The Bombay high court will hear on 12 March Kotak Mahindra Bank Ltd’s petition challenging the Reserve Bank of India’s (RBI) rejection of its proposal to reduce promoter shareholding. The central bank had asked all banks to reduce promoter stake to 20% of paid-up capital by 31 December 2018, and 15% by 31 March 2020. According to BSE data, promoters held 30.02% in Kotak Mahindra Bank as on 30 September.
After the central bank rejected Kotak’s proposal to reduce stake through an issue of perpetual non-convertible preference shares (PNCPS), the bank challenged the move in Bombay high court on 10 December.
Earlier on 17 December, the high court had refused to pass any order, but granted Kotak interim relief by extending the RBI deadline of 31 December, 2018. It had also directed the RBI to file an affidavit in response to the petition by 17 January.
When the case came up for hearing on Thursday before a division bench of Justices B.P. Dharmadhikari and Revati Mohite Dere, the central bank lawyer requested more time to reply to the Kotak petition, which was granted.
Mumbai-based Law firm Manilal Kher Ambalal & Co. along with senior counsel Harish Salve appeared for Kotak Mahindra Bank, while the central bank is advised by Udeshi & Co. along with senior counsel Venkatesh Dhond.
The bank in its petition has argued that “The impugned reduction communications and the 2018 RBI letter have been issued by the RBI without authority of law, contrary to the provisions of the Banking Regulation Act, Article 14 and Article 19 (1) (G) of the Constitution of India."
However, at the last hearing, the central bank lawyer had argued that every bank has complied with the promoter shareholding dilution requirement.
Kotak Bank had earlier said it was looking to raise as much as ₹ 500 crore by issuing PNCPS to dilute the promoter shareholding. The RBI had mandated the bank to reduce its promoter shareholding to 20% of paid-up capital by 31 December 2018, and 15% by 31 March 2020. According to the BSE website, the promoter group’s stake in the bank stood at 30.02% as on 30 September.