ICICI Securities breached shareholder privacy rules: Shareholders tell NCLT

They claimed ICICI Bank contacted and misled shareholders in delisting process

ICICI Securities breached shareholder privacy and administration rules by sharing the details of shareholders with ICICI Bank, minority shareholders told the National Company Law Tribunal (NCLT) on Monday. They said that employees of ICICI Bank called and misled shareholders to vote in a particular way in the name of "spreading awareness".

The lawsuit, filed by minority shareholders led by Bengaluru-based investment manager Manu Rishi Guptha, said ICICI Bank influenced shareholders to support its proposal to delist the private lender’s broking subsidiary from Indian stock exchanges. They said that ICICI Bank employees, not the employees of ICICI Securities, contacted public shareholders, persuading them to vote in favor of delisting. They said that bank employees created a PowerPoint presentation to influence shareholders and exploit their lack of technological expertise. 

The petitioners also alleged that the asset management arm of ICICI parentage purchased a significant number of shares a month before the voting and then voted in the ‘guise of public shareholding’.

“ICICI Prudential Mutual Fund purchased 13 lakh shares, 1.65 per cent of the public shareholding a month before and voted in the guise of public shareholding. They directed their own promoter group company to purchase shares,” argued the counsel for minority shareholders. 

He added that ICICI Prudential Mutual Fund falls within the definition of promoter group and not public shareholder. However, on allegations that ICICI Securities coerced retail shareholders into voting favourably, the bench said that investors have the knowledge and should know the tricks of the trades.

“Shareholders are supposed to be knowledgeable on what shares to invest in. Even my gardener is selling and buying shares in the morning. How can you say shareholders are misguided?” asked the tribunal.

In March, ICICI Securities announced it had received approval from 72 per cent of the public shareholders for its delisting and merger with ICICI Bank. A total of 83.8 per cent of the institutional investors voted in favour of the scheme while 67.8 per cent of the non-institutional investors voted against it.

In April, Quantum Mutual Fund alleged that the scheme of merger with ICICI Bank was ‘flawed and bridled with irregularities’ in a letter sent to ICICI Bank, the capital market regulator, and stock exchanges. The fund house had objected over the concerns of valuation and alleged fraudulent practices used to secure the votes.

Upon delisting, for every 100 shares of ICICI Securities, shareholders would receive 67 shares of ICICI Bank. The NCLT is hearing the matter amidst reports that the market regulator, the Securities and Exchange Board of India (Sebi), may probe the voting process.

The minority shareholders said before the NCLT that the delisting permission from Sebi must have been taken by 'misleading things'.

Additional Solicitor General N Venkatraman, appearing for Sebi, told the court that the regulator would provide the court and appellants with the letter granting approval to ICICI Securities.

He requested that the bench remove them as a responding party in the matter as there is no request for them in the matter concerning the shareholders. The next hearing will be on July 2.

Delisting saga

> Minority shareholders say ICICI group’s AMC bought shares, voted in ‘guise’ as public shareholder

> Several retail shareholders had earlier alleged of ‘coercion’ by employees of ICICI Bank to vote in favour

> ICICI Securities received approval from 72% public shareholders for delisting and merger with ICICI Bank

> Quantum MF, which voted against the scheme, said the merger was ‘bridled with irregularities’