented by Solicitor General Tushar Mehta, referred to the laws governing amalgamation of banks and said the investors, who were getting higher returns on their money compared to ordinary depositors, will lose the investments they made in case of merger of the bank with DBS.
“Bond holders are never held to be akin to ordinary depositors,” the law officer said, adding that as many as 12 Indian banks earlier refused to step in to save the cash-strapped LVB before the present bank stepped in.