The Delhi High Court on Monday dismissed a plea challenging the LIC move to acquire 51 per cent stake in the Industrial Development Bank of India (IDBI).
Justice Vibhu Bakhru rejected the petition by the All India IDBI Officers Association, which had opposed the move of Life Insurance Corporation (LIC) on the ground that change in shareholding could take away the public sector bank status of IDBI.
The association was concerned that taking away public sector status of IDBI could affect the employment conditions of its staff.
LIC had earlier told the court it wanted to acquire 51 per cent stake in the IDBI as the state-run insurance company has been toying with the idea of having banking operations since 2000.
LIC said it had in the past made several attempts to have a bank of its own, but its endeavours had "failed" as "nothing fructified".
Additional Solicitor General Tushar Mehta, appearing for LIC, had also said it has applied for a banking licence.
Senior advocate Sandeep Sethi, representing the bank, said that consent of employees was not required while changing the status of the company by government's dis-investment.
IDBI, in which the government holds 85.96 per cent stake, had posted a net loss of Rs 24.0989 billion in the quarter ended June 2018. It had posted a gross non-performing asset (NPA) of about Rs 578.07 billion.
The association, represented by advocate Prashant Bhushan, had claimed that the change in shareholding was not in public interest as it "exposes the investments made by the public in the IDBI and corrodes the ability of the LIC to pay back its policy holders since it will have to invest an amount of Rs 130 billion to acquire the 51 per cent stake".
The petition had stated, "The said investment will be made from the funds of 38 crore policy holders of the LIC who have invested their hard earned money to secure their own futures. The said investment made by the LIC will adversely hamper its own abilities to pay its insurance holders."