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Court nod for LKB, Centurion merger

Court nod for LKB, Centurion merger
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First Published: Thu, Aug 23 2007. 12 22 AM IST
Updated: Thu, Aug 23 2007. 12 22 AM IST
Kochi: The Kerala high court has given its approval for the merger of Kerala-based Lord Krishna Bank (LKB) with Centurion Bank of Punjab, which has its registered office in Panaji, Goa, and corporate offices in Mumbai, Gurgaon and Chandigarh.
Dismissing the petition of LKB shareholder Umesh Kumar Pai, Justice M.N. Krishnan ruled on Wednesday that there was no reason for ordering a probe by the government or any of its agencies into the affairs of the bank.
Pai had filed a petition against LKB decisions at the bank’s annual general meeting (AGM) on 30 September 2006 and sought an investigation into the bank’s affairs. In 2004, another petition seeking intervention in the affairs of the bank was sought.
Pai said during the AGM, several shareholders had been prevented from participating in the meeting, which was held under police supervision. The vote in favour of the merger with Centurion Bank of Punjab also was on the support of proxy votes, he claimed. In addition, the merger decision was taken without an independent chairman, Pai contended.
Kochi-based LKB, which was founded in 1940 by the Swargath Madhom family in Kodungaloor in Thrissur district of Kerala, had been under the shadow of a takeover ever since it missed the boat under the 1969 bank nationalization programme.
In 1969, when several banks were nationalized, LKB lost out because it did not have the minimum stipulated working funds.
The court remarked that 2,152 people had attended the AGM, out of which 1,784 people voted in favour of the merger resolution and 368 people refrained from voting. The results of the voting revealed that there was a two-thirds majority for the merger resolution.
On charges of malpractices in the bank and the failure of the Reserve Bank of India (RBI) to act and appoint an inspection agency to probe the bank, the court observed that RBI is an expert body and even the government depends on it for advice. The apex bank had been following the developments and issuing oversight guidelines on the lender.
“It is true that LKB has not been doing well and there are allegations levelled against the discriminate advancement of amounts and creation of large number of posts,” Krishnan said. “But they are not sufficient to order a probe into the affairs of the bank.”
He said there is no ground on which the Union government could be directed to order an investigation of the lender.
The hunt for a suitor ended with Centurion Bank of Punjab, and in August 2006, the shareholders of both banks agreed on the deal.
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First Published: Thu, Aug 23 2007. 12 22 AM IST