PIL before Delhi High Court seeks investigation into Hinduja Group as promoters of IndusInd Bank

A public interest litigation (PIL) has been filed before the Delhi High Court seeking an investigation into the “fit and proper status” of IndusInd Bank’s promoters, the Hinduja Group..The plea has also sought a direction to the Reserve Bank of India (RBI) to disallow the policy of raising stakeholding of private promoters to 26 per cent in private banks where promoters were tainted with credentials of criminality or financial fraud..The petition was filed by an advocate and tax consultant Mahek Maheshwari in the backdrop of a review of the extant guidelines on ownership and corporate structure of Indian private sector banks by an internal working group (IWG) constituted by the RBI.The RBI accepted 21 of 33 recommendations and said that in the interim, while amendments were taking place, all stakeholders would be guided by these decisions..The petitioner cited three recommendations in relation to the cap on promoters’ holdings and monitoring to ensure that the control of a promoting entity/major shareholder of the bank did not fall in the hands of persons who are not found to be fit and proper.“Recommendation No.2: There is no need to fix any cap on the promoters’ holding in initial five years.Recommendation No. 3: The cap on promoters’ stake in long run of 15 years may be raised from the current levels of 15 per cent to 26 per cent of the paid-up voting equity share capital of the bank. This stipulation should be uniform for all types of promoters and would not mean that promoters, who have already diluted their holdings to below 26 per cent, will not be permitted to raise it to 26 per cent of the paid-up voting equity share capital of the bank. The promoter, if he/she so desires, can choose to bring down holding to even below 26 per cent, any time after the lock-in period of five years. It is clarified that the lock-in period here refers to initial lock-in period.Recommendation No. 6: A monitoring mechanism may be devised to ensure that control of promoting entity/ major shareholder of the bank, does not fall in the hands of persons who are not found to be fit and proper. Licensing conditions/ approvals for acquisitions may stipulate reporting requirements whenever a shareholder becomes a significant beneficial owner (as defined in the Companies Act, 2013) of the promoting entity/ major shareholder of the bank.”.The plea highlighted that the increase of the promoters' holding in IndusInd Bank suggested more siphoning, money laundering and playing with public money. It was submitted that the promoters were not Indian citizens, so they felt more secure from Indian law as they were in foreign destinations..The petitioner said that these accepted recommendations had no economic policy base, nor any financial fraud protection policy.A democratic country could not afford to have its economy controlled by a few powerful industrial houses that also have a huge stake in the banking system, the plea stated and flagged that we were seeing the rise of economic oligarchs in key sectors of the economy..It was the petitioner’s stand that recommendations 2 and 3 were very dangerous for our economy in the context of private banks, since the current status of our economy was already filled with high inflation and we could not afford the collapsing of more banks.“If these recommendations are implemented by promoters of Private Banks then surely the Life of Depositors will be vulnerable in terms of their trade, profession & day to day needs which will be surely the violation of Article 14, 19(1)(g) & 21of Constitution of India as it affects fundamental rights of Depositors(Public) at large,” the petition reads..It was further stated that the recommendations accepted by the RBI were like adding fuel to flame.“...means already money is laundered and implementation of recommendations will act as catalyst to vitally siphoning of public money to safe harbours because promoters are also not citizen of India.”.The petition went so far as to state that this inaction by the RBI clearly implied the existence of a nexus between the regulator and IndusInd Bank.“...these recommendations accepted by RBI are in direct conflict with its Main Function which undermines Public confidence in our system & a direct attack on the interest of the Depositors.”.Therefore, the petitioner sought a stay against the operation of recommendation 2 and 3 till the adjudication of this petition.