Mumbai: Pravin Kumar Tayal, promoter of the erstwhile Bank of Rajasthan Ltd (BoR), has moved the Rajasthan high court against the capital market regulator, seeking to unlock his shareholding worth at least Rs 1,000 crore in ICICI Bank Ltd.
Tayal is seeking legal relief through some of his group companies that received ICICI Bank shares following a Reserve Bank of India (RBI)-driven merger between the two banks in August, according to two persons familiar with the development.
Tayal is arguing that there is no case for the Securities and Exchange Board of India (Sebi) to keep his shares in ICICI Bank frozen, given that “the merger process is already over and the entity—BoR—does not exist now”, according to one person, a senior official with the group.
Both people familiar with the development declined to be identified as they are not allowed to talk on matters that are sub judice.
An email questionnaire sent to Sebi on Monday did not elicit a response from the regulator.
Tayal’s lawyer Paras Kuhad declined comment.
According to the Rajasthan high court’s website, four entities banned by Sebi in March —Jaybharat Textile and Real Estate Ltd, Eskay K‘n’IT India Ltd, 21st Century Entertainment Pvt. Ltd and Cyberinfo Zeebombia.com Pvt. Ltd —have pending cases against the “Union of India and others”.
These cases are likely to come up for hearing later this week, one of the persons cited above said.
Jaipur-based BoR, one of the oldest private sector banks in the country, was forced into a merger following a clampdown on the bank by Sebi and RBI for alleged irregularities earlier this year.
The merger, effective 13 August, valued BoR at Rs 3,000 crore. The merger involved no cash changing hands.
BoR shareholders received 25 ICICI Bank shares for every 118 shares of the bank they held.
Over 100 entities, including those owned and controlled by the Tayals, received ICICI Bank shares in exchange for their BoR stock, but they have not been able to trade them because of the Sebi ban on them.
“The shares have been swapped. But they cannot be sold because of the Sebi order,” one of the persons quoted above said.
The Tayal family has directly promoted eight firms—Jaybharat Textile and Real Estate, Eskay K‘n’IT India, KSL and Industries Ltd, Krishna Lifestyle Technologies Ltd, Asahi Fibres Ltd, Krishna Knitwear Technology Ltd, Rajasthan Bank Financial Services Ltd and Single Point Security Solutions Pvt. Ltd.
Of these, five are listed firms.
The Sebi order alleged that besides these, Tayals had indirect control of 100 different entities belonging to the Yadav group and the Silvassa group.
Going by the Sebi order, the Tayals had increased their stake in BoR and many of the promoter entities had made fund transfers or share transfers through off-market deals to various other entities “in a deceptive and fraudulent manner with the active connivance of others”.
According to the regulator, the Tayal group had falsely disclosed its shareholding in BoR as 28.61% at end-December 2009, while the promoters’ holding in the bank “had actually increased” and “stood at 55.01% as at quarter ending December 2009”.
The erstwhile BoR had a total of 161.3 million shares outstanding. At the stated holding of 28.6%, Tayal group entities held 46.1 million shares in the bank.
These entities include 21st Century Entertainment, Ahmednagar Investments Pvt. Ltd, Cumballa Hill Property Developers Pvt. Ltd, Cyber Info Zeeboombia.com, Cyber Infosystems and Tech Ltd, EDC Securities Pvt. Ltd, Girganga Investments Pvt. Ltd and Sumander Property Development Pvt. Ltd.
Post-merger, these firms would have received at least 9.7 million shares in their demat accounts.
At Tuesday’s closing price of Rs 1,131.45, their holding in ICICI Bank, India’s largest private bank by assets, would be worth at least Rs 1,106 crore.
If the Tayal group was indeed holding a 55.01% stake in BoR, as claimed by Sebi, it would have received another 9.02 million ICICI Bank shares.
At Tuesday’s closing price, these shares would be worth at least Rs 1,021 crore, taking the total value of the Tayal group’s holding in ICICI Bank to Rs 2,127 crore.
According to the same senior group official quoted above, the Tayal group has debt running into several crores that it owes to state-run banks and is eager to get the shares unlocked to clear the debt. This person is a senior official with the group.
Ahead of the Sebi action, RBI had imposed a Rs 25 lakh penalty on BoR for allegedly violating various prudential norms, including acquisition of immovable properties, deletion of records in the bank’s information systems and conduct of some accounts, among others.
Following an RBI rule, BoR had also removed its then managing director Deepak Saruparia from the bank.