Centre’s decision to dilute stake in IDBI challenged in Delhi High Court

The Delhi High Court today issued notice to the Central Government and the Life Insurance Corporation of India (LIC) in a plea seeking to prevent the Government’s move to dilute its stake in IDBI below 51%, and the subsequent acquisition of that stake by LIC..Justice Vibhu Bakru also asked LIC to file an affidavit stating why it would not be bound by The Insurance Act, 1938 and its regulations which do not allow insurance companies to hold more than a 15% stake in another company..Notice was also issued to IDBI Bank, Securities Exchange Board of India (SEBI), Reserve Bank of India (RBI) and Insurance Regulatory and Development Authority of India (IRDAI)..The notice to the respondents was issued in a writ petition filed by All India IDBI Officers’ Association, fearing that IDBI’s loss of status as a “public sector bank” would adversely affect the employment conditions of its employees especially the one belonging to SC/ST and OBC categories..The acquisition will also result in the loss of the status of IDBI as a “Government Company”, which is in violation of the parliamentary assurances that the Government of India, shall at all times, maintain not less than 51% of the issued capital of the Company..The petitioner Association alleges that this acquisition is also not in public interest since it exposes the investments made by the public in IDBI, and corrodes the ability of LIC to pay back its policyholders since it will have to invest an amount of Rs 13,000 crores to acquire a 51% stake..The Petitioner Association has sought a direction to IRDAI to withdraw its approval granted to the LIC’s move to acquire a stake in IDBI Bank..Furthermore, a direction is also sought to direct SEBI and RBI to not grant permission to LIC to obtain a 51% stake in IDBI Bank..It is the Petitioner’s case that the reduction of 51% stake by the Central Government in IDBI Bank and acquisition of 51% stake by LIC is ultra vires of the Industrial Development Bank of India Act, 1964 and the Industrial Development Bank (Transfer of Undertaking and Repeal) Act 2003..It is also claimed that the said acquisition is not a financially prudent decision for LIC as IDBI has gross NPAs amounting to Rs. 55,588.26 crore..The petition was filed through Advocate Pranav Sachdeva..The Petitioner was represented through Advocates Prashant Bhushan and Pranav Sachdeva..The matter would be next heard on August 28..Read Petition: