RBI Puts Lakshmi Vilas Bank And Indiabulls Housing Finance Under The Scanner After PIL Filed In the Delhi High Court

The Reserve Bank of India (RBI) has begun scrutiny of the managements of the Lakshmi Vilas Bank (LVB) and Indiabulls Housing Finance (IHF) which were in the process of a merger.

After accusations of wrongdoings which led to the sudden exit of LVB’s CEO recently, the RBI has prohibited the two companies from exchanging information or interaction between their managements.

LVB CEO P Mukherjee, who had headed the bank since 2015, quit recently citing personal reasons, without completing the two-year extension the RBI had given him in January 2019.

The RBI is likely to scrutinize names recommended for chairman and MD of the merged entity more closely.

The RBI move came after an NGO called Citizens’ Whistleblowers’ Forum filed a public interest litigation (PIL) in the Delhi High Court, seeking a special investigation into alleged irregularities, diversion of funds and other violations alleged to have been committed by promoters of Indiabulls.

The NGO’s PIL has alleged that Indiabulls promoters advanced dubious loans to companies owned by large corporate groups.

Allegedly, the corporate groups routed a part of these loans back to accounts of companies owned by the promoters of Indiabulls.

However, Indiabulls has described the PIL as “malicious” and “malafide” with the intention of scuttling the planned merger of the two companies.

Senior advocate Mukul Rohatgi who appeared for Indiabulls said at a recent hearing that the NGO’s petition had been copied from an earlier plea filed by one Abhay Yadav in the Supreme Court.

Rohatgi stated that Yadav withdrew his plea, tendered an apology and the facts stated in his plea are also said to be wrong.

The next hearing of case is scheduled to be held on September 27.