Kotak-RBI row: High court rejects interim relief again, adjourns hearing to April 1
Mumbai: The Bombay High Court on Tuesday once again refused to give any interim relief to Kotak Mahindra Bank in its row with the RBI over a regulatory diktat to pare promoter's holding in the fourth largest private sector lender.
The court turned down the bank's plea for an interim protection from regulatory action saying the matter is not as simple as the petitioner is making it out to be, and posted the matter for further hearing to April 1.
When the petition came up for hearing before a division bench of justices AS Oka and MS Sanklecha, senior counsel Harish Salve, appearing for the bank, sought an interim protection from the RBI directive and proposed capping voting rights of the promoters.
"We need interim protection. The RBI's concern is with regard to concentration of control of power. We will give assurance that till May 2020 promoters shall not vote in excess of 20 per cent," Salve told the court.
The court, however, shot down this suggestion and said, "It cannot be that simple."
Salve then said the RBI cannot force the bank's promoters to sell their shares.
The court adjourned the matter to April 1.
The bank had moved the court on December 10, 2018, challenging an RBI directive of August 13, 2018, which had directed it to dilute the promoter's shareholding from around 30 per cent to a maximum of 20 per cent of its paid-up voting equity capital by December 31, 2018 and to 15 per cent by March 31, 2020.
This is the second time that the bank failed to get any interim relief from the court. On the first day of the hearing on December 10, 2018, the bank had sought a stay on the December 31 deadline but it was rejected.
In August 2018, the promoters had tried to lower the holdings through a complex perpetual non-cumulative preference shares sale but it did not make the regulatory cut.
Through this sale Uday Kotak, the founder and main promoter of Kotak Mahindra Bank, had said that his family's stake was coming down to 19.70 per cent from about 30 per cent.
However, within a few days, the Reserve Bank rejected the stake dilution method adopted by Kotak saying it did not meet its regulatory norms, something the private sector lender contested in its reply to the regulator.
Following this, in an unprecedented move, Kotak Bank had on December 10, 2018, taken the regulator to the Bombay High Court challenging the December 31, 2018 deadline to dilute the stake.
In the petition, the bank is seeking a widening of the definition of the paid-up equity capital to include these preference shares as well beyond the present equity voting capital. It is also questioning the laws related to capping of the shareholding at a more fundamental level, asking if there is a legal basis to have shareholding caps.
It can be noted that the Kotak shares are the most valuable banking stocks in the country today.
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