SC to hear appeal against LIC’s move to acquire 51% stake in IDBI

New Delhi: The Supreme Court will next week hear an appeal challenging the Life Insurance Corporation of India's proposal to acquire 51 percent stake in the state-run Industrial Development Bank of India (IDBI), a move that is expected to be valued between 12,000 to 13,000 crore. After senior counsel Kapil Sibal, appearing for All India IDBI Officers' Association, called for an urgent hearing, a bench led by Chief Justice Ranjan Gogoi agreed to hear the case on January 25.

"Though as per the IRDAI Investment Regulations 2016, any insurance company cannot have more than 15 percent invested in an investee company. Similarly, the guidelines of RBI clearly says that no shareholder/promoter should have shareholding in a private Bank more than 40 percent,"

Last year, the Insurance Regulatory Authority of India (IRDA) also allowed LIC, the country's largest state-run insurer, to purchase a stake of up to 51 percent in IDBI Bank. The All India IDBI Officers' Association, challenging the Delhi High Court's decision last month that rejected its plea, claimed that LIC's move violated provisions of the Insurance Act.

"Though as per the IRDAI Investment Regulations 2016, any insurance company cannot have more than 15 percent invested in an investee company. Similarly, the guidelines of RBI clearly says that no shareholder/promoter should have shareholding in a private Bank more than 40 percent," it stated in its appeal.

IDBI Employees Association Fighting Against Acquisition

The association added that the proposed privatization of IDBI will have an adverse effect on the existing service conditions of its employees.

"Although as per Section 5(1) of the IDBI Repeal Act, 2003 the existing service conditions of its employees shall be maintained/protected, LIC is going to take over the IDBI Bank very soon and to involve itself in the Banking business. Although as per Section 3 (4) (f) of the LIC Act 1938, it cannot involve in any business other than Insurance business."

"the amount LIC is investing in the bank is just 1% of its entire funds and we assure the bench that interests of its policyholders are protected"- LIC in HC

"The Central government has initiated the process of privatization of IDBI Bank without any legislation passed by the Parliament and that too only on the basis of executive orders, which is contrary to the decision of the Supreme Court."

The LIC had told the HC that the amount it was investing in the bank was just 1% of its entire funds and assured the bench that interests of its policyholders are protected