The Supreme Court on Friday said it will hear next week an appeal challenging the Life Insurance Corporation’s (LIC) move to acquire 51 per cent in IDBI Bank. The total value of the deal is expected to be Rs 12,000-13,000 crore.
A bench led by Chief Justice Ranjan Gogoi agreed to hear the case on January 25 after senior counsel Kapil Sibal, appearing for All India IDBI Officers’ Association, sought urgent hearing.
Challenging the Delhi High Court’s decision that rejected its plea, the Association said that the LIC’s move to acquire 51 per cent stake in IDBI violated provisions of the Insurance Act.
“… as per the IRDAI Investment Regulations 2016 any insurance company cannot have investment more than 15 per cent in an investee company. Similarly, the guidelines of RBI clearly say that no shareholder/promoter should have shareholding in a private Bank more than 40 per cent,” it stated in its appeal.
The association said that due to the proposed privatisation of IDBI Bank, the existing service conditions of its employees will be adversely effected.
“Although as per Section 5(1) of the IDBI Repeal Act, 2003, the existing service conditions of its employees shall be maintained/protected, LIC is going to take over the IDBI Bank very soon and to involve itself in the banking business. Although as per Section 3 (4) (f) of the LIC Act 1938, it cannot involve in any business other than Insurance business. The Central government has initiated the process of privatisation of IDBI Bank without any legislation passed by Parliament and that too only on the basis of executive orders, which is contrary to decision of Supreme Court,” the association said.
It claimed that the change in shareholding was not in public interest as it “exposes the investments made by the public in the IDBI and corrodes the ability of the LIC to pay back its policy holders since it will have to invest an amount of Rs 13,000 crore to acquire the 51 per cent stake.”
The Cabinet Committee on Economic Affairs had in August last approved the deal. Once the acquisition is completed, LIC — which held 7.98 per cent in IDBI Bank prior to the deal — will have control of the state-run lender and get the status of a promoter.
The government, which held 85.96 per cent in IDBI Bank as of June 30, will see its stake diluted to around 44 per cent, Finance Ministry officials had said earlier.
The high court had on December 21 last dismissed the Association’s appeal challenging the LIC’s move to acquire IDBI. It said that its single judge had considered all aspects before denying any relief to the All India IDBI Officers’ Association, which had opposed LIC move on the ground that change in shareholding could take away IDBI’s public sector bank status.
The LIC had told the HC that the amount it was investing in the bank was just 1per cent of its entire funds and assured the bench that interests of its policyholders are protected. FE