Bombay HC Refuses To Stay RBI's 31st Dec Deadline for Kotak Mahindra Bank
Moneylife Digital Team 17 December 2018
The Bombay High Court on Monday refused to grant a stay on the deadline given by Reserve Bank of India (RBI) to Kotak Mahindra Bank for dilution of promoter stake. The RBI had given a deadline of 31 December 2018 for diluting the promoter's stake in Kotak Mahindra Bank. With the High Court’s refusal to grant a stay, Kotak Mahindra Bank had to follow the 31st December deadline given by the central bank. 
 
Last week, Kotak Mahindra Bank had filed a writ petition against RBI to validate its position over dilution of promoter stake. In August this year, the central bank had rejected the Bank's position saying that issuance of perpetual non-convertible preference shares (PNCPS) by Kotak Mahindra Bank does not meet the dilution requirement of promoter stake.
 
In a regulatory filing, the lender had said, "We had clarified and conveyed to the RBI our position in relation to PNCPS being a part of paid up capital and the legal basis on the matter of dilution of shareholding under the Banking Regulation Act.
 
"We had also shared with the RBI the opinions of eminent jurists and senior-most legal counsels of the country which confirm our understanding. However, we have not heard from the RBI on the above matter. Given the milestone of 31 December 2018, the Bank has been left with no option but to protect its interest. By way of abundant caution, the Bank has today filed a writ petition with the Bombay High Court to validate the Bank's position."
 
Following RBI's directions, on 2 August 2018, Uday Kotak, promoter of the Bank, had sold about 1 billion PNCPS to domestic institutional investors and companies.
 
The sale, at Rs5 per share or at about Rs500 crore, helped the promoter to reduce his stake to 19.7% from 30%.
 
The next hearing in the case is scheduled for 17 January 2019.
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