The ownership imbroglio at Tamilnad Mercantile Bank has taken a fresh twist yet once more with the Reserve Bank of India (RBI) finding Ramesh Vangal-led overseas investors and some influential individual investors from the Nadar community to have acted in concert and worked as a group while picking up a substantial stake in the closely-held Tuticorin-based bank couple of years ago.
The apex bank is of the view that its February 2004 guidelines on acknowledgment of transfer and allotment of shares vis-à-vis to any group in private sector banks will have to be applied to these foreign and Indian investors in TMB.
Consequently, TMB has been asked to approach the apex bank afresh ``with full details in the enclosed format for acknowledgement of transfer of shares'' in favour of the non-resident investors and entities purportedly spearheaded and promoted by Ramesh Vangal, Chairman of Katra Holdings Ltd., and also a few Indian individuals from the Nadar community.
The RBI move comes in the wake of an inquiry conducted by its Executive Director Anand Sinha into complaints of `concerted action' by these select individuals and entities to corner the shares of TMB. In all, these individuals and entities together hold 32.62 per cent the shares in TMB.
The RBI inquiry itself was a fall-out of a representation filed by one C. Kanagaraj in pursuance of an order by the Bombay High Court in April this year.
In May 2007, TMB had transferred 46,862 shares of the bank to seven non-resident investors - Katra Holdings, RST Ltd., GHI Ltd., FI Investments (Mauritius) Ltd., Cuna Grouop (Mauritius) Ltd., Kamehameha (Mauritius) Ltd. and Swiss Re Investors (Mauritius) Ltd. This followed a no-objection letter from the foreign exchange department of the RBI in March 2007. On the same day in May 2007, TMB had also transferred 48,556 shares of the bank to M.G.M. Maran, B. Ramachandra Adityan, Gokul Patnaik, Vector Programme and a few others. Besides the aforementioned foreign and Indian investors, the dispute also pertained to share transfers to a few other Indian investors. All these involved 32.62 per cent of TMB shares. These shares were picked up from the companies of C. Sivasankaran-promoted Sterling Group. These share transfers were subsequently challenged in the Madras High Court.
The bank has a paid-up capital of Rs.28.45 lakh and reserves worth Rs. 1,000 crore.
The TMB imbroglio has since seen one new twist after another. First, there was this board resolution of March 2008, which restricted the voting rights of the aforementioned seven non-resident investors and two resident investors - Gokul Patnaik and Vector Programme Ltd. - (who held a combined holding of 24.89 per cent shares in TMB) to 10 per cent of the total voting rights. The board of TMB had citied `perceived linkages among these investors' while freezing their combine voting rights to 10 per cent of the total voting rights. A fresh board resolution in May 2008, however, had sought to keep in abeyance all rights vis-à-vis the 24.89 per cent shares held by these entities and individuals. The apex bank had declined to take a view on the TMB board's decision on the plea that the matter was sub judice. Subsequently, the 83rd, 84th and 85 the annual general body meetings of TMB were held under the directive of the Madras High Court on June 5, 2008 and the results of the polls were submitted to the Madras High Court. In the meanwhile, the Bombay High Court had directed the petitioner to make a representation to the RBI on these issues.
The RBI Executive Director in his order dated October 12 said that ``concerted action is normally difficult to obtain beyond a reasonable level''. He, however, went on to add that ``the circumstantial evidence available in a given case has to be considered as a whole in reaching a conclusion''. In a detailed report, he said ``the investors had a clear understanding and co-operation among themselves and had a common purpose of obtaining substantial acquisition of shares\ representation on the bank's board and thereby gain control of TMB''. Hence, the RBI guidelines in respect of a group needed to be applied, he said in directive.
If the Ruias of the Essar Group and the Sterling Group had found themselves in bind by dipping their money into TMB, the Ramesh Vangal-led investors too may find the going tough with the RBI seeking to apply the group yardstick to their investments into the controversy-ridden TMB.