Merger Of Dena Bank and Vijaya Bank With Bank of Baroda Challenged In Court

The proposed amalgamation of Bank of Baroda, Vijaya Bank and Dena Bank has seen a legal challenge with the Delhi High Court agreeing to hear a petition challenging the move, days after it was approved by the union cabinet.

The petition filed by the All India Bank Officers' Confederation and the All India Vijaya Bank Officers' Association has questioned the decision-making process behind the merger, calling it a “blatant circumvention and disregard for statutory procedures”. The petitioners argued that the step was taken under the direction of the government, accusing it of abuse of power as the majority shareholder.

While the law says that the scheme for amalgamation must be drawn by the government in consultations with the RBI, in this particular case it was sent to the board of the banks, the petitioners said. They claimed the decision taken by the boards of state-run banks is invalid due to the absence of directors on behalf of the employees, which is mandatory under the law.

The petitioners alleged there was lack of effective consultation with the RBI even as the government “repeatedly attempted to inaccurately describe” the events leading up to the decision of amalgamation. The decision to amalgamate, according to petitioners, was not a voluntary or an autonomous decision.

The union cabinet on Jan. 2, 2019 gave its approval for the merger. Addressing the media, Law Minister Ravi Shankar Prasad had said the merger will result in more lending powers to the merged entity, giving it a globally competitive identity.

The petitioners, however, questioned the economic reasoning behind the merger, calling it an irrational exercise by not considering the interests of various stakeholders such as the shareholders, employees and customers.